Nike's Sustainable Supply Chain

This assignment examines Nike's strategies for enhancing sustainability within its global supply chain. Students are tasked with analyzing Nike's initiatives to improve social and environmental conditions, including waste management practices. The analysis should also consider Nike's position in sustainability rankings and compare it to other companies like Nestle and GSK.

Supply Chain
Management

TABLE OF CONTENTS
Introduction......................................................................................................................................4
Overview of Nike.............................................................................................................................4
1) Evaluating Nike has performed in its efforts for sustainability by using AAA model...........4
2. Reducing waste and increasing recyclability...........................................................................7
3) Forecasting lessons to reduce inaccuracies...........................................................................10
4) Nike approach to setting up supply chains and their structure and how it help business
achieve a competitive advantage...............................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
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Illustration Index
Illustration 1: Wealth Management Hierarchy................................................................................8
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INTRODUCTION
Management of physical product and the flow of information that goes along with the
product, be in a proper supply chain will result in the highest level of customer satisfaction at
low cost (Tayur, Ganeshan and Magazine, 2012). Supply chain management is the control of the
supply chain and it is a process from supplier to manufacturer, then from wholesaler to retailer
and at last to customers. In normal word, supply chain management is a management of goods
and services (Fawcett, Ellram and Ogden, 2014). This project is based on the case study of Nike
and an analysis of the supply chain management approaches of this cited company. By using
AAA model, evaluation is done on the performance of the business in its efforts for
sustainability. Different measures are taken to reduce waste and increase recycle ability in supply
chain. Analyzing of Nike approaches to setting up supply chain and their structure and the
strategies to achieve competitive advantages are covered in this project.
OVERVIEW OF NIKE
Nike is an American multinational corporation that involved in designing, manufacturing,
and sales of footwear. It is one of the largest supplier of the athletic shoes and manufacturing of
the sport equipment in the world. The company was founded on January 25, 1964 and is
headquartered in the Portland metropolitan area. The role of the SCM in Nike is that it improves
the profit margins, reduces the inventories and it also helps in ensuring that the customer receives
right product on right time (Soni, 2014). From SCM, the cited company's manufacturing network
consists of over 700 factories in 42 countries. From 57 distribution centers, each product of Nike
moves to 18500 accounts and 140000 retail shops across the world. In term of footwear
manufacturers, mentioned company in 2014, supplied 150 footwear factories in 14 countries.
Now Nike has a license agreement which gives permission to the third parties to manufacture
and sell digital devices and applications and other equipment designed for sport related activities
by using Nike owned trademarks (Porteous and Rammohan, 2013).
1) Evaluating Nike has performed in its efforts for sustainability by using AAA model.
The AAA sustainable quality program was launched with a motive to help the company
by providing the best quality products to the consumers (Monczka and et.al., 2015). It also
secures the livelihoods of those employees who produces shoes. Nike adopted three generic
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approaches to create the value across the world. The AAA denotes adaptation, Aggregation and
Arbitrage strategies.
Adaptation strategies is used to increase the revenue and the market share of Nike, which
can be done by producing those products which suits the requirement and preferences of the
customers. It is the most widely used global strategies (Hugos, 2011). Later, Nike focused on
Sport shoes, by using this strategy now they also focused on formal shoes and equipment for
sports activity as it suits the preference of the consumers. Therefore, some degree of adaptation
is necessary or essential for almost all the products all over the world. The another type of
adaptation strategies focuses on a specific product, geographies or market segments. These have
an advantage that wide difference can exist within broad product and they can compete
effectively in the local markets (Ross, 2013). Nike adopted this strategies by focuses on a
specific product and produces varieties of that product. The another adaptation is to focus on
design and reduce the cost of that product. The mentioned company introduced formal shoes at
an affordable price to significant number of citizens. For example if Nike is expanding its
business in other countries, for this they have to change their strategies according to the
countries, they can't go with the strategies which are adopted in their home countries. Different
countries have different supply chain management and strategies.
The another strategy is Aggregation which is about creating economics of scale and
scope into the global business (Wisner, Tan and Leong, 2015). The objective of the strategies is
to exploit the similarities among geographies. With the help of this strategy, Nike can identify
the ways of introducing economies of scale. It can be done by reducing the price of the products
against the competitor's product. It can be done by reducing the cost of expenses and the wastage
of the materials, by reducing this it helps the company in reducing the cost of the product and
also helps in maintaining the customers. With the help of the supply chain management it helps
the company in managing the goods and services at a lower rate so that it attract the people and
from the sale of the product will increase. Aggregation not only focus on the cost but also focus
on the geographic. To create a substantial cost advantage, they have to centralized their
purchasing firstly in regionally and then globally (Dekker and et.al., 2013).
Nike produces different variety of shoes and have a market presence in every major
country in the world and ranks among the world's most valuable brands. For the growth and
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highly competitive they began a series of acquisitions that give the Nike the scale and the
resources to participate in global market. By this, the company establish new relationship with
rate sustainability (Blanchard, 2010). It also helped to promote the integration of sustainability
within the organization. The AAA program is launched to support the employees by providing
training and technical assistance to them with a motive to improve sustainability and productivity
of the company by maintaining the highest quality. Millions of customers in countries. Nike's
global initiative focused on establishing its business in different countries. With the help of
proper supply chain it helps the company to expand its business in different countries.
The third generic strategy adopted by the Nike for sustainability is Arbitrage. This is a
strategy of exploiting differences, rather than bridging them. It means buy at a lower rate and sell
at higher price. With a proper supply chain management, Nike can buy material which are used
for producing products at a lower rate, so that the expenses for production will not increase and
then sell the product at a higher rate, with this Nike will increase the profits (Coyle and et.al.,
2012). Through the globalization of supply chain has happened, the risk and challenges also
emerged.
By rewiring of Nike's approaches for sustainability of supply chain brings changes to the
company level and also with its suppliers. The globalization is affected by managing the AAA
model, Nike changed its business to better integrate sustainability. It also helped to promote the
integration of sustainability within the organization (Waters and Rinsler, 2014). The AAA
program is launched to support the employees by providing training and technical assistance to
them with a motive to improve sustainability and productivity of the company by maintaining the
highest quality.
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2. Reducing waste and increasing recyclability
Waste is the residual outcome that occurs at every next step of supply chain. Reducing
waste and increasing use of recycle products in supply chain will help Nike to cut short its
overall cost. It is the material which is obtained anywhere in the supply chain that do not reach to
the final consumer (Carter, and Easton, 2011). Nike can involve in the measure by which it can
reduce its waste materials by increasing the use of recycling. There are ways which can be used
by the company to initiate the same. Some of the ways to reduce waste and increase recyclability
are discussed further:
 Waste management hierarchy: This is the process which will help Nike to protect the
environment and also examine the energy and resources consumption to the least to most
favourable actions as shown in the figure below. Hierarchy concerns with “3 R's”
strategy, where 'R' refers to reduce, reuse and recycle of waste material of Nike's supply
chain (Sarkis and Lai, 2011). This model targets at maximising the utilisation of material
into product's manufacturing and minimising the use of waste material. It will even
initiate Nike to form an Eco-friendly environment. Retailer can also increase the use of
recycled products which will increase the productivity and profitability of the company
and the retailers (What is the Waste Management Hierarchy?, 2016).
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(Sources: What is the Waste Management Hierarchy?, 2016)
 Selling out outdated products at discount: Retailer of Nike can sell their outdated
products at a discounted rate so that they can sell out the maximum products and can also
minimise their waste (Gold, Seuring and Beske, 2010). Furthermore, the company can
donate and do charity of old stuff which will upgrade the brand image. This way of
reducing waste will have positive impact on reducing the dead stock of the company.
 Avoiding excess stock: Retailers maintain sales record by which they can avoid excess
orders of the products which will reduce excessive storage of material. This will also help
the retailers to upgrade themselves with updated stock. Retailers should entertain Just-In-
Time (JIT) delivery which will ensure them in minimising the stock quantity (Sarkis,
Zhu and Lai, 2011). Retailers can send back the damaged and unsold stock to the parent
company which can be recycled.
 Use of reusable plastic bags: Retailers can initiate customers in using plastic bags which
are reusable. For the same, retailers can provide them with paper bags or the bags which
are made up of disposable plastic. This use will help the company to initiate the use of
bio degradable items which will have positive impact on the environment.
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Illustration 1: Wealth Management Hierarchy

 Less use of packaging: Nike's retailers can offer less packaging to their customers
(Sarac, Absi and Dauzère-Pérès, 2010). Excessive packaging is the shoe boxes which can
be kept with the retailers and can be used further for the recycling process. Retailers can
also reduce the use of bulky packaging so that it will be convenient for the customers to
handle and also to reuse them. This will also cut short the production cost as the
packaging can be reused.
 Adopting Green alternatives: Retailers can buy and sell the products which are Eco-
friendly. Customers appreciate the products which are environment-friendly. They have
become more conscious and particular about the products manufactured by company
(Seuring, 2013). This will bring a positive impact on the goodwill of the company and
will also the help them to increase the revenues outcomes.
 Educate staff: Nike can provide education and training to their staff for proper use of
resources which can reduce the wastage of raw materials. Staff of Nike can be well
educated so that they can even spread their knowledge to customer for the use of recycled
material. Skilled staff will help in increasing the productivity of the company and will
also bring new ideas for the recycling and reusing of the products.
 Improving recycling programs: To achieve the target of recycled products, company
has to improve and initiate the programs which will help to recycle the waste material
(Testa and Iraldo, 2010). They can train their employees to reuse the material which is
left behind and are not in use. Nike can plan clever campaigns to initiate the recycling of
waste products.
 Conduct audit: Company can conduct waste audit under which they can make a list of
the left out products which can be recycled or reused. Over this audit, Nike can plan the
further process for recycling waste. This will also lead to cost-saving outcomes and
brings more revenue opportunities.
 Digital marketing: In spite of using paper marketing, company and their retailers can
initiate the digital marketing (Wu and Pagel, 2011). This will not only increase the
marketing of the product but will also enhance the productivity of the product. It will be
cost effective and would be the best and fastest way to reach to customers.
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3) Forecasting lessons to reduce inaccuracies
As per the structured study, Nike is facing key issues in regard to forecasting that
has impacted its strategies implementation in diverse manner. At present the company uses its
knowledge management system for effective forecasting but due to some failures in last few
years. It became necessary for organisation to overcome issues through access of various
forecasting lessons. Management of Nike can overcome issues through enhanced level of focus
on forecasting techniques (Business forecasting lessons, 2013). In order to improve the
efficiency of forecasting system the organisation must ensure that they have considered past and
present data in appropriate manner so that key aspects can be identified in most suitable way.
Current and future trends analysis is also beneficial for the organisation and it can reduce the
inaccuracies in the work culture.
In addition to this, there are two types of forecasting methods that can be adopted by
the organisation in order to understand the key aspects and leads business to impressive level of
success (Richey and et.al., 2010). Classification of methods can be as qualitative and quantitative
methods. Qualitative techniques covers various factors such as executive committee consensus,
delphi method, sale force composite and customer surveys. In regard to the executive committee
consensus it can be asserted that the organisation can focus on activities that can improve
knowledge and helps in collection of data. Number of activities can be established that can
provide long-medium forecast elements (Ahi and Searcy, 2013). For example, the suggestions
can be take by managers and executive in order to understand the key factors. It will assist in
effective designing of strategies and provide better values in the future in terms of forecasting. It
is necessary to consider the opinion of powerful member in the group so that issues can be
overcome in most suitable manner.
On the other side, the management of Nike can also concentrate on the delphi
method of forecasting for further improvements. In this, the assistance of various professionals
and experts is required so that needs identification can be accomplished in desired form (Barney,
2012). It is beneficial for attaining long term forecasting results and leads business to impressive
level of success. Future technological aspects can also be considered to improve working and
sales and improve the circumstances in respect to forecast. Sales people are the person that have
regular interaction with the customers so with an assistance of sales force composite the
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management can easily reduce its exposure in inaccuracies. Company can also consider the
suggestions from sales person so that needs can be identified in most suitable form (Porteous and
Rammohan, 2013). Customer survey is also beneficial for the organisation that helps in
improvement of forecasting system. It will also provide a descriptive information about the work
culture and market scenario that is advantageous for effective forecasting.
Moreover, the management of Nike can also focus on quantitative methods to
improve the forecasting system and accomplish goals in effective manner. It includes time series
model and casual models. In time series model, it is vital for organisation to focus on
independent variable for effective analysis of conditions (Wilner, 2011). For example,
information about market trends must be analysed in appropriate way so that business can have
better opportunities. With an improved level of forecasting process the demand and supply
aspects can also be maintained in optimistic form. Company can also have evaluation of further
factors that can influence the work culture and enhance organisational capabilities. In addition to
this, business firm needs to focus on three key aspects of forecasting such as technical,
psychological and political. Due to improper inforict situation for business. It is significant for
management of Nike to ensure that the unreliable information has not accessed during forecast so
that issues can not be occurred (Fawcett, Ellram and Ogden, 2014).
Other than this, the management of Nike also needs to make sure about
psychological aspects because most of time person anticipate success without evaluation of facts
and figures. It creates a bias among actual performance and anticipated information, so proper
analysis is essential for improvement in forecasting system. Consideration of objective is also
necessary so that inaccuracies can be reduced in appropriate manner. Improper tendency of
people and misrepresentation of aspects for personal gain also impacts the effectiveness of the
system (Improving project forecasting, 2010). Organisation must consider few activities that can
overcome the issue of strategic misrepresentation in order to acquire optimistic forecast system.
In this respect, the business firm can also focus on valid and realistic data collection because it
helps in identification of issues. Reliability of information ensure that the forecast data will
facilitate business to attain better competitive advantage and leads business to impressive level of
success. Proper comparison between present and past data also provides effective forecasting
that helps in reducing issue of inaccuracies. mation about these aspects the inaccuracies in
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project forecasting occurs and impacts further developments. Most of time the inappropriate
selection of forecasting model also creates a conflict situation for business. It is significant for
management of Nike to ensure that the unreliable information has not accessed during forecast so
that issues can not be occurred.
Other than this, the management of Nike also needs to make sure about
psychological aspects because most of time person anticipate success without evaluation of facts
and figures (Wisner, Tan and Leong, 2015). It creates a bias among actual performance and
anticipated information, so proper analysis is essential for improvement in forecasting system.
Consideration of objective is also necessary so that inaccuracies can be reduced in appropriate
manner. Improper tendency of people and misrepresentation of aspects for personal gain also
impacts the effectiveness of the system (Improving project forecasting, 2010). Organisation must
consider few activities that can overcome the issue of strategic misrepresentation in order to
acquire optimistic forecast system. In this respect, the business firm can also focus on valid and
realistic data collection because it helps in identification of issues. Reliability of information
ensure that the forecast data will facilitate business to attain better competitive advantage and
leads business to impressive level of success. Proper comparison between present and past data
also provides effective forecasting that helps in reducing issue of inaccuracies.
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4) Nike approach to setting up supply chains and their structure and how it help business achieve
a competitive advantage
One of the leading seller that deals in supplying athletic footwear as well as apparels in
the different region. However, the main business of Nike is to develop and design the high
quality apparels, footwear and accessories for the premium segment customers (Wisner, Tan and
Leong, 2015). Supply chain management is being highlight as a process that ensue proper
management and flow of goods and services from the supplier to manufacturing areas then to
wholesaler to retailer and then it ultimately reaches to their final customers. Nike mainly
emphasize on using different sourcing for acquiring the raw material and fabric as a result Nike
have different manufacturing sites across the world. Furthermore, acquiring raw material from
different supplier across the world is beneficial for Nike as it assist the company in achieving
competitive advantage (Coyle and et.al., 2012). Due to inexpensive labour, lower import and
export rates, high degree of efficiency in the production process etc.
An effective supply chain management support the organization in improving their profit
margins through reducing the intermediaries as the ultimate product will be directly reach to the
target customers. The overview of Nike supply chain is that its main purpose is to ensure that
customers must receive the high quality products and assortment in the given or stated time
period. According to Soni (2014) it has been stated that in the previous year that is in 2013 Nike
has moved around 900 million units through their effective supply chain procedure. Furthermore,
the Nike manufacturing system consists of around 700 factories in 42 different countries across
the globe (Sarkis, Zhu and Lai, 2011). In addition to this, Nike owns no manufacturing plant for
processing and manufacturing their footwear and apparel products that benefit in gaining 88% of
their revenue. Furthermore, to attain competitive advantage in the market company is engaged in
outsourcing their manufacturing raw material and fabrics from the third party as in the present
environment it is considered as cost advantage method. Moreover, Nike company is engaged in
lean production or lean manufacturing that is considered as organized method that results in
eliminating the waste in designing as well as in distributing their products to the customers. The
benefit of lean manufacturing is that it results in improving the profit margin of the organization
as lean manufacturing mainly focuses on driving down or lowering the costs associated with the
manufacturing (Carter and Liane Easton, 2011).
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Furthermore, Nike also engaged in outsourcing different raw material and fabric for
manufacturing their athletic products. The key reasons for outsourcing include that wages and
costs of production are lower as compared to United States. In addition to this, it has been stated
that Nike basically distribute its products through three different channels that is selling high
quality products to wholesaler in US market and other markets, selling or supplying their quality
footwear and apparels to global brand divisions and through e-commerce sales or direct to
customers sales that is with the help of setting their retail outlets (Testa and Iraldo, 2010). In
order to achieve competitive advantage in the contemporary environment it is essential for Nike
to focus on online approach for supplying and distributing their manufactured footwear and
apparels as it is considered as fastest and modern method for supplying and distributing their
products in the global marketplace. In the year 2014 the online sales of Nike products were 3%
high as compare to previous year. Therefore, online selling of the Nike products are considered
as key factor that support the future growth of brand in the international market. In comparison,
with the Nike its competitor have also introduced their online platform to attract the large
audiences across the world by displaying variety of products and category on their online
websites. On the hand, Nike brick and mortar premium store also offer and deliver premium
experience to their customers who visits their stores for purchasing the quality athletic product
(Ahi and Searcy, 2013).
CONCLUSION
The aforementioned report concludes the supply chain management of Nike company.
Evaluation of sustainability is done through AAA model in which company can adopt, aggregate
and arbitrage the products. Several ways are discussed in the above report which will help the
company to reduce its wastage of raw material and will also help them to recycle them. In
addition, by this report reader can enhance the optimized utilization of resources. Forecasting
lessons are discussed so far and company is suggested to use delphi method of forecasting.
Supply chain structure of Nike is analysed and on the structure company's competitive
advantages are evolved.
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