Assignment on Supply Chain Management

“Process mapping design of supply chain management of Nike”

SUBMITTED TO:Mr. Dibyendu B. Datta

SUBMITTED BYASHISH KUMAR (24)

ASHISH KUMAR VERMA (25)

SUPPLY CHAIN MANAGEMENT- PROCESS MAPPING DESIGN OF NIKE:

The supply chain for Nike starts out with the suppliers who sell Nike the rubber,

die, and materials used to make products. The factories then transform those raw

materials into products. Then the factories ship the items to wholesalers who

then sell them to the retail stores across the world. The retail stores ultimately

sell Nike products to the everyday customers. When it comes to delivery Nike

does a good job of keeping positive fill rates with on time delivery. Their quality is

strong because they are able to meet customers’ specifications and customers

have stayed loyal to the brand for a long time. Flexibility is another positive Nike

has because they are able to meet customer demand changes in production.

Lastly, Nike is effective in time because they are able to complete the entire

supply chain process in an orderly and timely fashion to continue to meet

demands.

Supply chain management defined as the design and management of seamless,

value-added processes across organizational boundaries to meet the real needs

of the end customer. Nike currently has the typical supply chain managements in

effect which consists of distribution from suppliers to factories which then

connects to warehouses, lastly to retailers which help to reach the customers. To

enhance their customer service Nike retailers should offer charge sends for

customers who would like to purchase items from stores that are not be available

online, from the comfort of their home. This would help to boost the customer

experience scores because as they are increasing the amount of units in which

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they are selling, they are able to engage in an experience with the customer that

would be satisfactory and ultimately memorable as well.

Quality Control:

The Nike Company currently uses flow charts to depict step by step processes

when mapping out ideas for events such as new product launch or holiday

transitions, run (trend charts) to show what items are selling more/better in a

particular area and cause and effect(fishbone diagrams) to show the outcome of

the selected reports or ideas. Continuous improvement is used in the company

so that it can continue to grow and prosper. Through the use of opinions in which

customers lend during customer service surveys as well as their store visits help

to keep the company aware of how to become the best in the retail clothing

market. Supplier certification as well as inspection at the time the goods are

finished is also used for inspection to ensure quality service. Nike also

implements the Six Sigma Practices in their routine when assessing the

customer service aspect of the company. Through the use of customer surveys

and feedback from customers, the company is able to work on the weak areas

that can become beneficial.

Managing Quality:

Availability: The Nike products are available both within retail stores as well as

online. Customers are also able to customize equipment and footwear according

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to their color or style specifications and the products are able to be shipped to the

customer according to their preference of delivery and arrival time.

Quality of Design: Nike provides top- of- the line clothing and footwear which

are comfortable and reliable for the everyday commuter as well as energetic

athlete. Whether producing a basketball or running shoe, they strive to meet the

expectations of customers and continue to give 100% in doing so. Nike provides

inexpensive sporty, efficient products that are stylish and easy to maintain and

keep up. In the field of service area, Nike practices a 30- day policy for online as

well as in store unwashed, unworn items to be returned or exchanged to meet

the customers’ requirements. They also train their employees so that quick and

courteous customer service can be guaranteed or given in a satisfactory manner.

Nike also asks for customer feedback on purchases in store and online as well,

but only in-store, offering the customer a chance to voice their opinions and

simultaneously earn discounts. This helps them to stay aware of what customers

expect when being serviced (quality of conformance). Nike currently has the

quality service of conformance in place, aiming to continue to market and

produce products that are reliable to the customer when they desire. This also

helps build the NIKE brand name.

Service Process Design: Nike’s three elements of the service-product bundle.

Tangible (Explicit Service) - Nike provides the customers with a variety of

sporting goods and apparel, which can be worn causally or used athletically. The

clothes are produced in a wide variety of factories and sold by retailers all over

the world.

Psychological (Implicit Service) - The look and feel of Nike’s products. The

style type and design that the name brand gives. The personal mindset Nike

gives to the customer knowing that they have a high quality product.

Physical (Facilitating Goods) - The actual clothing or equipment worn or used

after purchasing the items. The shirts, shoes, hats, sporting goods, pants, and all

other accessories Nike produces.

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The cell Nike operates in on the service matrix. Nike would be located right in

between Provider- Routed and a Co-Routed company on the service matrix

because they operate in the mass production of apparel, but they lean closer to a

Co-Routed company because it has many styles to offer including shoes with a

customization feature available. Nike also produces all types of sports apparel,

golf clubs, t-shirts, hats, and more. Nike focuses on one industry, but provides a

flexible direction for all types of customers. Some types of customer contact Nike

encounters and how they respond to it. Nike is definitely a Low-Contact company

because face-to-face interaction is not required. Nike has efficient processing

and fairly standardized products. Some problems Nike may encounter would

involve inventory and demand levels. They then must re-evaluate the demand of

a particular product, and change processes based on the new demands of their

customers as a whole. They must also keep a variety of up to date quality

products to keep customers coming back. Nike uses self-service though the

process of shopping and ordering online. It also provides a way for customers to

design and create their own version of a specific pair of shoes. These examples

show self-service being used by Nike, but besides these two services the

majority of Nike’s business is not self-service. In the Nike retail store technology

is very much so an innovative tool. A computer generated inventory control

system is used to find various sizes of merchandise on stock so that the sales

associate is able to assist customers quicker. This is so because the shipment

boxes of merchandise are scanned before processing, into the system with a bar

code reader after being unloaded from trucks.

Nike also uses focus operations to drive sells within the retail store as well as

online. Within retail stores there are sometimes additional percentage discounts

on certain active wear or footwear to persuade the customer to buy more.

Customer service scores are also boosted along with sales when sales

associates hand out mesh bags for the customers to store their potential buys

while browsing in the store. This is so because the customer then feels

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acknowledged and it also gives them the ability to pick up more. Special shipping

discounts and promotions are also offered online for the customer’s convenience

when the customer spends a particular amount or buys a certain item.

The Nike Company supports their employees through their internal service

quality. Due to the fact that they value and appreciate their hardworking and

productive employees, their company continues to be one of satisfaction and

positivity. Through the refreshing and warm work place environment provided, a

furnished lounge with many activities to keep employees' breaks well spent, and

also comfortable uniforms which are universal for both men and women, Nike

keeps the employee satisfied. Nike provided monetary bonuses and awards for

the performance job recognition of employees. This helps employees to stay

satisfied with their jobs in addition to the company discount that they receive and

are able to share with family as well as the employee exclusive stores.

Nike offers the return service policy of 30 day refund or exchange with receipt of

unwashed, unworn merchandise if the event that the customer is not satisfied.

Items purchased online are also able to be returned online or within store when

accompanied by the online transaction receipt. In the event the customer does

not possess a receipt and would like to return/exchange an item purchased at a

Nike retail store, they can be issued a store credit for the purchase price of the

item. Customers can also receive price adjustments within 14 days of receipt

date on items purchased if it happens to go on sale when presenting a receipt of

purchase at a retail location.

Process Selection:

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Nike uses an assembly line flow. “An assembly line flow is characterized by a

linear sequence of operations. The product moves from one step to the next in a

sequential matter from beginning to end.” (Operations Management) They also

use a project flow for a small portion of the business. A project flow is used for

unique or creative products. Each unit is made individually and is different than

any other unit. So for Nike when and order comes in from the customer, each

shoe is going to be made different from others, whether it be the color or style of

the shoe. Nike uses a “Make to Stock” customer order which provides a fast

service to customers from available stock. Make to stock has a standardized

product from the producer, not specified by the customer. “Everything is keyed to

producing inventory in advance of actual demand in order to have proper

products in stock, for when the customers call (Operations Management).” In the

make to stock customer order process, products are not always readily available.

Customers can put orders through but the products can be on back order and

they will have to wait until more of the product is produced. They also use "Make

to Order" because there are customers who customize their own shoes online

and then Nike has to make the orders as they come in, they will not have them in

stock

Nike falls into the continuous and assembly line cell. This cell consists of order

type, flow of product, product variety, market type, and volume. Nike has a large

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batch, a sequenced flow of product, a high product variety, a mass market type,

and a high volume. The factors that influence their process selection are the fact

that they have a high volume and standardized product. They have to produce a

lot of shoes and the shoes are made by the producers not the consumers, so

they are not made to order they are mostly always in stock. Nike has already

adopted the mass customization methods

Inventory:

Inventory is one of the most important operations management responsibilities of

any company because it affects the delivery of goods to customers, which

controls the amount of product a developed business makes. Nike Inc., a

company that focuses on the distribution and sales of finished goods, operates in

the areas of footwear, apparel and sporting equipment. Operating in various

countries as well as states, the Nike Company has many retail locations which

house their store’s stock supply of merchandise on their grounds, keeping

replenishment of materials to meet demands. The various supply of inventory

includes merchandise in different sizes and colors to satisfy customer preference

during regular shopping occasions as well as times where there are holiday

rushes for the “last minute” and/or “perfect gift”. The various points of inventory

structure, item cost, ordering cost, holding cost as well as stock out costs are

determined by corporate offices after the reviewing of the store’s ability to meet

annual profit goals as well as the store’s regional geographic. These

headquarters also view records which show statistics of items which are more

popular in sales, this helps to determine the amount of a certain products to order

to create a shipment schedule for each store. In this retail market the demand is

independent because it is influenced by market conditions outside of the control

of operations. In this operation various materials of shoes, clothing, and sporting

equipment is replenished before it runs out. This helps the company from a

customer service aspect as well because they are able to deliver a product in a

timely fashion to each shopper.

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Filling the orders:

Nike also overhauled its supply-chain system, which often left retailers either

desperately awaiting delivery of hot shoes or struggling to get rid of the duds.

The old jerry-built compilation strung together 27 different computer systems

worldwide, most of which couldn't talk with the others. Under Denson's direction,

Nike has spent $500 million to build a new system. The percentage of shoes it

makes without a firm order from a retailer has fallen from 30% to 3%, while the

lead time for getting new sneaker styles to market has been cut to six months

from nine. Meanwhile, Nike has started paying serious attention to its handful of

acquisitions, once treated as more of an afterthought. After buying up Cole Haan

almost 15 years ago, Nike struggled to add any real value at the dress-shoe

outfit. But lately, Nike managers have figured out that by giving their acquired

brands some independence, rather than forcing Nike's testosterone-laced

corporate culture on them, they can achieve better results. Nike doesn't break out

results for each sub-brand, but the group's sales grew 51%, to $1.4 billion last

year.

Nike has also had to grapple with the touchy topic of sweatshop labor at the 900-

odd independent overseas factories that make its clothes and sneakers. When

Nike was getting pummeled on the subject in the 1990s, it typically had only two

responses: anger and panic. Executives would issue denials, lash out at critics,

and then rush someone to the offending supplier to put out the fire. But since

2002, Nike has built an elaborate program to deal with charges of labor

exploitation. It allows random factory inspections by the Fair Labor Assn., a

monitoring outfit it founded with human rights groups and other big companies,

such as Reebok International Ltd. and Liz Claiborne Inc., which use overseas

contractors. Nike also has an in-house staff of 97 which has inspected 600

factories in the past two years, grading them on labor standards. It's overseas, in

fact, where most of Nike's sales now come from.

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Nike operates distribution centers in Wilsonville, Oregon and Memphis,

Tennessee and deals with local distributors all over the world. In addition, Nike

also has retail stores called Nike town stores (13 in US) and Nike factory stores

(80 in US) around the world. Nike focuses on the “create”, “source”, “market &

sell” and “return & service” processes. During the “create” process, the products

are designed to capture the customer’s needs, while product life cycles are

planned during portfolio planning, and finally the products are transitioned in and

out of the market. Nike focuses on the “source” process to do strategic sourcing

by selecting contract manufacturers and suppliers primarily in Asia, thus

establishing not only long term contractual agreements but monitoring them as

well. During the supply planning process, capacity and material plans are

generated to meet the footwear and apparel demand. These plans are validated

through collaborative processes with the contract manufacturers and suppliers.

Nike was created in 1971 and began outsourcing in the mid 1970’s. In 1975, Nike

introduces the “Futures” program. Nike’s patented AIR-SOLE technology is

placed in Nike shoes for the first time in 1979. In 1980, Nike begins negotiations

with China to manufacture shoes there. “Just Do It” slogan is introduced in 1988.

It becomes one the most successful advertising slogans ever. In 2001, Nike and

i2 blame each other over lost revenues to Nike. In an industry first Nike reveals

their list of over 700 suppliers from all over the world. Relationship with suppliers

and the companies who assemble Nike products allows them to reduce

administrative costs, payroll costs and switch to companies that provide low labor

costs and a quality product. Nike increases the speed their product flows through

the supply chain by sending new designs to suppliers who produce shoe parts,

suppliers send these shoe parts to the assembly companies and ship the finished

products to distributors worldwide. This allows them cut down on the amount of

time required from the initial design, to production and then distribution.

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The below given supply chain model of Nike illustrates the major entities in Nike’s

supply chain and the flow of information upstream and downstream to coordinate

the activities involved in buying, making and moving a product.

Nike’s Supply Chain:

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Tier 3 Suppliers

Tier 2Suppliers

Tier 1Suppliers

ContractSupplier

Nike

Distributor

Retailers

Consumers

Upstream

Downstream

Capacity, inventory level, delivery schedule, payment terms.

Orders, return requests, repair and service requests, payments.

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ContractSupplier

Nike enjoys a strong brand, well-managed distribution processes and a

compelling product offering. However, with new competitive entrants with better

service and lead time, and even fashion brands moving into their market space,

supply chain excellence has been elevated in the past few years, and is viewed

as a competitive weapon. Nike’s “Just Do It” motto has affected the mentality of

the company and the transformation agenda is calling for change. Their new

Process Excellence mantra calls for: process innovation (do it different),

continuous improvement (do it better), and execution discipline (do it right). In

support of this philosophy, their transformation initiative is defined as the 5 pillars

of the supply chain house: achieve delivery precision through disciplined end-to-

end execution enable category consumer focus w/ multiple supply chains and

speed to market think and act like a retailer, because we are; focus on the

customer maintain pull-market through disciplined inventory optimize cost &

infrastructure to drive profitable growth. In meeting the major object of improving

customer satisfaction, this supply chain transformation is focused on the

customer – meeting customer product requirements, improving customer

relationships, improving requested delivery performance, and reducing claims

and cancellations to lower inventory holding costs. Focused on actual point-of-

sale demand, processes are being transformed from the retail shelf backwards,

to achieve a leveled flow of product throughout the supply chain. Demand

planning processes are also being redesigned from the retail perspective, and

“retail reality” is incorporated in product design. Their delivery precision roadmap,

includes a playbook of prioritized initiatives, with executive sponsorship,

including: demand/supply matching, improving sales catalog accuracy,

streamlining distribution center operations, and optimizing processes globally.

They have also created a governance board that sets the strategies, prioritizes

the initiatives and drives company-wide execution based upon standardized

processes and platforms. Several overarching principles of Nike’s supply chain

transformation include: focus on the vital few prioritize investments aligned with

business strategy and return simplify end-to-end: drive out waste & complexity

from the process first, then enable avoid customization: standardize solutions to

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improve processes copy-paste companywide: replicate best practices across

business units, regions and brands lead the change: invest in project & transition

management accelerate the pace: respond quickly to new business needs

deliver business results: finish what we start through business benefits

achievement.

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