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7/27/2019 Nike Final Ppd
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Supply Chain in Nike
Presented by
Group C6
Ashish Patodia(11127)
Chirag Gupta(11133)
Haniya Eram(11139)
Kaustubh Sinha(11145)
Naba Kumar Barman(11151)
Paul Joseph Fernandez(11157)
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Introduction: NIKE
The Journey
NIKES supply chain Introduction of new supply chain system
Benefits
Reasons for i2s software failure Impact of failure in new system
Conclusion
OVERVIEW OF THE CASE
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Introduction: NIKE
Founded in 1957 by Philip Knight.
Manufactures:
Sports equipment
Sports wear
Apparels
Accessory products
Products sold in over 140 countries.
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The Journey
1960s-Phillip Knight(CEO) & William Bowerman
partnered to sell running shoes to athletes named
BRS Ltd.
The Glorious 1970s
Sales Grew from $10million to $270million.
Creation of new designs
Sales increased in Europe, Asia &Australia
In 1971 designed Swoosh Symbol
In 1972 BRS Ltd became Nike Inc.
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Journey Contd..
The Successful 1980s
Public Issue of 2 million shares of common
stock
Sports Research & Development Lab was set up
Manufactured shoes in 11 countries and employed
more than 3000 people
Good hold on the overseas market New Punch Line adopted JUST DO IT
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Journey Contd
The success story continues in 1990s Total revenue surpasses $3 billions
Opened a NIKETOWN in Chicago
Nike Asia was formed
Company implemented a SCM & CRM software
The turbulent beginning of 20th century
Company profits fall in third quarter of 2001 by almost 24%
Failure of NIKE SCM software that it implemented in June2000
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Demand Management System
Nike were the first to introduce Futures booking
program.
In this orders were placed by retailers six months
ahead of the delivery dates.
These orders had to be forwarded to the factories
in Asia.
And the final product had to be shipped back. Started encountering problems with the orders due
to increasing demand , number of factories and
retailers.
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New SCM and CRM System
Nike contracted i2, to install main system
and SAP AG and Siebel Systems Inc. for
CRM. Cost of i2 software is $40 million
Total cost of project is $400 million and
going to complete in 5 years
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i2 Trade Matrix Plan SolutionSolution Objective Challenge Benefit
Strategic
Planning
Maximize profitability by
optimally allocating
resources
Unclear parameters Long term profitability
Demand management Anticipate and influence
demand
Accurate demand
estimation is difficult
Improved customer
service
Supply planning Determine what to make
and when and how to
profitably distribute
supply
Size and complexity of
problem
Global visibility and
coordination , fast
reaction to changes
Production Determine what to
produce and when
Managing material &
capacity trade offs is
complex
Reduced inventory,
Improved due date
performance
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What benefits did the company expect to
achieve by implementing a new supply
chain system?
The IT overhaul was designed to streamline
communications with buyers and suppliers. Lower operating costs.
Reduce order to delivery time by 50 percent.
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POSSIBLE REASONS FOR i2S
SOFTWARE FAILURE? Customization.
Trying to forecast too far out ahead.
Third party integrator.
Early implementation
Inexperience of i2. Pilot test.
Nike implemented two projects
simultaneously.
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NIKEs Profit falls
Nikes profit falls by 24% in 3rd quarter of
2001
Trends are what make this industry so unpredictable. Not having the right
shoes in the stores in that short window of opportunity is disastrous
-John Shanley, an analyst at Wells Fargo Secur ities
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How did the breakdown harm
Nike? Nikes share dropped from 48% to 39%.
A large number of unpopular models were producedand had to sold at high discounted rates.
Not enough quantity of popular models wereproduced.
Additional shipping costs incurred.
Liquidation of the excess inventory took Nike six toeight months.
Soured relations between Nike and major retailers.
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Important elements while
implementing a new system in
organization?
Use of third party integrators.
Taking up one project at a time. Using the system after it has developed
completely.
Testing the system before implementing.
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Mistakes made by Nike and i2
Both took hasty decisions without any
cautionary measures.
Before testing the system, it was alreadyimplemented in all the Nike outlets.
Third party integrators were not there.
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Comments on the future of Nikes
supply chain system In 2003 the company could closely monitor the
movement of goods from raw materials throughfactories to retailers.
Reduced its inventory levels. Gross margins and profits increased form 41% to
43%.
Before almost 30% of Nikes orders were based on
guesswork, in 2003 it reduced to 3% of guesswork. Future orders increased by 10% over the previousyears.
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Measures to overcome demand
forecasting problemWell equipped and competent
system
Continuous interaction with thecustomer
Proper analysis of data
Supplier and retailer feedback
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BENEFITS
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CONCLUSION
Implementation is a complex process.
Evaluating pros and cons.
Continuous assessment.
Adaptability
Importance of pilot test.
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Thank you
Just do it