Operation Management: Nike's Global Supply Chain Efficiency Report

This report provides an in-depth analysis of Nike's operation management, focusing on its global supply chain. It examines the company's internal strategies, external factors, order winners and qualifiers, market trends, and demand forecasting. The report identifies challenges in Nike's strategic planning and offers recommendations for improving efficiency and cost-effectiveness within its supply chain. It also includes a critical analysis of the proposed recommendations and implementation plan, considering alternative solutions and potential barriers to success. The analysis draws on various operational management concepts and techniques, providing a comprehensive overview of Nike's operational challenges and opportunities. This document is available on Desklib, where students can find a wealth of study resources, including past papers and solved assignments.

Operation Management
Nike’s Global Supply Chain Management
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Operation Management
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.

Operation Management
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

Operation Management
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

Operation Management
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

Operation Management
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

Operation Management
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).

Operation Management
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.

Operation Management
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)

Operation Management
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.

Operation Management
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).

Operation Management
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