Supply Chain Management - Research Paper Example

Running Head: Company Assessment Company Assessment [Tayyaba Raza] [Institute's Supply Chain Management Supply chain is the sequence of processes by which a final product is created. For many products, the supply chain takes in many different suppliers, often located in different countries. Many sophisticated manufactured products are built up in developed countries using intermediate products assembled in developing countries where wages are lower. Founded in 1964 and originally known as Blue Ribbon Sports (BRS), Nike was named in 1971 after the Greek winged Goddess of victory. The sneakers and sportswear manufacturer has its headquarters in Oregon, United States. (Nikebiz, 2009) Nike faced problems with its Chinese manufacturers last year, who produce 1/3 of Nike's shoes and a large proportion of Nike equipments and apparel as well. China, which is Nike's largest single sourcing country, employs more than 210,000 people and has over 180 manufacturers. The supply chain management was affected by the issues of unpaid wages, presentation of falsified documents, and underage employees. (Global Supply Chain Council, 2008) Nike tried to make sure that its code of conduct was followed by the Chinese manufacturers, in addition to Chinese laws. The official report released by Nike stated that labor-related issues such as hiring practices, inadequate grievance system for workers, falsified payroll records, and underage workers, were of great concern. (Global Supply Chain Council, 2008) When an identity check was carried out on 150,000 of Nike's workers in China, it was found that 167 employees were underage at the tie of recruitment and two of them were still underage. Paid wages were also not as per the raises mandated by the government. Moreover, the report stated that some of Nike's Chinese contract factories were playing tricks so they don't have to alter the wage levels. (Global Supply Chain Council, 2008) Nike is building a logistics centre in eastern China, which is to complete by the end of next year. This facility, like that in Jiangsu province, will be using high-tech conveyers and sorters for tracking and mobility of its products.Radio frequency technology will also be used to enhance efficiency and accuracy. Nike China is working hard to develop a state-of-the-art logistics facility and exhibit its expertise in supply chain management. It's also working to resolve labor issues, which leave a bad impact on company's reputation. Employing underage workers is the violation of international human rights and working laws. Moreover, many countries, such as USA are very particular about not doing trade of items that involve underage labor. This does not only harm company's prestige but also its revenues. (Gabe Perna, 2009 and Portland Business Journal, 2009) Recently, a Greenpeace report named "Slaughtering the Amazon" had identified different shoe companies that were held responsible for deforestation in the Amazon. Nike was one of them. Last month Nike announced its new leather policy of no sourcing from Amazon rainforest. It conducted extensive discussion with the suppliers and claimed that it is going to make sure that leather used in Nike products is not coming from Amazon rainforests. However, as there is no standard tracing systems a yet, the company cannot give a 100% guarantee. (Global Supply Chain Council, 2009) Nike has called its suppliers to develop a tracking system that would make sure that the leather used does not come from cattle raised in Amazon Biome. Suppliers are to come up with a transparent and traceable tracking system by July 1 next year. Incase suppliers fail to do so; Nike will extend the area outside of Amazon as its leather source. Suppliers are also required to become members of Leather Working Group by the end of this year. Nike is working with this group to create an industry standard traceability system. (Global Supply Chain Council, 2009) References Nikebiz, Company Overview, 2009, < http://www.nikebiz.com/company_overview/facts.html>, Accessed on 12 August, 2009 Global Supply Chain Council, Nike's Supply Chain Report Highlights Problems at China Factories, 27 March, 2008, < http://www.supplychain.cn/en/art/2408/>, Accessed on 12 August, 2009 Gabe Perna, Supply Chain Digital, Nike to build logistics center in China, 18 February, 2009, http://www.supplychaindigital.com/MarketSector/Logistics-and-Distribution/Nike-to-build-logistics-center-in-China_17260.aspx, Accessed on August 12, 2009 Portland Business Journal, Nike breaks ground on distribution center in China, 18 February, 2009, http://portland.bizjournals.com/portland/stories/2009/02/16/daily28.html, Accesed on August 12, 2009 Global Supply Chain Council, Nike's New Leather Policy: No Sourcing From Amazon Rainforest, 28 July, 2009, http://www.supplychains.com/en/art/2991/, Accessed on August 12, 2009 Business Intelligence Business intelligence covers areas such as market analysis, competition analysis, and industry analysis. An efficient business intelligence model ties together different ways of improving business, resulting in easy and communication. It also helps in generating ideas for new initiatives and effective marketing. It also gives a deeper insight of what consumers want and how to beat the top competitors in the market. (wiseGEEK, 2009) Nike was facing problems relating to data collection and standardization. In February 2006, Nike announced its BI project. Miss Marianne Faro, the then Nike's European information manager, had commented that Nike's reporting system was causing problems as it was not standardized. Different Nike units used varied techniques and methods to record and evaluate the business figures. Moreover, incorporation of newer acquisitions into the existing system was also a matter of concern. (Jeremy Kirk, 2006) Nike Business Intelligence Strategy was designed such that data could be processed faster and be standardized. Miss Faro had also mentioned that Nike had switched from its ERP (enterprise resource planning) system and transactional systems region after region. Business Workflow-based warehouse has replaced its five datamarts. Nike had also aimed to lower down the number of reports it generated. It was decided that 3,000 reports that were acquired from the region covering Africa, Europe, and Middle East, were to be lowered down to 1,000 only by the end of 2008 fiscal year. (Jeremy Kirk, 2006) Reports from different parts of the world implied different meanings of the same business terms. In order to fix this problem, Nike came up with its own common dictionary. At times, a word as simple as 'month' was also used to imply different meanings. Some referred to it as a calendar month, while some adjusted the number of days of months to their needs. This dictionary helped in standardizing the data. The strategy has not only been adopted by the management section, but also Nike's finance department. (Jeremy Kirk, 2006) Nike also revised its marketing strategy by restraining from selective-demand advertising of professional athletes only. It came up with its 'swoosh' logo and 'Just do it' phrase, in order to cover the extreme sports and aerobics market segments. It also aimed to target casual footwear market and brown shoe market. With expansion of its product line, in conjunction with signing of famous athletes like Venus Williams and Michael Jordan for its advertising campaign, Nike's publicity increased phenomenally and attracted males and females both. (Scribd Working Paper, 2006) Nike was also clever enough to promote the brand when a major event was nearing; giving an impression that it was one of the sponsors. Moreover, it also sponsored several events and was able to penetrate extreme sports market by doing cooperative advertising with a skateboard manufacturer. (Scribd Working Paper, 2006) Nike has faced negative publicity for manufacturing most of its products in developing countries and employing underage laborers. Nike may highlight its non-profit organization, Nike Foundation, which is working for empowerment of young females in the developing world in order to create a positive impact. It should also show the working conditions at its manufacturing plants in its adverts in order to satisfy the customers. To deal with this issue of supply chain management, Nike introduced the internet facility to customize the shoe purchases. This makes it easier to cater the niche markets and to keep up with the changing trends. Some people argue that expanding product line is not enough. Nike should also increase existing offerings and introduce mild-priced athletic wear as a lot of customers are not willing to pay hundreds of bucks, even for high performance shoes. (Scribd Working Paper, 2006) References wiseGEEK, What is Business Intelligence, 2009, http://www.wisegeek.com/what-is-business-intelligence.htm, Accessed on 12 August, 2009 Scribd Working Paper, Nike: Maintaining a Promotional Edge, February, 2006, http://www.scribd.com/doc/3575302/Nike-Maintaining-a-Promotional-Edge, Accessed on 12 August, 2009 Jeremy Kirk, InfoWorld, Nike BI project seeks standardization, February 6, 2006, http://www.infoworld.com/t/data-management/nike-bi-project-seeks-standardization-548, Accessed on 12 August, 2009 E-Commerce and Small Business In September, 2006, Nike decided to look seriously into expanding its e-commerce rather than just having it as a small sideline business. Mr. Mark Parker, CEO, had told the analysts that Nike was earning 1% to 2% of its total revenue from ecommerce. This amounted to $16.3 billion. (Internet Reatiler, 2007) Until 2006 Nike had been neglecting e-commerce but then it realized that it could grow phenomenally with the help of e-commerce. In order to do that, Nike re-arranged its website with richer media and faster searching facility. Chris Shimojima was appointed as the vice president, global e-commerce. (Internet Reatiler, 2007) Improved web infrastructure allowed Nike to grow easily. Nike was focusing on US markets initially, but now it is also covering European and Asia Pacific region. Nike also expanded it e-commerce management team in October 2007. It recruited three previous executives of Art.com Inc., target Corp., and Kohl's Corp. (Internet Reatiler, 2007) A substantial rise in Nike's annual sales was reported in 2008, only a year after it expanded its e-commerce management team. In the fiscal year 2008, Nike's sales rose to 30% because of e-commerce. Nike told that web contributed to almost 2% of its annual sales revenue. This amounted to $424.3 million. In the fiscal year 2007, the revenue generated from web amounted to $326.5 million. (Internet Retailer, 2008) Only in a period of a year, Nike was able to improve its rank from 77 to 47 in the 'Internet Retailer Top 500 Guide'. Net income for the fiscal year 2008 was $1.9 billion, while sales were $18.6 billion. For fiscal year 2007, net income amounted to $1.5 billion with sales revenue of $ 16.3 billion. (Internet Retailer, 2008) In the fiscal year 2008, Nike's approximate e-commerce sales amounted to 4% of its total sales. Nike is really encouraged to recruit more resources for its web operations. For instance, Nike.com was redesigned in 2006 and richer media, for instance Flash, was used to enhance the web. This change from traditional ways of e-commerce not only made the purchase process easier by offering a shopping cart facility, but also enhanced users' experience. Most of other companies were still using HTML. Moreover, former vice president and general manager of Sears Direct, Chris Shimojima, was also hired, as mentioned earlier. (Internet Retailer, 2008 and MarketingVox, 2006) References Internet Retailer, Nike gets its e-commerce team into shape with three retail veterans, 15 October, 2007, , Accessed on 12 August, 2009 Internet Retailer, Nike steps up its commitment to e-commerce, 26 September, 2007, http://www.internetretailer.com/dailyNews.aspid=23871, Accessed on 12 August, 2009 Internet Retailer, Nike sprints to higher annual web sales, 2 July, 2008, http://www.internetretailer.com/dailyNews.aspid=26972, Accessed on 12 August, 2009 Marketin Vox, Nike Uses Flash for E-Commerce at New NikeStore.com, October, 2006, , Accessed on 12 August, 2009 Enterprise Wise and Inter-Enterprise System The term 'enterprise wide' is used to refer to a 'corporate-wide' or a 'company'. To be more specific, it means a parent company's subsidiaries and firms that are affiliated with it, irrespective of the geographical location and the business line. Inter-enterprise systems are systems designed to make collaboration easier for the company and its partners. (Minnesota OETweb, not dated and IEEE Xplore, not dated) In 2002 Nike revised its supply chain strategy for US and deployed SAP Apparel and Footwear Solution, a leading provider of e-business software solutions at the time. This was a big achievement for its enterprise technology infrastructure. Nike chose SAP AFS solution for all its technology operations. (AllBusiness, 2002) This sophisticated IT system helped in streamlining company procedures and making them efficient for the customers and the company itself. It improved Nike's supply chain and manufacturing potentials, and presented a consistent picture to its retail consumers. (AllBusiness, 2002) Nike Supply Chain (NSC) project was based on SAP Apparel and Footwear Solution. Later, it consolidated many other application subsystems of Nike into 5 main systems. SAP AFS solution was designed particularly in accordance with the unique requirements of the footwear and apparel industry. It provided Nike with a very comprehensive and complete enterprise management system. It integrated different aspects of the business which included logistics, finance, and order fulfillment. Inventory was made very easy to manage with its data structure solution. (AllBusiness, 2002) Nike had planned to extend its SAP solution to its operations in Europe as well. SAP's Professional Services Organization, along with companies like HP and Bristlecone Inc., had supported the implementation of this program. (AllBusiness, 2002) It gave Nike complete control of its supply chain, starting from acquiring raw materials to delivery of finished goods. This solution incorporated offshore as well as in-house manufacturing. Moreover, it also dealt with subcontracting, global sourcing, and direct shipment processes. It helped in applying global strategies and maintaining consistent quality. (AllBusiness, 2002) The year after that, Nike chose GeoLearning Inc.'s GeoMaestro e-learning delivery platform and learning management system to encourage enterprise-wide learning. Nike deployed GeoLearning's Classroom & Event Scheduler and GeoMaestro LMS, in conjunction with MyPlan Competency Management Tool. This was done in order to conduct classroom training and e-learning for Nike's 10,000 workers. GeoLearning's ASP delivery model was to be used for deployment of the whole system. This model was known for its scalability and speed of implementation. (Elearnity, 2003) References Minnesota OETweb, BCM Glossary, not dated, http://www.state.mn.us/portal/mn/jsp/content.doagency=OETweb&action=content&contenttype=EDITORIAL&contentkey=BCM_Glossary_051806082957, Accessed on 12 August, 2009 IEEE Xplore, A Multi-Agent-Based Service-Oriented Architecture for Inter-Enterprise Cooperation System, not dated, http://ieeexplore.ieee.org/Xplore/login.jspurl=http%3A%2F%2Fieeexplore.ieee.org%2Fiel5%2F4270559%2F4270560%2F04270588.pdf%3Farnumber%3D4270588&authDecision=-203, Accessed on 12 August, 2009 AllBusiness, Nike Successfully Deploys SAP Apparel And Footwear Solution In US, 5 June, 2002, , Accessed on 12 August, 2009 Elearnity, Nike Global Footwear selects GeoLearning LMS, 2003, http://www.elearnity.com/EKCLoad.htmload=ByKey/DWIN5N5FQS, Accessed on 12 August, 2009 Read More