Supply Chain Management - Nike & Adidas

1. Discussion: What factors drive Nike’s decision to stick with some form of network organizational structure rather than own its manufacturing operations?

     History: NIKE, Inc. is engaged in the design, development and worldwide                 marketing of footwear, apparel, equipment and accessory products. The                 Company sells its products to retail accounts and through a mix of            independent distributors, licensees and subsidiaries in over 120 countries            around the

Nike is as major US footwear, clothing and sportswear supplier based in Beaverton, Oregon. In this era, Nike is considered the world’s leading supplier

“Nike is focusing on long-term supply agreements by having fewer factories that are getting in the way of product our strict standards of sustainability and product excellence.”(help-en-us.nike.com/)

Nike subcontracts the production process of its footwear to 900 contract factories located worldwide with Asian developing countries such as China, Indonesia and Vietnam accounting for the bulk of total world production. Production of the footwear is based on a vertically integrated model. In the primary stage, raw materials such as rubber, leather and plastic are extracted from places located in close proximity from the factories. In the secondary stage, the extracted resources are sent to the factories or “Sweatshops” for manufacturing. It should be noted that the whole production process of Nike footwear are being carried out by independent private contractors.

The athletic shoe industry is made up of companies that produce footwear for athletic use. This is a strong industry and has been around for over 100 years. The athletic shoe industry is one of the fastest growing footwear industries and have top growing sales compared to other footwear industries (NDP Group, 2016). The key players that currently dominate the market are Nike, Adidas, and Puma (Kates & Bolduc, 2013). This paper will use the porter five forces, industry life cycle, and the key players to understand the industry. Over these years the athletic shoe industry has grown into a competitive market.

The supply chain is made up of suppliers, manufacturing centers, warehouses, raw materials, retail stores, distribution centers, work in process inventory and finished products that typically flow between the suppliers reaching customers (Slack et al., 2013). Supply chain management on the other hand, combines all of these to ensure that the right quantities are distributed to the right locations at the right time(Barratt, 2004). Nike’s supply chain is centralized since the outsourcing, designing of the product, and logistics are all controlled by the company’s headquarters in Beaverton, Oregon. Nike outsource most of its manufacturing products to overseas factories so that it would produce shoes in Japan for lower costs than in the United States. However, when the production costs in Japan increased; Nike shifted its manufacturing firms to Korea and Taiwan. Later on, Korea and Taiwan experienced strong economic growth; as a result, Nike ended up relocating in Thailand, China, Cambodia, Indonesia and Vietnam (low cost countries). Nike operates by three distribution

This research paper will be demonstrating a more in depth look at the way athletic shoes are produced and sold. The information that will be provided contains all the background history and production process all the way up until the shoe is ready to be sold. The brand of shoe that I am specifically targeting is Nike. I wanted to do a big brand name like Nike because it is one of the most dominating companies in the sports industry. Their shoes are upon the highest sellers in the U.S. and many sports teams and athletes sponsor Nike to extend the name to many people. Nike is so popular throughout the world and it will be interesting to learn more about where the product is actually coming from and how it is being made.

After sluggish focus and growth in the 1980ies, Nike experienced strong growth in the 1990ies and cemented the position as global recognizable brand. The increased international focus created strains on the supply chain, which was consider inadequate to cater efficiently to the organization and the rapid changes consumer demands . As a consequence of the afore mentioned supply chain problem Nike faced inefficient inventory management, problems in flow of goods and poor demand

Rosenzweig, Philip M. (1994) International Sourcing in Athletic Footwear: Nike and Reebok. Harvard Business School Case 394-189. Retrieved from https://hbr.org/product/International-Sourcing-in/an/394189-PDF-ENG

Nike took responsibility and created stringent benchmarks for production associations - the Code of Conduct (CoC). While CoC became a need and necessity as it was evident that there still was more to be carried out to direct and deal with the inventory network. Nike constituted the CR Board. It also disclosed the locations of the source factories and manufacturing plants. Nike took measures to match the expectations and published its progress reports. This signalled Nike’s tough stand against these issues and that Nike takes is very seriously to strictly adhere to the best practices and find the solutions. This has resulted into transparency. It has empowered Nike to better fathom the issues and shape more fitting

Home country refers to the headquarters of the organization. As Nike’s headquarters is situated at Beaverton, Oregon, United States of America, the home country of Nike will be United States of America. “When a nation environment permits and supports the most rapid accumulation of specialized assets and skills, sometimes simply because greater effort and

(1) How did Adidas become Europe’s leading sports footwear manufacturer, and what have been sources of its competitive advantage?

Thus, Nike began to persuade its suppliers to relocate their operations to other, lower-cost countries. The company suppliers opened new manufacturing plants in Indonesia, China and Vietnam. By guaranteeing a significant number of orders and by placing Nike employees at these new factories to help monitor product quality and production processes, Nike could help its lead vendors establish an extensive network of footwear factories throughout Southeast Asia. Today, Nike’s products are manufactured in more than 700 factories, employing over 500,000 workers in 51 countries. Nike has only 22,658 direct employees, the clear majority working in the United States. Over the years, Nike has broadened its product range. Whereas in 1980, Nike sold 175 different styles of shoes, it offered 772 different styles in its Spring 1990 collection and almost 1200 different styles in its Spring 2000 collection.11 Nike has also moved into other sectors (apparel and sports equipment) and expanded its sales beyond the United States into Europe, Latin America and

This paper shall discuss the opportunities that exist to improve supply-chain activities for Nike; how to better align logistics and the company’s strategic plan, to integrate the supply-chain; as well as how to continue to meet the labor rights issues the company continues to address within its supply chain. In order to improve the movement of goods; identify challenges in integration of suppliers and manufacturers in the logistics management; Nike must be willing to adjust their practices to current circumstances affecting supply-chain. Many processes exist on the market today that companies can adopt to increase their values, which affects the supply-chain management on organizational level; and financial implications by reviewing some of the best practices available on the market and improving their own supply-chain management.