Nike’s Global Supply Chain Management - Efficiency and Cost Effective Plan

This report analyzes Nike’s global supply chain management and provides recommendations for an effective efficiency and cost-effective plan. It covers internal strategies, external factors, critical analysis, market trends, and recommendations.

Operation Management
Nike’s Global Supply Chain Management
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Date:

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1.0 Executive Summary
Global supply chain management is complex because of the management of the wide distribution
and logistics management systems. Nike is a household name in the fashion industry.
Operational management is critical in business organizations because it addresses efficiency and
cost reduction. Profitable companies depend on reliable business functions in order to succeed.
Nike’s supply chain management faces risks because of the competition and the management of
infrastructural issues. Global companies face challenges in manufacturing and distribution
processes. OM is a multidisciplinary process that captures the supply chain, finance, IT and
Operation Management segments. Managing these functions requires an effective coordination
of processes for supportive and successful outcomes. Strategic operations emphasizes on
excellence in service, cost effectiveness, efficiency and effectiveness in the creation of a
competitive edge. Business organizations have a plan to maximize on profits while cutting down
on costs. Efficient management of different functions may require an integrated approach to
business. The operations manager has a responsibility to create a competitive edge through
strategic implementation. This report gives an analysis of the Nike company business and its
external environment in order to give recommendations of an effective efficiency and cost
effective plan.

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Contents
1.0 Executive Summary...............................................................................................................................2
2.0 Introduction...........................................................................................................................................3
2.1 Company overview............................................................................................................................4
2.2 Internal Strategies..............................................................................................................................5
2.3 External Factors.................................................................................................................................6
3.0 Critical analysis and Review..................................................................................................................8
3.1 Order winners....................................................................................................................................8
3.1 Order qualifiers................................................................................................................................11
3.3 Market trends...................................................................................................................................11
3.4 Customer journey............................................................................................................................14
3.5 Demand forecast..............................................................................................................................15
3.6 Measuring capacity..........................................................................................................................16
4.0 Recommendations...............................................................................................................................17
5.0 Implementation Plan............................................................................................................................18
6.0 Critical analysis...................................................................................................................................19
Bibliography..............................................................................................................................................27

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Figure 1: Nike’s product segment analysis showing revenue earnings (Shabotisky, 2017).........................6
Figure 2: Nike’s Logo.................................................................................................................................7
Figure 3: Nike US brand value and user ratings (Shoertmnb, 2018)............................................................8
Figure 4: Nike verses Adidas stock performance (Tonner, 2016)................................................................9
Figure 5: Comparison of Nike business in sports equipment (Business side of sports, 2015)....................14
Figure 6: Planning objectives for NSC & Objectives (Kosasih, 2010)......................................................16
Figure 7: Nike market analysis (Alpha, 2017)...........................................................................................17
Figure 8: Nike’s supply chain showing its inventory capacity process (Ym, 2014)...................................18
Figure 9: Strategic IT structure (Harindranath, 2018)................................................................................19
Figure 10: Risk management approaches in OM (Mckinsey Quarterly, 2009)..........................................20
Figure 11: Cost effectiveness in supply chain (Data Quest, 2014).............................................................21
Figure 12: Integrating the supply chain and value chain (Surbhi, 2015)....................................................22
Figure 13: Alternative factor influencing the supply chain (Deloitte Insights, 2015)................................23

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2.0 Introduction
Washburn & Hunksaker (2011) dicuss new ideas in global business where companies innovate
and devise strategies for success in the market. Multinational organizations have a complex
system with multiple operational issues. Critical factors in operation management include
efficiency in the supply chain management. Reliable decision making factors include the
management of operations, processes and functions. This report presents primary data from
Nike’s case study on cost effectiveness and efficiency in the supply chain management. This
method is effective because it targets issues of concern for better data interpretation on specific
issues. Nike faces challenges of managing supplier expectations. This is due to changes in the
system, pricing plans, divergent customer trends and managing multiple segments.
2.1 Company overview
Nike is a retail seller of designer products from the US. The company’s business model
comprises of products and services. It has a manufacturing unit, design, distribution, sales and
marketing. Its processes have a consistent theme that revolves around a niche strategy. Operation
management of the store influences customer behavior (Hill & Hill, 2012, p. 203). Nike is a
global brand specialized in footwear, apparel and accessories. Recognized as the leading global
supplier of apparel and athletic footwear, the company employs more than 44000. It also
manufacturer of sports equipment such as balls, and rackets. The company has a progressive

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growth in brand value with an equity value of more than $29 billion (Forbes, 2017). The figure
below shows a BCG matrix with footwear as the leading revenue earner for the company
(Shabotisky, 2017). Nike’s business strategy features a business model for Nike Inc. and its
subsidiaries, and product segments. Its target market include men, women and sports persons.
Figure 1: Nike’s product segment analysis showing revenue earnings (Shabotisky, 2017)
Nike achieves value proposition through its cost effectiveness, monetization and reduced costs.
This are important because poor management strategies bring out the negatives of a business
strategy (Simons, 2010).
The Company has a remarkable global marketing strategy that includes taglines like Nike Air,
Air Max and Nike Golf. Known for numerous products its product segmentation includes
trademarks with a ‘Just Do it’ Logo. The company’s growth and development has been through
acquisitions sales and marketing strategies. The company has a brand mission to blend
inspiration and innovation in meeting the athletic customer needs. Its values feature inspiration,
innovation, focus, care, and connection. Its brand agenda is to develop an authentic performance.
Nike also invests in CSR practices and it has partnerships with leading institutions for various
causes. The global supply chain today faces challenges in maintaining a balance between the cost
factor, profitability and service personalization (Swartz, 2014). Its strategic decisions include
product development, talent, efficiency and quality management. Below is the company’s

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famous company logo, which has global recognition. Operation management includes branding
strategies that enhance customer loyalty for stronger brands (Hill & Hill, 2012, p. 117).
Figure 2: Nike’s Logo
2.2 Internal Strategies
Internal strategies place the customer needs ahead of the profitability. An open strategy includes
crowd sourcing principles that emphasise on IT systems and e-commerce (Newstead &
Lanzerotti, 2010). This becomes a challenge because of the internet and information sharing
factors. Improvements in the Nike market share depends on operational efficiency within its
business categories. The brand has an edge in the market size depicted by different consumers
segments. These include the fashion and consumer goods. The figure below shows Nike’s
performance with a higher market capitalization as compared to its enterprise value and market
value (Shoertmnb, 2018).

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Figure 3: Nike US brand value and user ratings (Shoertmnb, 2018)
2.3 External Factors
The figure below shows Nike’s performance in the market against its competition Zacks. From
the graph, Nike faced a dwindling market performance in 2016 and it attributes the drop to
operation management issues (Ferguson, 2017). In order to succeed, the company needs to make
continuous improvements in strategic decisions. Customer experience, supply chain efficiency
and e-commerce enhance Nike sales for a competitive edge against competitors such as Adidas,
which capitalizes on casual and athletic footwear.

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Figure 4: Nike Stock performance (Zacks, 2016)
Nike stock perfomance in the market (Zacks, 2016). A critical analysis of the OM identifies gaps
in the Nike strategic planning. the figure below shows Nike’s performance against its leading
competitor Addidas. From the chart, it is evident that the company’s price strategies keep
changing showing a continous struggle (Tonner, 2016). This report is about these operational
issues in Nikes case. It gives recommendations for the present and future management.
Figure 5: Nike verses Adidas stock performance (Tonner, 2016)

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3.0 Critical analysis and Review
Nike is a reputable global organization with a high brand equity. However, its performance
against industry leaders shows drops. Insights into these shows that the brand has challenges in
maintaining its market position. Managing unprofitability is one way to deal with brand issues.
Research reveals that there are common issues affecting businesses in the manufacturing industry
(Mittal, et al., 2008). Operation strategy issues include an analysis of the competition and service
delivery. It considers the business health, market objectives, and maintenance. A research on the
internal and external operations looks for its level of efficiency, cost effectiveness differentiation
and focus.
3.1 Order winners
Terry Hill (1998) notes that a company has to face stiff market competition in order to thrive. In
order to ascertain this, Nike needs to check the market response for its products because creating
a competitive edge happens when the brand responds to the market trends. The adoption of
strategy by a brand is in response to the changing market. Research by Gino & Pisano ( 2011)
describes the strategic decision making process involved in after action review of factors leading
to a win. The discussion points out the need to test the theories for effectiveness. Nike UK needs
an analysis of competitive market features products from different brands. The order winners
involves standards set by a firm such as different products and services, quality and affordability.
Nike has set standards in the sports arena as the largest manufacturer of sports shoes. In logistics
management, the company needs to analyze order qualifiers present entry strategies required by
the product in order to perform in a market as shown in the figure below. Order winners feature
factors that enhance product performance or why consumers prefer it.

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Table 1: Logistics management (Yuan, 2014)
Decisions made by the management in the manufacturing sector supports its success. These
strategies have lessons for both the products and service sectors. This calls for data on attributes
defined by the customer’s perception of goods and services. The table below shows Michael
Porter’s competitive strategies with the firm’s profitability at the center of the industry needs
(Porter, 1985). From the table, Nike’s internal strategies endears it towards consumers giving it
an edge against the competitors. Therefore, the operational management needs order winning
strategies or the corporate strategy that gives it a win in the retail or fashion industry.
Sustainability in competitive edge leads to market performance. Nike has unique product designs
with a quality management process and capacity design. The brand data analysis of its process
and capacity design focused on efficient production and improved strategies (Hill & Hill, 2012,
p. 25).

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Table 2: Porter’s generic competitive strategies (Porter, 1985)
Table 2 below shows an approach that Nike’s uses for internal and external management. Its
policies revolve around the quality response to the product and service levels. Nike invests in
cost effectiveness and lean management strategies for cost reduction, quality enhancement and
lean strategies (Gouillart & Sturdivant, 1994).
Table 3: The relationship between product and supply chain (Sonia & Power, 2010)
3.1 Order qualifiers
Order qualifiers represent the competitive standards that describe a product as quality based on
specific tactics of management. The table below shows data for Nike to collect information on
price, reliability, design, leadership and brand name as some of the qualifiers (Tsai, et al., 2008).
Competitive strategies approaches cover themes in cost leadership, differentiation factor and the

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brand focus. The table below shows corporate guides to developing objectives through a
questionnaire process. Nike’s plans to develop a marketing mix strategy will design interviews
based on the function support. The questionnaires in this case contains data on the brand’s
manufacturing planning, systems controls, quality assurance, brand capacity and size of work
structuring (Hill & Hill, 2012, p. 312).
Table 4: corporate plans in a marketing strategy within an OM system adopted from (Tsai, et
al., 2008)
3.3 Market trends
Market dominance gives Nike an edge in market share and for athletic shoes but it needs
improvements in organizational structures for efficient management. The shifting global supply
chain reveals the emergence of differentiation as the management of supply chain and product
innovation (Hill & Hill, 2012). The company’s value creation supports improvements in market
share, cost reduction and improved market support. With a global brand presence in more than
180 countries, the business needs a closer monitoring process for its supply chain, production
units, brand image development and revenue capabilities. In order to understand the market
trends, the research set out to carry out a survey on efficiency in the brand’s efficiency. Using

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questionnaires as formal and informative techniques for this discovery, the research opted for a
sample analysis of the entire population (Rowley, 2014). My preferred choice was an online
survey featuring 50 participants. These are men and women in Nike working as employees at
different branches. Using cloud sharing, the research sought information about the company
including its strengths and weaknesses. In order to understand the target population, the study
used a sampling unit from one Nike’s distribution and manufacturing centers. This was a good
decision because it reduced bias. The market opportunities while overcoming threats to business
growth (Khanna, et al., 2011). From the figure below, Nike, which has a wide variety of
products, enjoys a large market share with Adidas as the main competitor.
Figure 6: Comparison of Nike business in sports equipment (Business side of sports, 2015).
The table below shows these research questions identifying financial, social and environmental
goals of the Nike UK brand. Appendix 1shows themes used when designing the questions on
how to influence sales, market share, and the customer service. The data collected from the Nike
UK headquarters. Unique strategies include ideas for tackling price the supply chain issues (Yan,
et al., 2013)

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Themes Positive response Negative response
Does Nike have supply chain
management strategies that
works with its employees or
teams
10 40
Does the team have a
strategic plan with effective
leadership?
12 38
Is there a team charged with
the oversight of OM
functions?
38 12
Does the Nike team enjoy
interaction while at work?
45 5
3.4 Customer journey
Research into Nike’s customer focus combines cost leadership and its differentiation in order to
come up with a competitive advantage in its production costs. Its marketing mix strategy covers
the pricing strategy in which Nike comes out as a success based on value and quality. Product
image is critical in the Nike case study because it explains why a brand gains a positive
reputation due to its target on a variety of consumers and productivity issues. Hill & Hill (2012,
p. 52) discusses operation management with a focus on selling services, design, deliver and
account transactions. Driving business management in the manufacturing sector calls for

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effective business processes. In order to do this, a survey on the distinct customer perception
gives the brand its distinct attributes. For the observation, it was necessary to test the findings
from Nike’s enterprise (ERP) forecasting plan that reveals a competent, continuous interaction
and analysis approach. The figure below shows its collaboration in the supply chain for
improved customer satisfaction, production planning and reduced inventory. This reinforces the
planning and objectives for its footwear segments. (Kosasih, 2010)
Figure 7: Planning objectives for NSC & Objectives (Kosasih, 2010)
3.5 Demand forecast
Although the brand has products for sports and casual customer needs, the survey identifies
Nike’s main target consumer as the sports person. This case study’s analysis reveals that the
company’s investment in advertising techniques has a focus on its segments (Gino & Pisano,
2011). Customers get motivation in associated thinking processes. Unfortunately, interviews on

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the customer perception failed to match the customer demand. It was difficult to find information
on improved reliability and efficiency plans. Nike has a complex system with a wide range of
designer footwear, accessories and apparel. The figure below shows its highest revenue earner as
the sports equipment followed by the parallel and footwear (Alpha, 2017). This research covers
the North American market.
Figure 8: Nike market analysis (Alpha, 2017)
3.6 Measuring capacity
The research notes that Nike’s corporate objectives include a return on shareholder investments.
Customer satisfaction attracts and retains customers hence calculated efforts directed at higher
revenue projections, reduced debt and personal trainers. Distribution strategies also support cost
reduction for a higher yield. Communication and promotional strategies create a structure for a

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competitive edge. Through observation, the research took few days trying to understand the
customer through observation (Gouillart & Sturdivant, 1994). The customer gives insights into
the market trends and distribution chain for end user product designs. The appendix 3 shows
some of the ideas obtained from the consumer with a highlight of sales projections.
From the analysis of the brands technology department indicates an implementation structure
focused on the internal and external factors such as process re-engineering, project management
and consultant competence (Harindranath, 2018). The figure below shows how to develop an
ERP for the Nike team under its supply chain management.
Figure 9: Nike’s supply chain showing its inventory capacity process (Ym, 2014)

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Figure 10: Strategic IT structure (Harindranath, 2018)
4.0 Recommendations
Green supply chain approaches to business influence the internal and external systems (Sonia &
Power, 2010). Nike needs a clear plan on reduced energy usage, reduced wastage of natural
resources like water and minimized production of surplus order. Sustainability is critical for a
business because it leads to competitive position through value addition and situational analysis.
The emerging markets present a good opportunity for Nike’s sale. However, this should have a
focus on research and development guides. Nike UK risk management plan is also a strategy
concerned with the business environment (Business side of sports, 2015).
Customer participation in the global footwear designer wear is appropriate for the optimization
of sales in the international market targets through different buyers. Nike needs leadership
objectives for its segmentation. Customer satisfaction in the supply chain supports efficiency,
waste management and customer satisfaction. An analysis of the case example reveals
progressive revenue increases and turnover. The figure below identifies areas in which Nike may
capitalize on for the ultimate goal, which is customer satisfaction. Nike needs to gain more
customer insight for its multichannel operations. New strategies focusing on supply chain
management, pricing, IT, and people leadership enhance the brands ability (Harindranath, 2018).

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Figure 11: Risk management approaches in OM (Mckinsey Quarterly, 2009)
5.0 Implementation Plan
Educating staff and customers on the brand reputation and new product is crucial. This is
because the customer has the power to inspire and affect the brand and product development
(Grant, 2011). Effective leadership motivates a positive outcome such as energy efficient
products and processess across different points. The cost verses benefits analysis reveals the
importance of value addition using non tangible elements.
Figure 12: Cost effectiveness in supply chain (Data Quest, 2014)

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Alternative approaches to improvements include incremental improvements in the level of
investment. This captures the procedues and technology additions within the longterm and short
term (Hill & Hill, 2012, p. 222). Customer response on a business provides data for strategic
processess. The cost and benefit analysis is important because it identifies the resource
availability for the next move in business (Godin, 2003). Operational realities reflect on the
delivery process for costs, demands and delivery processes. Creating a competitive advantage
calls for marketplace analysis with a focus on order qualifiers and winners. Using quality in the
criteria analysis brings out the customer perception and Nikes brand performance. Operation
management in the manufacturing sector changes the cycle time makes use of the time resources.
6.0 Critical analysis
Nike has a good reputation because of its quality mark. The company has high quality products
sold globally under favorable pricing strategies. Its management practices reveals a strategic
process that captures the target market and capitalizes on the brands strengths. Training staff is
one way of supporting the supply chain for customer satisfaction. These factors support its
development into the largest sports manufacturer. However, an analysis of the business shows
the need for constant monitoring systems in is internal and external factors (Fleschmann, et al.,
2014). Below is integration of the supply chain and value chain with critical areas of focus.

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Figure 13: Integrating the supply chain and value chain (Surbhi, 2015)
An ideal OM plan is sensitive to price mechanisms and value factors. The perceived value in
Nike shows the need to emphasis on cost factors, differentiation and IT benefits. This effect is
evident in the critical variables within the operations management. This is about enterprise
resource planning and its optimization of the company name and visions (Ram, et al., 2013). The
figure below shows critical aspects of for the brand’s focus with the incorporation of technology
in the supply chain. In this case, Nike needs IT solutions for an integrated business plan,
optimization tools and supplier and risk analytics. Therefore, operations management is the
implementation of improved measures for a better output and increased productivity. Using a
product related demand is ideal for Nike, which needs an effective management of both tangible
and intangible.

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Figure 14: Alternative factor influencing the supply chain (Deloitte Insights, 2015)

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APPENDIX
A. Questions addressed on Nikes operational management
1. Employee self-Organizing ability
-Are you aware of the goals and objectives on supply chain management?
-Is your work schedule flexible enough to allow you accommodate and manage change?
-How often do you share ideas through an open communication system?
2. Efficient learning
-Does Nike Share new ideas and challenges based on these ideas.
-What are some of the impending challenges in the supply chain?
-By which segment can Nike improve product quality?
3. Sense of belonging
-Does financial pressure influence the cost factors?
-What is the connection between the brands labour market and talent development?
-What makes Nike a complex supplier and stakeholder brand?
Who are Nikes main competitors, what gives the brand an edge.
B. Brand Perception

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Nike stands out as a reputable brand designed for the sophisticated. Its values coincide with the
customer perception.
Brand Values Brand perception
Authentic Maximum optimization
Sports features Sophisticated
Performance based Competent
Achievement Designed for champions
C: Sales Projections
Nike Sales projections from Nike UK store

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Income Statement Amount $
Revenue 34000
Sales 20000
Expenditure 11000
EBIT 4500
Net Interest 25
Taxes 1050
Net Income 3600
D: Supply Chain Questionnaires for Employee segment
a) Manufacturing
1. What is your role as the operation manages?
2. Do you find the job satisfying?

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3. What are the complex issues in the supply chain process?
4. Which tasks require physical effort?
5. Are there technology solutions for such tasks?
6. What is the estimate of your annual sales output?
b) Service Operations
1. What are some of the critical inputs that lead to positive output in your department?
2. Between people management and asset management, which one bears much success?
3. Please fill in the table indicating whether you agree or disagree
Question Strongl
y Agree
Agree Not sure Disagree Strongly
disagree
Quality is critical in our
choice of suppliers
Our organization cultivates
long term relationships with
suppliers
Continuous improvement is
critical
New product development is
part of our annual agenda
Constant evaluation and
monitoring of customers is

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key
Our organization engages in
information sharing with
stakeholders
Our supply chain output is
dependent on sales
Our supply chain output
depends on customer
response
Our supply chain is based on
waste reduction
Our supply chain depends on
efficient timing
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