Nike Case Study

Nike roots trace themselves back to the 1950s with University of Oregon field coach Bill
Bowerman. Bowerman was always trying to find a competitive advantage for his track runners
and had the idea of a lighter show. He would late team up with recent graduate Phil Knight and
create the first Nike shoe, the Swoosh, which debuted in 1972. Through the years, Nike would
continue to create innovative sports apparel, expand into new markets, and challenge the way
people look at athletics.
Forty years later Nike continues to seek new and innovative ways to develop superior
athletic products, and creative methods to communicate directly with customers (nikeinc,
2012). Nike is one of the leading distributor and manufacturer of sports apparel, controlling 32
percent of the worldwide market (Koch, 2004). Nike offers brands such as Converse, Cole
Hann, Umbro, Jordan brand, etc. to markets around the world. With a stock price ranging from
91.40-92.95, with 450.55 million shares, Nike is one of the highest grossing apparel companies
in the world. Lead by president and CEO Mark Parker, Nike runs a complete offense, and its
based on core commitment to innovation.(nikeinc, 2012)
In the 2012 fiscal year, Nike generated 24.1 billion dollars, a 16 percent increase from
the previous year. The company has announced an increase in its fiscal 2015 target revenue to
range from 28-30 billion (nikeinc, 2012). Nike employs more than 30,000 employees worldwide,
and the contracts that Nike is involved in employ more than 80,000 employees (nikebiz, 2012).
Nike continues to follow its mission statement, To bring inspiration and innovation to every
athlete in the world*(if you have a body you are an athlete),(nikeinc, 2012).
In 2000, Nike decided to implement a new supply chain management that would be able
to forecast market demand, and meet those demands quickly. At the same time the organization
was also in the process of implementing a SAP ERP system, but found that its demand

forecasting was inadequate to their needs at the time (Laudon, Laudon, 2010). Nike decided to
use i2 technologies supply chain management software which was meant to improve
management of inventory, production, shipping, and sales forecasting. Nike chose the i2
software to be able to respond faster to shoe market changes, plan production schedules of the
new demand, and begin production of the new shoes in one week, rather than the one month it
took before (Laudon, Laudon, 2010). If successful, Nike would quickly be able to reduce the
production of unwanted shoes, reducing inventory, while increasing the production of shoe
styles that were rising in demand (Laudon, Laudon, 2010). Nike knew that ERP systems can be
dangerous, and were being patient when implementing it. However, since the i2 system was
much smaller, they did not take as many precautions as they should have (Koch, 2004).
The new i2 system had to be customized to the legacy that was being used at that
timeNike decided to do a Big Bang approach for implementing their new supply chain
management system. In 2000 the demand-planning engine, I2, of Nike made orders for
thousands more Air Garnetts than the market had demanded and thousand fewer of the then
popular Air Jordans (Koch, 2004). This caused a loss of more than 100 million in sales, and
depressed the stock price by 20 percent. This caused a large amount of class-action lawsuits.
Nike stated that the new system was responsible for manufacturing the wrong kind of sport shoe
(McVey, 2001). However, Nike failed to properly train its employees to understand the new
system, which lead to the excess creating of the wrong product (McVey, 2001). This being a
major blow to Nike, which spent over 400 million dollars on the implementation (Kalin, 2002).
Nike also found the system was too slow, didnt integrate well, and had some bugs. (Koch,
2004).
Though Nike faced massive losses and large technical issues, they did not waver when
the system did not function properly. The organization brought in consultants to build databases
to bypass portions of the i2 application. They also built bridges within the software to enable

data sharing. Nike switched its short and medium ranged sneaker planning to the SAP ERP
system, which used a more predictive algorithms for estimating demand (Koch, 2004). Finding a
new found respect towards the SCM system, Nike focused heavily on training its employees.
Employees received 140-180 hours of training to understand how the system works (Koch,
2004). Nike implemented a phased geographical approach when implementing its new SCM,
CRM, and ERP systems. Though envisioned as a 2-3 year implementation, it took Nike 6 years,
and an upwards of 500 million dollars to properly implement the supply chain management
system (Koch, 2004).
Since Nike implemented an ERP, CRM, and SCM system all at once, they experienced a
multitude of benefits. Benefits linked to the i2 management system were that they now had
better collaboration with their Far East factories. This would reduce the amount of pre-building
time required per shoe from 30 percent to roughly 3 percent (Koch, 2004). The amount of time
from initiating and completion of the shoe was reduced from nine to six months allowing faster
product-to-market cycle time. Inventory levels were reduced from cutting interval time from one
month to one week (Koch, 2004). The system also allowed better demand forecasting, and
demand visibility. A reduced risk of experience a bullwhip effect. Lastly major cost reduction
through reduced inventory, process costs, and product costs, increasing gross margins
(McLaren, Head, Yuan, 2004).
Though Nike experienced a more problematic experience through their implementation
of SCM, the benefits that the new system and offer have allowed the company to improve
revenue, productivity, and sales.

References:
-Koch, C. (2004). Nike Rebounds: How (and Why) Nike Recovered from Its Supply
Chain Disaster. CIO.com, Retreived November 15, 2012, from source
http://www.cio.com/article/32334/Nike_Rebounds_How_and_Why_Nike_Recovered_fr
om_Its_Supply_Chain_Disaster?page=1&taxonomyId=3207
-Kalin, S. (2002). The ROI of Application Integration. CIO.com, Retrieved November
15, 2012, from source
http://www.cio.com/article/31274/The_ROI_of_Application_Integration
-Laudon, J., Laudon, K. (2010). A New Supply Chain Project Has Nike Running for Its
Life. In Essentials of Management Information Systems: Managing the digital firm:
sixth edition
Pearson Education, ch.1- Additional Cases, Retrieved November 15,
2012, from source
http://wps.prenhall.com/bp_laudon_essmis_6/21/5555/1422333.cw/content/index.ht
ml
-McLaren, T., Head, M., Yuan, Y. (2004). Costs and benefits in Supply Chain
Collaboration. Idea Group Inc. Retrieved November 15, 2012, from source
http://www.business.mcmaster.ca/is/head/Articles/Cost%20and%20Benefits%20in
%20Supply%20Chain%20Collaboration.pdf
-McVey, S. (2001). Nike Blames i2 For Finish In Losers Bracket. Technology
Evaluation Centers, Retrieved November 15, 2012, from source
http://www.technologyevaluation.com/research/articles/nike-blames-i2-for-finish-inlosers-bracket-16344/?
tecreferer=http://www.technologyevaluation.com/search/default.aspx?
searchterm=+nike+scm+&doctype=colid98&languageid=0
-Nike biz. (2012). Retrieved November 15, 2012, from source
http://www.nikebiz.com/crreport/
-Nike inc. (2012). Retrieved November 15, 2012, from source
http://www.nikeinc.com/pages/about-nike-inc