Lean Manufacturing and Nike

This assignment delves into Nike's adoption of lean manufacturing practices. It examines the company's case study, focusing on the influence of lean principles on labor standards within its supply chain. The analysis also considers the effectiveness of lean manufacturing in enhancing Nike's operational efficiency.

LEAN OPERATIONS
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LEAN OPERATIONS
In the present complex and uncertain business world, it becomes necessary for all the
organizations to manage their costs through optimum utilization of available resources and earn
high revenues which results in high profitability. Lean process greatly helps to administrate
business manufacturing process effectively so that firms can run successfully. It is a technique to
eliminate waste and other non-value adding functions from the production process in which the
term valuable will be decide by the customers only. It is an effective tool which helps to reduce
waste such as waste due to overproduction, waiting time, inventory waste, processing waste such as
by-product, product defects and others.
Each manufacturing business can implement this tool in their manufacturing process to
eliminate unproductive activities and focus on only value-driven operational functions. It mainly
aims at improving efficiency and produce required quantity of goods at less costs. Present project
will address the use of lean manufacturing process in Nike. It is an US multinational company who
designs footwear, equipments, accessories and offer other services to large number of customers. It
is operating across the global market and also one of the world's largest distributor of athletic shoes
and apparel. In 2013, its manufacturing network is very large as 700 factories are producing the
products in 42 countries. It adopts lean operations for apparel and footwear products which results
in additional savings at $0.15 per unit. It became possible because of high labour productivity and
minimum waste.
Through implementing lean process, Nike can minimize its production cost and enlarge their
efficiency in a great extent. Nike manufacture footwear and other products in number of countries
henceforth, staff skills and their knowledge will be significantly different. Inefficiency and unskilled
staff may results in high labour costs due to less labour productivity. Thus, it will results to enhance
waste in the business (Distelhorst, Hainmueller and Locke, 2014). Lean manufacturing process
helps to enhance staff efficiency, skills and their knowledge through conducting an effective
training and development program. For instance, in 2008, Nike provided extensive training to their
staff so that their efficiency can be improved and resulted in less production costs by waste
reduction. It launched an footwear training centre in Vietnam in which all the personnel will receive
training about their job and work allotted. There after, its Apparel Innovation and Training Center
(AITC) has been further organized in Shri Lanka. Eight week training was provided to all the
managers and they learn a lot of things by observation and practical training methods in its lean
implementation (Leach, 2012).
Recruitment of multi-talented and multi-skilled labour force in Nike's production factories
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will results in improved efficiency because they are highly efficient to perform their duties
effectively and timely. It will results in declined wastage in the production process.
Illustration 1: Human resource management strategies
(Source: Soni, 2014)
As per the diagram, it can be seen that Nike workforce management strategies, safety and
health policies and performance management tool helps to enhance employees skills and their
productivity. Between 2009 to 2013, Nike's lean operational system resulted in 15% reduction in
labour violation (Soni, 2014). But still, in China and South-east Asian factories the problems can be
seen now-a-days. Hence, it can be advised that Nike should introduce lean process in these
countries so that waste can be eliminated due to higher labour productivity through providing
adequate training to them.
Moreover, before implementation of Lean, Nike's operations are distributed in different
functions which are not in connection. For instance, sewing, ironing and packing were separate
activities which led to high inventory buffer at each production process. It resulted in high inventory
cost due to inefficient inventory management. This waste can be minimized or eliminate through
connecting the process with each other which helps to reduce inventory buffer and cost as well.
Lean operation will greatly assist to connect each forthcoming process with the end of previous
process such as connecting ironing and packaging operates in line with sewing operations with
using physical moving operators (Fullerton, Kennedy and Widener, 2014). It will led to reduce
production cycle time through immediately transferring the products to the next process. So that, it
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drive value for the customer by lowering their waiting time and enhance inefficiency. In Nike
business corporation, apparel factories used lean manufacturing process to connect ironing and
packaging stages at the end of sewing line. Along with this, managing each process by different
supervisor will impose high cost burden to the Nike. However, while activities and process are
connected to each other than only one supervisor can be appointed who will be responsible to
administrate all the functions (Gamage, Jayamaha and Grigg, 2016). So that, final output can be
achieved as per target.
Waste can also be arise due to high inventory cost because of storage and care it. If Nike
produce goods in large quantity than it will increase company's inventory cost and reduce
profitability. Meet customer demand timely is essential to earn greater sales revenue. Under the lean
manufacturing process, Nike can use flow racks, kanbans and pull system to produce goods in
required quantity according to the market demand (Rahman, Sharif and Esa, 2013). In the present
market, customers demand are rapidly changing. Thus, it becomes necessary for Nike to reduce the
time lag between placement of an order for material purchase and accomplish the market demand
by fastest production. Lean manufacturing process provide huge assistance to place order on
scheduled time and eliminate overtime. Uses of racks allows users to manage their inventory on the
basis of FIFO method in which stock which came first will be sold prior and so on. However,
Kanbans are only the cards which indicates the timing of inventory purchase. Both these will
provide an huge assistance to manage stock through pull system. Therefore, productions can be
made in required quantity which will be sufficient to meet customer demand effectively.
This lean production process will reduce inventory wastage because if Nike produce huge
quantity of goods than it will led to impose high inventory burden with none of the value
contribution. Thus, it can be said that Nike can use Kanbans system to administrate inventory at
minimum level and decline stock wastage (Dora and et.al., 2013). Management can use this system
in their production lines to maintain stock at minimum level and produce goods only when market
demand is available. Thus, it will contribute value in the product through eliminating the waste in
managing extra inventory. By implementing such procedure, Nike can manage their inventory cost
by reducing both storage and holding cost in the factories. But still, for the success of this method, it
is necessary that supplier will deliver material timely as per Nike's order. Along with this, Kanban
system not only provide assistance to reduce inventory costs but also ensure product quality and
control through inspection. Further, Just-in-time (JIT) is also an effective tool that can be use in
strategic management operation which ensure the quality standard for business output. Thus, it
becomes clear that Kanbans and JIT helps to reduce waste due to overproduction, defective
products, ineffective quality products and inventory costs as well (Ghosh, 2012). This in turn, Nike
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can achieve greater profitability and enhance their operational performance.
Further, Nike is the part of society and has some responsibility towards society such as
environmental responsibility through reduction in CO2 emission. High emission will increase
wastage and costs as well. Increase in contracts with manufacturer participation, energy and carbon
continuous improvement program, expand use of renewable energy and report energy and CO2
footprint helps to reduce such emission. In FY 2013, Nike achieved 13% reduction in carbon
emission. In addition to it, lean processing helps to reduce scrap in manufacturing process by
recycling and reuse of production wastage (Shmula, 2014). In FY 2013, Nike decided target of 10%
reduction in wastage from the finished products and its achieved 8.6% in real. Thus, very large
proportion of set targets has been accomplished by Nike Inc. It will contribute to drive value in the
products for its large customer base.
Another, Nike can use Andon system to encounter the problems and eliminate it from the
operations so that waste can be reduced. It allow production members to dissolve problems quickly.
For instance, supplier can use coloured cards, digital signboards and others to address problems
such as defective materials. Furthermore, appropriate formats of safety, quality, delivery and costs
will helps to track actual performance and compare it with the targets so that effective decisions can
be carry out to meet organizational goals (Fullerton, Kennedy and Widener, 2013).
Along with this, TQM (total quality management) techniques will assist Nike to assure
product quality and enlarge customer satisfaction level. Under the lean operations, workstation
inspection can be done through which operates will assess and examine the quality of the product
on their own basis. It is because if inspection will be done at the end of the production completed
than defects can not be eliminated. While, inspection at each stage will assure quality production
hence, waste can be reduced largely. Moreover, by standardizing the process in terms of required
time, inventory and the series and sequence of functions helps to clearly exhibit the manufacturing
stages (Hosseini, Kishawy and Hussein, 2015). So that, all the operators will know that which
process and actions will be taken after completing one stage or process. It avoid confusion and
wastage of time results in improved efficiency.
In addition to this, 5S who exists for Sorting, Setting, Standardizing, Shining and Sustaining
in the lean manufacturing process will contribute to reduce waste in the work environment. In this,
sorting will assist Nike to remove non-essential material and tools from the production functions.
Setting helps to proper arrangement of labour, tools, parts, raw material and other items to reduce
waste by performing value driven activities only. While, shining is a term which increase
cleanliness in the working station. However, Standardizing and Sustaining are the factors which will
be use in the real business practices (Wen, Wee and Wu, 2015). On contrary, visual management
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strategies such as sign boards, shadow boards, use of different colours and production areas will
assist management to indicate actual performance. Nike can use this 5s management technique to
eliminate wastage through proper and effective administration at each and every production stage
which results in improved efficiency and declined costs.
Above discussion concluded that Nike can use lean manufacturing system to achieve desire
outcome and strategic business goals. Through reducing wastage, increasing production efficiency,
workers skills, adequate and proper administration of all the functions, reduction in inventory
buffer, work-in-progress, quality management and connecting different production stages with each
other will greatly assist Nike to enhance their productivity and enjoy greater success. All the factors
will contribute to drive value and enhance orientation production. Along with this, it also helps to
determine difficulties and problems and dissolve it for potential improvement and operational
stability. This in turn, Nike can fulfil global market demand timely and results in enlarging their
strategic and competitive ability due to high performance. So that, Nike can run successfully ans
ensure long run sustainability.
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REFERENCES
Books and Journals
Dora, M. and et.al., 2013. Operational performance and critical success factors of lean
manufacturing in European food processing SMEs. Trends in Food Science & Technology.
31(2). pp. 156-164.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2013. Management accounting and control
practices in a lean manufacturing environment. Accounting, Organizations and Society.
38(1). pp.50-71.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance:
The incremental contribution of lean management accounting practices. Journal of
Operations Management. 32(7). pp. 414-428.
Gamage, P., Jayamaha, N.P. and Grigg, N.P., 2016. Acceptance of Taguchi's Quality Philosophy and
Practice by Lean practitioners in apparel manufacturing. Total Quality Management &
Business Excellence. pp. 1-17.
Ghosh, M., 2012. Lean manufacturing performance in Indian manufacturing plants. Journal of
Manufacturing Technology Management. 24(1). pp. 113-122.
Hosseini, A., Kishawy, H.A. and Hussein, H.M., 2015. Lean Manufacturing. In Modern
Manufacturing Engineering. Springer International Publishing.
Rahman, N.A.A., Sharif, S.M. and Esa, M.M., 2013. Lean manufacturing case study with Kanban
system implementation. Procedia Economics and Finance. 7. pp. 174-180.
Wen, C.L., Wee, H.M. and Wu, S., 2015. Revisiting Lean Manufacturing Process with Vendor
Managed Inventory System. In Proceedings of the 5th International Asia Conference on
Industrial Engineering and Management Innovation (IEMI2014). Atlantis Press. pp. 139-
142.
Online
Distelhorst, G. Hainmueller, J. And Locke, M.R., 2014. [Pdf]. Does Lean improve labour
standards? Capability Building and Social performance in the Nike Supply chain. Available
through: <http://watson.brown.edu/files/watson/imce/locke/publications/NikeLean_8_SSRN
%20%281%29.pdf>. [Accessed on 18th April, 2016].
Leach, A., 2012. Nike reduces lead time through lean manufacturing. [Online]. Available through:
<http://www.cips.org/en/Supply-Management/News/2012/May/Nike-reduces-lead-times-
through-lean-manufacturing/>. [Accessed on 18th April, 2016].
Soni, P., 2014. Traditionally Innovative: The history of Nike. [Online]. Available through:
<http://marketrealist.com/2014/12/traditionally-innovative-the-history-of-nike/>. [Accessed
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on 18th April, 2016].
Shmula, 2014. Nike Lean Manufacturing. [Online]. Available through:
<http://www.shmula.com/nike-lean-manufacturing-example-good-policy-deployment/
13755/>. [Accessed on 18th April, 2016].
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