Supply Chain Management in Nike

Serial Number Topic Page Number

1. Executive Summary 1

2. Company Profile

2.1 Introduction 2

2.2 Areas of business 5

2.3 SWOT Analysis 6

2.4 PESTEL Analysis 8

2.5 Vision, Mission and Values 11

3. Economy of Nike

3.1 History 13

3.2 Manufacturing 13

3.3 Cost of a pair of shoes 15

3.4 Retailers 16

3.5 Branding Partnerships 16

3.6 Social Media and Resellers 17

4. Supply Chain Management in 18
Nike

5. Nike Footwear and Raw Material 22

Manufacturing Facilities
 1. Executive Summary
Nike is an incorporated company that operates primarily in the footwear industry. The
Company designs, develops and markets athletic footwear, apparel, equipment and
accessory products. CEO and President Philip Knight runs Nike, Inc. Mr. Knight co-
founded Blue Ribbon Sports in 1962, which officially became Nike in 1978.

A strategic audit of Nike Inc. and its wholly owned subsidiaries was conducted by
gathering the company’s financial data, press releases, industry information, company
history and current projects. After the data was collected, it was analyzed and a SWOT
analysis was conducted for Nike to reveal strengths, weaknesses, opportunities and
threats Nike has as a company. The footwear industry was analyzed using Porter’s Five
Forces model.

Based on findings, the following recommendations are being made for Nike Inc.:
Improve quality and brand name image of ACG, Nike’s All Condition’s Gear line for
extreme sports; use money more efficiently by expanding promotions into
entertainment; expand marketing efforts in the casual footwear lines; continue to be on
the cutting edge of the design and development of athletic footwear; enhance website
to be more appealing to customers shopping online; increase international marketing
efforts; and continue to be the technological and performance leader in athletic shoes.

In retrospect, Nike has taken many initiatives to tackle above mentioned challenges and
in this report we will go through some of these initiatives and the challenges it
encountered while implementing the changes.
 2.Company Profile
2.1 Introduction

The Beginning

Phil Knight, a good miler, and Bill Bowerman, a track coach who tinkered with shoe
designs, met at the University of Oregon in 1957. The two men formed Blue Ribbon
Sports in 1962 in an effort to make quality American running shoes. The next year they
began selling Tiger shoes, manufactured by Japanese shoe manufacturer Onitsuka
Tiger. They sold the running shoes out of cars at track meets.

The company rebranded as NIKE in 1972, named for the Greek goddess of victory. The
NIKE "Swoosh" logo was designed by a graduate student named Carolyn Davidson,
who was paid $35. The same year NIKE broke with Onitsuka in a dispute over
distribution rights. It went public in 1980.[1]

About:

Nike, Inc. is an American global enterprise that deals with the planning, advancement,
producing, and the overall promotion and sales of footwear, clothing, hardware,
embellishments, and administrations. The organization is based close to Beaverton,
Oregon, in the Portland metropolitan zone. It is the world's biggest brand in athletic
shoes and apparel and a significant maker of athletic gear, with income in excess of
US$37.4 billion in the financial year 2019-2020 . Starting in 2020, it employed 76,700
individuals worldwide. In 2020 the brand alone was esteemed in abundance of $32
billion, making it the most important brand among sports businesses. Previously in
2017, the valuation of Nike brand was more than$29.6 billion. Nike is at the 89th.
position in the 2018 Fortune 500 rundown of the biggest United States organizations by
overall revenue.

The organization was established on January 25, 1964, as "Blue Ribbon Sports", by Bill
Bowerman and Phil Knight, and authoritatively became Nike, Inc. on May 30, 1971. The
organization takes its name from Nike, the Greek goddess of victory. Nike advertises its
items also as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Blazers, Air Force 1, Nike
Dunk, Air Max, Foamposite, Nike Skateboarding, Nike CR7, and auxiliaries including
Jordan Brand and Converse. Nike likewise possessed Bauer Hockey (later renamed
Nike Bauer) from 1995 to 2008, and recently claimed Cole Haan, Umbro, and Hurley
International. Notwithstanding fabricating athletic apparel and gear, the organization
works retail locations under the Niketown name. Nike supports some prominent
competitors and sports groups the world over, with the profoundly perceived brand
names of "Take care of business" and the Swoosh logo.
Nike has acquired several apparel and footwear companies over the course of its
history, some of which have since been sold. In order to refocus on its core business
lines, Nike began selling some of its subsidiaries in the 2000’s. Since 2013, Nike has
owned two key subsidiaries: Hurley Int. and Converse, Inc.

The company, which generates some 60% of sales outside the US, sells through more
than 1,090-owned retail stores worldwide and an e-commerce site, and to thousands of
retail accounts, independent distributors, licensees and sales representatives.
Customers in North America account for about 40% of total revenue. [2]

Sales and Marketing

NIKE generates about two-thirds of sales from wholesale customers such as retail
accounts (footwear and sporting goods stores; athletic specialty stores; department
stores; skate, tennis, and golf shops), independent distributors, licensees, and sales
representatives. It also sells directly to consumers through a strong global network of
company-owned stores and its growing ecommerce site.

NIKE markets its footwear and other products globally through diverse advertising and
promotional programs and campaigns, including print, social media, online advertising,
and endorsement contracts with celebrity athletes. Total advertising and promotion
expenses were $3.6 billion, $3.8 billion and $3.6 billion for fiscal years 2020, 2019 and
2018, respectively.

Strategy

NIKE's strategy is to achieve long-term revenue growth by creating innovative, "must-

have" products, building deep personal consumer connections with its brands and
delivering compelling consumer experiences through digital platforms and at retail.

Since fiscal 2018, through the Consumer Direct Offense and NIKE's Triple Double
strategy, the company has focused on doubling the impact of innovation, increasing its
speed and agility to market and growing its direct connections with consumers. In June
2020, the company announced a new digitally empowered phase of the Consumer
Direct Offense strategy: Consumer Direct Acceleration.

On July 22, 2020, management announced a series of leadership and operating model
changes to streamline and speed up strategic execution. These changes are expected
to lead to a net loss of jobs, resulting in pre-tax, one-time employee termination costs of
approximately $200 million to $250 million, which is expected to be incurred primarily
during the first half of fiscal 2021, in the form of cash expenditures.
This next phase of NIKE's Consumer Direct Offense is expected to drive sustainable
growth and profitability as the company accelerates NIKE to a digital-first company. The
company is committed to the execution of this strategy, despite the short-term adverse
impacts to business from a novel strain of coronavirus (COVID-19). As such, its long-
term financial goals on average, per year, remain the same. [2]
2.2 Areas of Business

The share of revenue generated by each of Nike's product lines, for example, is:
Footwear (68.7%); Apparel (27.3%); Equipment (3.6%); and Other. A negligible amount
is attributable to Other, which includes revenue from licensing businesses of the Global
Brand Divisions and Converse segments, and to foreign currency hedge gains and
losses accounted for in the Corporate segment. [16]

NIKE Brand: North America

Nike's North America segment posted $4.2 billion in revenue in Q1 FY 2021, comprising
nearly 40% of total revenue. EBIT came in at $1.3 billion, comprising almost 42% of the
total. The segment's revenue fell 1.6% while EBIT rose 18.4% compared to the year-
ago quarter.

NIKE Brand: Europe, Middle East & Africa

Nike's Europe, Middle East & Africa segment posted $2.9 billion in revenue during Q1
FY 2021, comprising about 27% of total revenue. EBIT was $692 million, about 22% of
the total. Revenue and EBIT for the quarter rose 4.9% and 13.6%, respectively.

NIKE Brand: Greater China

Nike's Greater China segment posted $1.8 billion in revenue in Q1 FY 2021, nearly 17%
of total revenue. EBIT was $688 million, comprising about 22% of the total. Revenue
and EBIT were up 6.0% and 2.8%, respectively, compared to the same three-month
period a year ago.

NIKE Brand: Asia Pacific & Latin America

Nike's Asia Pacific & Latin America segment posted $1.1 billion in revenue during Q1
FY 2021, about 10% of total revenue. EBIT was $280 million, about 9% of the total.
Revenue and EBIT fell 18.3% and 17.9%, respectively.

NIKE Brand: Global Brand Divisions

Nike's Global Brand Divisions segment revenue is primarily attributable to NIKE Brand's
licensing businesses that are not part of any of the geographic segments, demand
creation and operating overhead expense, and costs associated with its global digital
operations and enterprise technology. The division posted $4 million in revenue during
Q1 FY 2021, making up less than 0.1% of total revenue. The segment posted a $853
million loss before interest and taxes as revenue fell 33.3%. [16]
2.3 Nike SWOT analysis:

(S)trengths
● Branding: One particular strength of Nike is that it has become a competitive
organization through the use of branding and has created a competitive
approach from this. The slogan ‘Just Do it’ epitomizes its attitude towards its
business.
● Outsourcing: Strength of Nike is that it has outsourced all functions of production
to overseas facilities and therefore by doing this doesn’t have any manufacturing
outlet of its own. This has helped the company obtain a higher value through the
adding activities like design, research and development.
● Nike’s targeting is a very distinct way that they are able to gain advantage in the
market. Nike gets top athletes like LeBron James, Tiger Woods to wear and
sponsor their products rather than events or competitions. From this people
tend to remember the brand worn by the players and not the brand that
sponsors the events that the players perform at.
● Customer satisfaction: Nike invests a lot in product research and development
in order to offer better sports apparels to customers.
● Strength of Nike is that it has a consistent level of growth each year with 2011-
2014 with expected forecasts showing that it will continue to grow 7% every year.
By continuing to grow, this is the strength of Nike given that the market has been
experiencing a slowdown in sales growth.

(W)eaknesses
● The market that Nike participates in is very price sensitive. Most of Nike’s income
comes from the selling of its products to retailers. This usually shows that
margins tend to get squeezed as retailers try to get low price competition on
Nike’s products.
● The income of the business is still heavily dependent upon its share of the
footwear market which may leave it vulnerable if for any reason its market
share erodes
● Even though Nike is outsourcing its manufacturing aspects which is seen as a
strength, this can create negative publicity because of poor labour conditions in
overseas outlets. The poor pay and work conditions deem the term ‘sweatshop’.
● Nike has the image of being too ‘premium’ and a ‘luxury brand’ which can be
seen not a negative thing but the current market situation with consumers
migrating to the middle tier of luxury scale as they are being price conscious and
quality focused could mean that Nike has to put out an extra effort to draw
consumers in.[10]
 ● The company focuses on retailers who stock other brands which can be a bad
thing as they are not spreading out their products to exclusive retailer outlets.

(O)pportunities
● The technology is always changing in the retail market as well as the
sporting market giving Nike opportunities for innovation.[10]
● Nike is rooted by culture especially with youth culture as Nike is seen as a
fashion brand and youth in particular view Nike as a must own brand.
This creates its own opportunities.[10]
● Nike has the opportunity to develop products such as sport wear, sunglasses and
jewellery with such items that possess high profit.

(T)hreats
● With the international nature of trade involving buying and selling in different
currencies which means that the costs and margins are not stable over long
periods of time this would mean that such a level of exposure could mean Nike
may be manufacturing or selling at a loss.
● The retail sector being price competitive could mean that consumers are
shopping around for a better deal, for Nike this could mean fluctuations
in sales.[10]
● Nike has to commit to a continuation of improving on its image where it has to
resort to exploitative business practices in its overseas outlets. Nike would be
forced to pay a heavy price as the emerging consumers are socially conscious
which means that they would not like to buy the product of which a company is
practicing bad business practices.
● Given that Nike has a global supply chain can mean that it can be subject to a
change of circumstances of international trade practices including labour strikes
in its overseas locations, currency fluctuations which would lead to a decrease in
profit margins disrupting the global supply chain.[10]
2.4 PESTLE Analysis of NIKE

Political
In the estimation of some observers, Nike has benefited considerably from the growth-
orientated policies of the US government, which has maintained low interest rates,
currency exchange stability, and internationally competitive tax arrangements [18]. Nike
has also benefited from cooperation with government initiatives in terms of transparency
in the global value chain; one example of this lies in membership of the Clinton
administration’s 1997 Apparel Industry Partnership[18]. As will be discussed further
below, political pressures have featured more negatively in concerns over Nike’s
employment practices

Economic

In common with all consumer-facing organisations, Nike faced challenging trading

conditions since the financial crisis of 2008-9 and contingent economic slowdown; this
has applied in both Western markets (such as the US) and the Asia-Pacific region.
Conversely, Nike has used its established brand equity to take advantage of growing
consumer demand in emerging economies. The corollary to this has been an expansion
of Nike’s value chain in which it has also taken advantage of the lower wage rates paid
in those economies[18]. Nike has defended the contingent CSR critiques by arguing that
it has provided employment in otherwise underdeveloped economies, and paid the
established local rate for labour. In HRM terms, this implies a considerable divide
between the higher-value strategic and design function retained in the US, and those in
outsourced manufacturing[18].

Social/Societal
In the macro-economic sense, Nike (and its competitors in the sportswear sector) are
the beneficiaries of a growing societal preoccupation with health and fitness [18]. As Elliot
and Percy indicate, ‘Brands can also be used to counter some of the threats to the self
posed by post-modernity, such as fragmentation, loss of meaning and loss of
individuality’. However, Nike also faces continuing challenges arising from its CSR
(corporate social responsibility) position, chiefly related to the nature of its global value
chain. Nike was caught up in the ongoing debate around globalisation, perceived by
many pressure groups to be ‘Increasing the inequalities of political power and influence,
as well as highlighting new dimensions of inequality’ [18]. From the 1990s onwards, Nike
adopted the standard industry practice of outsourcing much of its skilled, semi-skilled
and unskilled manufacturing to emerging economies, including those in the Asia Pacific
region. Sweated labour (including that of children) was allegedly being used in a
manner that contravened both local and international standards, as well as Nike’s stated
CSR position. Moreover, the corporation’s compliance with requirements regarding pay
and working conditions was brought under further scrutiny, when it emerged that the
relevant workplace and HR records were not being properly maintained [18]. In some
circumstances, it was suggested that these lapses were achieved with the connivance
of local officials. To counter these allegations, Nike began to incorporate greater
transparency in its reporting, providing the locations of specific manufacturing facilities.
In 1993 it published its Memorandum of Understanding, clarifying its expectations
regarding the conduct of suppliers and subcontractors. The point here is that Nike has
to avoid being caught up in consumer boycotts, especially where these can be globally
popularised via the internet; as Goul Andersen and Tobiasen point out, ‘Within the
framework of globalisation, political consumerism takes on a particular significance,
sometimes providing the only opportunity to influence outcomes as trans-national
companies are outside the regulatory powers of national governments’. In HRM terms,
these kinds of lapses can also undermine employee confidence in leadership regarding
CSR issues.

Technology
In common with most consumer-facing corporations, Nike has been able to use
enhanced levels of digital metrics to analyse customer demand and revise its
segmentation accordingly. In the optimum model, transaction and supply chain event
management are linked via SOAP (Simple Object Access Protocol) and MPPS
(Massively Parallel Processor System) systems[18]. Meanwhile consumers will be able to
make contactless payments via mobile phone platforms. These processes may however
accelerate the speeding-up of the hollowing-out of the workforce, reducing the amount
of employment on offer[18].

Legal
Nike’s growth strategies have relied on internationalisation and, correspondingly, the
corporation has to adapt rapidly to the legal and policy frameworks in all of its trading
areas. Countries with a common law legislative framework (i.e. the United Kingdom and
United States tend to favour a less interventionist approach that supports the interests
of shareholders. Meanwhile, states which have code-orientated legal systems (e.g.
Germany, France and Spain), tend to acknowledge wider stakeholder interests [18].
However, Nike has still faced legal difficulties in the course of its international
expansion; following allegations of sweated labour, it closed some factories in Pakistan
and moved its operations to Thailand and China. However, the contingent
unemployment led to difficulties with the Pakistani authorities, as well as criticism over
the resulting unemployment[18]. As the Asia-American Free Labour Institute (AAFLI) has
argued, ‘Nike’s strategy is to pit six factories against each other and have them
compete
for orders based on who produces the cheapest shoe. The government doesn’t protect
the workers, the union is complacent, and Nike looks the other way’[18]. In 2003 Nike
countered claims that it paid below the minimum wage in countries such as Indonesia,
stating that it had paid, on average, ‘Double the minimum wage as defined in countries
where its products are produced under contract. History shows that the best way out of
poverty…is through exports of light manufactured goods that provide the base for more
skilled production. Nike was subsequently sued under California’s Unfair Competition
and False Advertising laws, on the basis that its statements were false. Following initial
defeat and later appeals to the California Supreme Court, Nike settled privately with the
plaintiff, prompting speculation that it had done so to avoid further damaging
revelations[18]. Again, such crises can undermine the role that CSR has in harmonising
the HRM effort across the organisation [18].

Environmental
In formal terms at least, Nike maintains a positive position with regard to green (i.e.
environmental) issues, with ISO 14000-compliance presented as part of its overall
policy[18]. Launching its initial sustainability policy in the early 1990s, Nike appointed 100
‘sustainability champions’ to oversee pilot projects in various aspects of its business,
such as the reduction of carbon emissions and elimination of waste [18]. As Willard
explains, externalised costs, such as those arising from human resources, ‘Must be
considered if the market’s “invisible hand” is to reconcile the basic conflict between
making decisions based solely on short-term profit and making decisions based on
social and environmental responsibility’. In HRM terms, the involvement of employees in
the operation aspects of environmental policy is calculated to have a positive effect on
both productivity, and the psychological contract of staff. [18]
2.5 Vision, Mission and Values

Nike has gone through multiple changes, ups and downs but what has remained
unchanged is their mission statement over their entire journey. It has always been,

“Bring Inspiration and Innovation to every athlete in the world.

If you have a body, you are an athlete”

Analysis of Nike’s Vision statement

Nike Inc.’s corporate mission and vision statements evolve to accurately represent the
company’s position as the leading athletic shoes and apparel supplier in the global
market. A company’s corporate mission statement defines the fundamental objectives of
the business, especially in terms of its purpose. In this company analysis case, Nike’s
mission statement prompts the business to support the endeavors of athletes. On the
other hand, a company’s corporate vision statement provides a picture of a target future
condition of the business. Nike’s vision statement focuses on brand strength and
development. The company applies these corporate statements as guides for the
evolution of its business, leading to the creation of business strengths like a strong
brand image, as determined in the SWOT analysis of Nike Inc. Through the evolution
and effective implementation of its corporate vision and mission statements, the
company supports its market position as a leading producer of sports footwear, apparel
and equipment.

As a leading manufacturer of sports shoes, apparel and equipment, Nike Inc. inspires
people to adopt a “winner mindset”, which is covered in the “inspiration” component of
the mission statement. The company’s slogan “Just Do It” represents this inspirational
goal. Also, Nike’s corporate mission statement emphasizes innovation. This component
is applied through the company’s strategy of continuous improvement of products
through new technologies, as included in Nike Inc.’s generic competitive strategy and
intensive growth strategies. The “every athlete in the world” component indicates that
the company’s corporate mission pushes the business to target every consumer in the
world. As noted, the company considers every person an athlete. Thus, based on this
corporate mission, Nike’s products are designed to attract and satisfy a wide variety of
market segments globally.[13]
Nike’s Corporate Vision Statement
Nike Inc.’s corporate vision is “to remain the most authentic, connected, and
distinctive brand.” The business continues to apply this vision statement, which was
emphasized in the corporation’s global growth strategy for 2015. The company focuses
on developing its brand.

Nike’s vision statement uses the word “remain,” which indicates that the company
already considers its brand as the most authentic, connected, and distinctive in the
global market for sporting goods and related products. The “authentic” component of
the corporate vision statement shows that the company aims to make its products
deliver high performance to consumers. On the other hand, the “connected” component
is about ensuring consumers’ personal connection with the brand. Nike’s marketing mix
or 4P supports the creation and maintenance of such connection with customers. The
company also maintains distinctiveness by delivering the best possible products to the
market. This corporate vision regards Nike Inc. as a leader in the industry, while
pushing the business to further separate itself from competitors. A notable point about
the company is it also develops connections with consumers through its vision for
corporate social responsibility: “to help NIKE, Inc. and our consumers thrive in a
sustainable economy where people, profit and planet are in balance.” This vision serves
as the basis for Nike Inc.’s corporate social responsibility strategy and stakeholder
management approaches.[13]
 3.Economy of Nike

3.1 History -
Before the birth of Nike, founder Phil Knight was running Blue Ribbon Sports (BRS).
After striking a deal with Japanese shoe maker Onitsuka on a trip to Japan, Phil Knight
ensured that BRS would be the sole distributor of Onitsuka shoes on the west coast of
the United States. This became a good starting point to ensure that ties with Asian shoe
manufacturers were strong. After ties with Onitsuka ended in 1971, these relationships
made with people from Japan helped Nike and Phil Knight to enter into various other
Asian manufacturers, mainly South Korea and Taiwan.

During this time, China was governed by the Communist Party of China and was not a
global player due to its political policies. None of the other shoe companies had
approached China yet and were still working with various Asian countries. Having
relationships with various Asian businesses opened up the gates of China for Phil
Knight and Nike and Nike officially became one of the earliest companies to enter into
China. The country with a population of almost 1 Billion had opened up its shoe
markets and manufacturing for Nike and due to its early entry advantage, Nike saw
China as both its key market and key manufacturer. Despite having factories in the
United States itself and the neighbouring country of Mexico, Nike outsourced a major
chunk of its manufacturing to China and other countries like Vietnam, Thailand,
Indonesia and moved its manufacturing operations from Japan and South Korea as the
economies in this country succeeded rapidly and Nike could no longer afford them as
manufacturers.

This play of Nike cutting costs by outsourcing manufacturing led to a massive rise in the
number of shoe manufacturing factories in the mentioned countries giving rise to
‘sweatshops’.

3.2 Manufacturing -
Nike outsources production to more than 1 million workers in factories in China and
other countries around the world where the labor costs are relatively cheap. As an
example, in 2014, Nike reported $28.50 as the general cost to manufacture one pair of
sneakers and ship them to the United States. Nike's cost breakdown includes
approximately $27.50 per pair for Chinese factory labor and overhead costs, plus $1 in
shipping.[6]
KEY TAKEAWAYS
● Nike makes some of their profits by selling sneakers at prices that exceed
the cost of manufacturing.
● Labor is an important manufacturing cost, which companies attempt to minimize
by using low-cost labor in Asia.
● Another way companies are reducing costs is by using robots instead of
manual labor.
● Deals with star athletes and celebrities can help shoemakers sell sneakers at
a substantial markup.
● Creating media buzz, while keeping supplies just below demand, can help
shoe resellers maximize their profits.

In recent years, rising costs of labor in China have impacted profit margins, and in
response, some companies have moved their manufacturing operations to Vietnam,
Indonesia, or Thailand. In addition, the big shoemakers are continuously shifting some
manufacturing tasks from human workers to robots in order to reduce labor costs.
Nike’s main components of production are polyester, rubber, eva foam, cotton, synthetic
leather, and leather.[8]

● 19% of the polyester Nike uses is recycled. Nike helped recycle 82 million water
bottles to make polyester out of.
● Rubber- 70% of Nike shoes use environmentally preferred rubber.
Thailand, Indonesia, and Malaysia are the top producers of rubber around
the world.
● Eva foam (Ethylene Vinyl Acetate) is a very environmentally friendly
material used in many shoes. Main producers of eva foam are located in
china.
● Cotton - Their cotton is mainly organic cotton, meaning its harvested without
pesticides, no fertilizer, and defoliants. Most of cotton is from China, India,
Turkey, and the USA.[8]

Workforce -
● Nike employs over 74,000 people worldwide.
● Nike manufactures all of its shoes overseas, it also delivers around 85% of its
footwear over lean manufacturing lines.
● Nike’s lean supply chain saves the company $0.15 per unit compared to a
traditional distribution model. Nike moves over 900 million units per year,
so these savings end up giving the company a serious competitive edge.
● Nike does not own or operate its own companies. Instead Nike outsources the
services to 14 countries around the world.
● 96% of the companies are in Vietnam, China, and Indonesia.[20]
3.3 Cost of a pair of Shoes -

How much does Nike actually spend on a pair of sneakers that retails for $100? About $28.50.
These figures are of course based on averages, as costs on production for individual
sneakers is going to vary based on materials. According to this chart, it costs Nike an
average of $28.50 to make a sneaker that will retail for $100. That sneaker will be sold
to wholesalers at $50, meaning Nike will get back $21.50 (the profit on this comes to
$4.50 after SG&A and taxes). This cut for Nike will of course increase in their direct-to-
customer channels of retail.[6]

The actual cost breakdown totals $28.50. This means Nike makes a profit of $21.50 on
a $100 sneaker. Subsequently, after taxes and administrative expenses (including
research and development), true profit is approximately $4.50.These profit and cost
numbers can fluctuate depending on a number of factors. These factors include new
supply chain advancements, regulations in industrial countries like China, deals with
factories, international tariffs, and the costs of freight/transportation/shipping. [9]
3.4 Retailers -

As you can see in the graphic, the manufacturer (in this case, Nike) pockets a
relatively small portion of the total profit. Retailers (Finish Line, Foot Locker, etc.) get
the biggest piece of the pie. Retailers getting 50% of the final retail price is common
practice in the footwear industry.
A rule of thumb for athletic apparel and sporting goods companies such as Nike is to
give retailers a 50% discount on suggested retail prices. Often, eventual markdowns
can take a chunk out of retailer profits. Or unsold inventory may force the retailer to
send the shoes back to Nike (depending on the retailer’s agreement).
Retailers taking a big chunk of profits is a big reason why Nike drives more purchases
to SNKRS and Nike.com. It makes a huge difference in terms of profit margin.
Consequently, it’s best for Nike if you buy directly from Nike. [6]

3.5 Branding Partnerships -

A significant part of sneakers' value includes the price companies pay celebrity
endorsers to attract consumers and build long-term loyalties. In the 1980s and 1990s,
sneaker companies partnered with top athletes to develop footwear designed to boost
athletic performance. The high-performance shoes also offered to regular consumers
the promise of superior quality.

Nike's Air Jordan brand sneakers—first introduced in 1985—are the most famous
example and have made Michael Jordan one of the richest athletes in the world.
Roughly 20 years after his retirement from the basketball court, the slam-dunking
superstar banked $145 million in the 12 months ended May 2019, including $130 million
from the Nike shoe label. Nike's Jordan brand now includes Russell Westbrook, Chris
Paul, and dozens of other professional athletes.
Furthermore, as young consumers associate sneakers as much with fashion as they do
with sports, companies have partnered with key trendsetters in arts and entertainment
to design and market sneakers. High fashion brands like Comme des Garcons,
Supreme, Virgil Abloh, etc. also link up with Nike to create expensive sneaker lines.
Nike had earlier signed a partnership with American rapper Kanye West and Canadian
rapper Drake, to create Yeezy and OVO sneaker lines respectively. [7]

Major Nike Sponsored athletes are -

1. Cristiano Ronaldo (Football player) - $1 Billion lifetime deal.

2. Neymar (Football player) - Yearly $100 million deal ended 2020.
3. LeBron James (Basketball player) - On track for $1 Billion lifetime deal.
4. Kevin Durant (Basketball player) - Has a 10 year contract for $300 million.
5. Rafael Nadal (Tennis player) - $10 million per year deal.

From the early days, this has been Nike’s philosophy, to get sponsorships from athletes
instead of sporting associations and this has paid off exponentially. Customers relate
more to athletes rather than to sporting associations, so when Adidas were signing
deals with FIFA and UEFA (football associations), Nike was sponsoring athletes like
Ronaldinho, Thierry Henry, and others.[7]

3.6 Social Media and Resellers -

When a celebrity is involved with a line of limited-edition sneakers, some consumers
want them, and they want them at any cost. Social media helps to fuel their desires.
Private collectors generate buzz by posting pictures of the latest sneakers on social
media. The resale market also fuels demand for sneakers. Resellers typically wait in
line outside brick-and-mortar stores for limited editions, so they can resell them online at
a profit.[9]

The fact is that avid sneaker fans are often willing to pay a significant markup for
popular designs. For instance, soon after retailers sold out of the limited-edition Yeezy
Boost sneakers at $315, enthusiasts paid up to $1,000 for the sneakers on eBay. Social
media trends and the impact of resellers indicate that sneaker companies can maximize
their profits by manufacturing sneaker quantities at levels just below demand.
 4. Supply Chain Management in Nike
Nike is one of the most recognizable brands in the world. Behind the hundreds of
millions of shoes it sells each year there lies a highly complex supply chain. [3] Their
proactive approach in managing their supply chain is the reason for their success.

Key principles followed by Nike in managing their supply chain is outsourcing and
diversification.[3] Outsourcing is a risky approach, but by diversifying Nike managed to
mitigate this risk. Nike contracts 100% of its manufacturing for footwear to independent
suppliers. This led to cost savings of $0.15 per unit as compared to the traditional
approach.[15] As of August 2020, Nike’s footwear were being manufactured in 105
factories in 12 countries and raw materials in 56 facilities across 10 countries (complete
list of factories/facilities is provided).[15]

Several overarching principles of Nike’s supply chain include:[14]

● 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 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

Strategy to Nike’s Global Manufacturing

An important part of Nike’s supply chain management strategy is using a number of
different global manufacturing resources to its advantage. Nike does this for many
different reasons. Most importantly, it allows them to take advantage of various
economic atmospheres across the world as well as utilize the industrial strengths of
different countries.

Key features for Manufacturing

Nike’s supply chain strategy heavily emphasizes the use of multiple sourcing partners.
As a result, Nike is always shopping for new and more productive manufacturing sites
around the world. In this shopping process, Nike is looking for, among other things,
inexpensive labor, low import taxes, and high levels of efficiency in the manufacturing
process. In order to maintain these important parts of their strategy, Nike officials are
located at all foreign factories.

Challenges faced by Nike in managing Global Supply Chain

Nike has faced numerous challenges in managing the supply chain. One of the major
challenges Nike faced was language barriers between Nike officials and foreign
workers. However there were some more complex issues like there were significant
initial costs relating to updating technology in manufacturing facilities. [14] Travelling costs
of Nike officials to foreign countries also increased the production costs while many of
these foreign countries lacked infrastructure and accounting capabilities to control
costs.

Overcoming Challenges

Nike has been successful in overcoming these challenges in different ways. Nike has
been able to utilize small numbers of partners that had many positive characteristics
including infrastructure, materials, technology, labor management and operational
experience.[14] This allowed Nike to minimize the risk of losing technology to less
reliable subcontractors. Nike also came up with a concept of diversifying equally
between facilities in five different countries. [14] This allowed them to quickly shift
production from one country to another in case of political instability or trade restrictions.

Nike Inventory System

Nike’s inventory system is based on a long term forecast. Nike established a “futures”
program that rewards retailers with significant discounts if orders are placed six months
in advance.[14] Nike used these orders as a basis for global demand. This information
helped Nike to set production levels at various manufacturing facilities worldwide. [14]

Sustainable Sourcing

Nike’s approach to managing supplier responsibility has greatly evolved since 1990s,
when the media uncovered claims of child labour, underpaid workers, and poor working
conditions in several Asian countries.[17]

Nike have started colour coded ratings for their facilities according to their Sustainable
Manufacturing and Sourcing Index (SMSI), a system to combine factory ratings for lean
manufacturing and human resource management, as well as for health, safety and the
environment.[17] If facilities are performing below NIKE’s minimum compliance
standards, they receive Yellow or Red ratings.[17] A Bronze rating indicates baseline
compliance, meaning that the supplier shares NIKE’s commitment to welfare of workers
and is using resources responsibly and efficiently.[17] Silver indicates that a facility is
enhancing its sustainability capabilities as a business driver within the industry. Gold
indicates that NIKE would consider a facility to be world-class in sustainability in any
industry.

After the SMSI was introduced in 2012, NIKE has set the target of having 100% bronze
or better factories by 2020. In FY19, 93% of the factories received bronze or better
ratings.[17]

When factories receive a below-compliance rating (red or yellow), they are expected to
remediate the issue within six months, with verification by an auditor. If the problem
persists, the facility is placed under probation. NIKE also considers responsible exit.
NIKE and Sustainability efforts

● Nike announced the opening of a new distribution center that will run on entirely
renewable energy and recycle 95% of the waste generated on site, according to
a company blog post.[8] The 1.5-million-square-foot center is located in Ham,
Belgium, expanding the company's existing European Logistics Campus in the
country.
● The facility's location close to a network of canals enables "99% of inbound
containers to reach the local container park by water" and eliminates the use
of 14,000 truck journeys per year according to Nike's estimation.[8]
● The move comes as the company pushes forward with its goal of achieving zero
carbon operations by 2025 and eliminating waste from its supply chain.[8]
● The distribution center, called the Court, runs on 100% clean energy sourced
from five local sources: wind, solar, geothermal, hydroelectric and biomass.[8]
● 75 percent of all Nike shoes and apparel now contain some recycled material.[8]
● A dye-coloring process for Air soles allows 99% of recoverable dye water to
be recycled.[5]
● By the end of 2021, Nike will completely eradicate single-use plastic bags in all
its stores.[5]
● Third-party carbon offsetting programmes, where Nike will pay for the planting
of trees, will also help to reduce overall emissions.[5]
● Launch of “ Move to ZERO” campaign[5]
5. Nike Footwear and Raw Material Manufacturing Facilities[19]

S Factory Name Product Country/Re

No Type gion

1 Aniger Calçados Suprimentos E Empreendimentos Ltda Footwear Brazil

2 Annora Vietnam Footwear Co.,Ltd Footwear Viet Nam

3 Anvil Knitwear Honduras Materials Honduras

4 Baiksan Co. Ltd. Materials Korea

(Republic
Of)

5 Baiksan Indonesia Materials Indonesia

6 Baiksan Vietnam Materials Viet Nam

7 C&K Vina Co.,Ltd Footwear Viet Nam

8 Can Sports Vietnam Co., Ltd Footwear Viet Nam

9 Chang Shin Indonesia Footwear Indonesia

10 Chang Shin Vietnam Co., Ltd Footwear Viet Nam

11 Chang Shin Vietnam Company, Ltd. Footwear Viet Nam

12 Changshin Inc. Footwear Korea

(Republic
Of)

13 Cheng Horng Industrial Co., Ltd. Materials Taiwan

14 Cocalqui Cooperativa De Trabalho Da Indústria De Footwear Brazil

 Calçados De Quixeramobim

15 Collitex S.R.L. Footwear Italy

16 Coopershoes - Cooperativa De Trabalho E Industria De Footwear Brazil

Calçados Joanetense Ltda (Picada Café)

17 Daehwa Leather Lestari Materials Indonesia

18 Dass Eldorado Srl Footwear Argentina

19 Dass Nordeste Calçados E Artigos Esportivos Ltda Footwear Brazil

20 Dass Nordeste Calçados E Artigos Esportivos Ltda. Footwear Brazil

21 Dass Nordeste Calçados E Artigos Esportivos Ltda. Footwear Brazil

22 Dean Shoes Vietnam Footwear Viet Nam

23 Diamant Srl Footwear Italy

24 Diamant Srl #2 Footwear Italy

25 Dona Orient Vietnam Footwear Viet Nam

26 Dona Pacific Vietnam Co., Ltd. Footwear Viet Nam

27 Dona Standard Footwear Co., Ltd Footwear Viet Nam

28 Dona Victor Footwear Co., Ltd Footwear Viet Nam

29 Dong Guan Stella Footwear Co., Ltd. Footwear China

Mainland

30 Dong-Jin Textile Co., Ltd. Materials Viet Nam

31 Dongjin Textile Dyeing House Footwear Korea
(Republic
Of)

32 Ducksan Yanbeol Ri Footwear Korea

(Republic
Of)

33 Eclat Textile Materials Viet Nam

34 Eclat Textile Co., Ltd Materials Taiwan

35 Ever Tech Footwear Viet Nam

36 Everest Textile Materials Taiwan

37 Everest Textile China Materials China

Mainland

38 Everest Textile Co., Ltd. Materials Thailand

39 Fairway Enterprises Company Ltd (Feng Tay) Footwear India

40 Far Eastern Materials Taiwan

41 Fe New Century Industry (Singapore) Pte Ltd Materials China

Mainland

42 Feng Tay Enterprise Co., Ltd Footwear Taiwan

43 Flextronics Manufacturing (Zhuhai) Co, Ltd Footwear China

Mainland

44 Formosa Taffeta Co., Ltd Materials Taiwan

45 Formosa Taffeta Co., Ltd (China) Materials China

Mainland

46 Formosa Taffeta, Co Ltd Vietnam Materials Viet Nam

47 Framas Korea Footwear Korea
(Republic
Of)

48 Framas Korea Vina Co., Ltd Footwear Viet Nam

49 Freetrend Vn Industrial Co.Ltd. Footwear Viet Nam

50 Fujian Lifeng Footwear Co., Ltd. Footwear China

Mainland

51 Fujian San Feng Footwear Co.,Ltd Footwear China

Mainland

52 Fujian Xiefeng Footwear Co.,Ltd. Footwear China

Mainland

53 Fu-Luh Shoes Co., Ltd Footwear Viet Nam

54 Gain Lucky Materials Viet Nam

55 Gb Light (Korea) Materials Korea

(Republic
Of)

56 Gb Light (Vietnam) Materials Viet Nam

57 Gianel Shoes Srl Footwear Italy

58 Gold Long John China Materials China

Mainland

59 Hayafuji Footwear Japan

60 Hua Feng Textile Group Footwear China

Mainland

61 Jade Long John Materials Taiwan

62 Jiangxi Guangyou Shoetown Footwear Co., Ltd. Footwear China

 Mainland

63 Jining Yongjin Shoes Co., Ltd. Footwear China

Mainland

64 Jsi Footwear Korea

(Republic
Of)

65 Jsi Vina Corporation Materials Viet Nam

66 Kuo Yuen (China) Materials China

Mainland

67 Kuo Yuen (Vietnam) Materials Viet Nam

68 Li Cheng Enterprise Co.,Ltd Footwear Taiwan

69 Long Chuan Simona Footwear Co. Ltd Footwear China

Mainland

70 Long Fa Shoes Industrial Huizhou Co., Ltd. Footwear China

Mainland

71 Long Yue Shoes Industrial Hui Zhou Co.,Ltd. Footwear China

Mainland

72 Longchuan Somona Footwear Co.,Ltd Wuhua Branch Footwear China

Mainland

73 Lotus Footwear Enterprises Limited Unit-2 Footwear India

74 Lotus Footwear Enterprises Ltd. (India Branch) - Unit 1 Footwear India

75 Mas Fabrics (Pvt.) Ltd - Matrix Footwear Sri Lanka

76 Men-Chuen Fibre Industry Co., Ltd. (Vietnam) Materials Viet Nam

77 Nam Dinh Stella Footwear Co. Ltd. Footwear Viet Nam

78 Ningbo Shenzhou Co., Ltd Materials China
Mainland

79 Pettenati Centro America Sa De Cv Materials El Salvador

80 Pingxiang City Guangxuan Footwear Co. Ltd. Footwear China

Mainland

81 Pony Leather Materials Taiwan

82 Pou Chen Corporation Footwear Taiwan

83 Pou Chen Vietnam Enterprise Ltd. Footwear Viet Nam

84 Prime Asia (China) Materials China

Mainland

85 Prime Asia (Vietnam) Materials Viet Nam

86 Promax Textile Co., Ltd. -6Th Road Materials Viet Nam

87 Pt Adis Dimension Footwear Footwear Indonesia

88 Pt Asia Dwimitra Industri Footwear Indonesia

89 Pt Changshin Reksajaya Footwear Indonesia

90 Pt Kmk Global Sports / K1 Footwear Indonesia

91 Pt Nikomas Gemilang Footwear Indonesia

92 Pt Pratama Abadi Industri Footwear Indonesia

93 Pt Pratama Abadi Industri Footwear Indonesia

94 Pt Selalu Cinta Indonesia Footwear Indonesia

95 Pt Shoetown Kasokandel Indonesia Footwear Indonesia

96 Pt Sumber Masanda Jaya Footwear Indonesia

97 Pt Victory Chingluh Indonesia Footwear Indonesia

98 Pt. Chang Shin Indonesia Merged With Seo Heung Footwear Indonesia

99 Pt. Ching Luh Indonesia Footwear Indonesia

100 Pt. Feng Tay Indonesia Enterprises Footwear Indonesia

101 Pt. Glostar Indonesia Footwear Indonesia

102 Pt. Pou Yuen Indonesia Footwear Indonesia

103 Pt. Shoetown Ligung Indonesia Footwear Indonesia

104 Pt. Tk Industrial Indonesia Footwear Indonesia

105 Pt. Yc Tec Indonesia Footwear Indonesia

106 Qingdao Changshin Jimo Factory Footwear China

Mainland

107 Qingdao Changshin Shoes Co., Ltd. Footwear China

Mainland

108 Qingdao Taehwa Shoes Co., Ltd Footwear China

Mainland

109 Qingdao Taejin Shoes Co., Ltd Footwear China

Mainland

110 Qingdao Taekwang Shoes Co., Ltd Footwear China

Mainland

111 Qingyuan City Liannan Yao Nationality Autonomous County Footwear China
Rongfang Footwear Mainland
112 Ramatex Industria Ltd. Materials China
Mainland

113 Ramatex Textiles Industrial Sdn. Bhd. Materials Malaysia

114 Rollsport Vietnam Footwear Limited Footwear Viet Nam

115 Rs/Tupa Ind. De Plastico Ltda Footwear Brazil

116 Sadesa (Ayutthaya) Materials Thailand

117 Sadesa (Chonburi) Materials Thailand

118 San Fang (Indonesia) Materials Indonesia

119 San Fang (Taiwan) Materials Taiwan

120 San Fang (Vietnam) Materials Viet Nam

121 San Fang China Materials China

Mainland

122 Sao Khue Footwear Viet Nam

123 Shanggao Yisen Industry Co. Ltd. Footwear China

Mainland

124 Shao Yang County Steiia Footwear Ltd Footwear China

Mainland

125 Shaoyang Liantai Sq Hanshou Upper Facility Footwear China

Mainland

126 Shaoyang Stella Footwear Company Limited Footwear China

Mainland

127 Shinta Woosung Materials Indonesia

128 Shoetown Footwear Co.,Ltd Footwear China

 Mainland

129 Shoetown Hunan Footwear China

130 Shoetown Jintan Footwear China

131 Sportek Footwear Bosnia &

Herzegovin
a

132 Suola Sa Footwear Argentina

133 Tae Kwang Can Tho Limited Liability Company Footwear Viet Nam

134 Tae Kwang Vina Footwear Viet Nam

135 Tae Kwang Vina Joint Stock Company'S Branch Footwear Viet Nam

136 Tae Kwang Vina Satellite Footwear Viet Nam

137 Taekwang Industry Co., Ltd. Footwear Korea

(Republic
Of)

138 Tiong Liong (China) Materials China

Mainland

139 Tiong Liong (Vietnam) Materials Viet Nam

140 Tong Hong China Materials China

Mainland

141 Tong Hong Vietnam Materials Viet Nam

142 Toray Sakai Co. Ltd. Materials China

Mainland
143 Viet Nam Dona Gold Long John Intl Co., Ltd. Materials Viet Nam

144 Vietnam Chingluh Shoes Co. Ltd. Footwear Viet Nam

145 Vietnam Moc Bai Joint Stock Company Footwear Viet Nam

146 Vietnam Pou Sung Co. Ltd. Footwear Viet Nam

147 Xinchang Shoes Co.,Ltd Footwear China

Mainland

148 Yesim Tekstil Sanayi Ve Ticaret A.S. Materials Turkey

149 Yichun Yisen Industry Co., Ltd Footwear China

150 Yongzhou Kaixiang Shoetown Footwear Co., Ltd. Not A Footwear China
Finished Goods Facility Mainland

151 Yongzhou Kaixin Shoetown Footwear Co., Ltd. Footwear China

Mainland

152 Yoon Textile Co., Ltd Materials Korea

(Republic
Of)

153 You Young Footwear Korea

154 You Young (Korea) Materials Korea

(Republic
Of)

155 You Young (Vietnam) Materials Viet Nam

156 Young Il Leather Co. (Korea) Materials Korea

(Republic
Of)

157 Young Il Vietnam Materials Viet Nam

158 Young Poong Textile Co., Ltd Materials Korea
(Republic
Of)

159 Yrc Textile Co.,Ltd. Materials Thailand

160 Yuan Ling Materials Taiwan

161 Zao Zhuang Ruixing Shoes Co., Ltd Footwear China

Mainland
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