OCTOBER 6, 2020

OPERATIONS MANAGEMENT – (CA-SCOMT)

TEAM PROJECT
Table of Contents
Nike’s Overview.................................................................................................................................2
The Mission, Vision and Strategy of Nike...........................................................................2
Public or Private Company..........................................................................................................3
The Size, Locations, Financial strength and Reputation of the Company.......3
Nature of Nike Air Jordan.............................................................................................................4
Current Operations Management Challenges..................................................................5
.................................................................................................................................................................... 6
Nike’s Productivity Levels and Variables...........................................................................6
The Quality of Air Jordan..............................................................................................................8
Recommended Process Strategy for Nike..........................................................................8
Dealing with Nike’s Constraints...............................................................................................9
References............................................................................................................................................9

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Nike’s Overview
Nike, Inc. is an American multinational corporation that is engaged in the
design, development, manufacturing, and worldwide marketing and sales of
footwear, apparel, equipment, accessories, and services. The company is
headquartered near Beaverton, Oregon, in the Portland metropolitan area. It
is the world's largest supplier of athletic shoes, apparel and a major
manufacturer of sports equipment. Nike was founded in 1964 by track coach
and runner duo Bill Bowerman and Phillip Knight as Blue Ribbons Sports (its
original name), later becoming Nike, Inc. in 1978, in reference to the Greek
Goddess of victory.
They opened their first retail outlet in 1966 and launched the Nike brand
shoe in 1972. The company was renamed Nike, Inc., in 1978 and went public
two years later. Nike markets its products under its own brand, as well as
Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Blazers, Air Force 1, Nike Dunk, Air
Max, Foamposite, Nike Skateboarding, Nike CR7, and subsidiaries including
Brand Jordan, and Converse. By the early 21st century, Nike had retail
outlets and distributors in more than 170 countries, and its logo—a curved
check mark called the “swoosh”—was recognized throughout the world.

The Mission, Vision and Strategy of Nike

Nike believes that being a responsible corporate citizen is not only the right
thing to do, but the right thing to do for their business.
The missions; “to bring inspiration and innovation to every athlete in the
world.” “If you have a body, you are an athlete.”
This mission conveys very positive values; Inspiration, innovation, to every
athlete in the world. The idea of inspiration, shows Nike’s will to be an
example, and inspiration and a leader to “every athlete of the world” to
success. It is a very positive, energizing value, inspiring people to find
motivation and go further by adopt a “winner mindset”. The quote “If you
have a body, you are an athlete” and the company’s slogan “JUST DO IT”
represents this inspiration goal.
The idea of innovation shows they will continuously research the
improvement of their products.
And finally, if we come again to the end of the quote “to every athlete of the
world” we see that they clearly target the whole world that gather their value
of the “winning mindset”
The vision is “to help Nike, Inc. and our consumers thrive in a sustainable
economy where people, profit and planet are in balance.”
The values through the vision; we could observe according to the vision
statement of Nike that they gave a large importance to the participation of
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their customer in the achievement of their goals. This leads to show how
valuable are the customer for the brand. Nike’s goals are the client’s goal
and vis versa, so there is the image of an invisible partnership with common
interests between Nike and their consumers. Afterwards “Sustainable
economy where people profit and planet are balance” thus this passage
demonstrate the interest of Nike to implement and apply a sustainable
economy which would be benefit for everyone.
Nike's strategy is to “Become the Leader in their Market”. Nike is successful
because it has some of the best, if not the best, marketing in the world. Their
brand is the number one brand in the sporting goods industry and is the
fourteenth most valuable brand in the world. The Nike business strategy is
clear, invest in building your brand through emotional marketing and sports
celebrity endorsements, develop products that have high-quality, market-
leading technology and buy out competing sports brands. When it comes to
marketing and branding, they work hard at marketing and invest a lot into it.
No other company in the world spends as much money on sports
sponsorships as Nike. They spent $3.031 billion on what they call “Demand
Creation. Their marketing can be anything from a TV ad buy to a
collaboration with a niche shop. Nike promotes their products with having
celebrities, professional and college athletes with sponsorship agreements,
some examples of their celebrity sponsorships are Michael Jordan, Tiger
Woods, Lebron James, Kobe Bryant just to name a few. They invested in
marketing early on in their establishment and currently, Nike focuses on
sponsorships, internet marketing, email marketing, and utilized multimedia
marketing campaigns.

Public or Private Company

Nike is a Publicly Traded Company; Nike launched its stock to the public
market through an initial public offer back on the second of December 1980.
The starting price was 18 cents, this meant that at the time the company
went public, you could have bought 5,555 shares at $1,000. Their trade
symbol is NKE. The stock currently ranks at about $65 and pays dividends of
about $0.80 for each share held. There are times when the share has traded
for below $50 and peaked at about $75.
Based on statistics from 2012, it indicated that over 44,000 people were in
its use worldwide. The brand valued at over $19 Billion thus making it the
most valuable sports brand in the world. Based on data from 2017, Nike
valued at over $29.6 Billion. It ranked as number 89 in the list of Fortune 500
companies in America based on revenue.

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The Size, Locations, Financial strength and
Reputation of the Company
Nike has come a long way from when its founders used to sell the shoes out
of the trunk of their cars until the first Nike store was built in 1966. Its
manufacturing network consists of over 700 factories in 42 countries. Each
product moves from 57 distribution centers across a network of 18,500
accounts and 140,000 retail doors. Nike products are sold in numerous shoe
and apparel stores worldwide as well as in specialty Niketown stores and
online at Nike.com. Today Nike Inc. has widespread arrangement of its
offerings, which are available throughout the world. As of Wednesday’s,
market close (October 7, 2020), Nike shares were down less than 1% this
year. The stock is up about 22% from a year ago. Nike’s net worth is
$199.12B.

As one of the world's most popular and profitable consumer brands, Nike's
reputation for innovation, efficiency, and creativity in every aspect of its
business is well-deserved. They've earned this reputation by constantly re-
evaluating their strategic position in the marketplace and not being afraid to
make big changes to continue to excel. Nike strives to expand its brand
through adopting development technique. By obtaining of Umbro, Nike has
expanded its position as the greatest football maker company in the market.
Nike has obtained a strong name or title in the market of running basketball
and football categories in North America and central and Eastern Europe.

Nature of Nike Air Jordan

Shoes were just shoes for the first eighty some years of the 20th century.
Then in the mid-1980s, Nike released a pair of basketball shoes featuring a
certain ex-Tarheel. This was the birth of the Air Jordan’s. The Air Jordan was
first produced for Michael Jordan a third draft picked basketball player, in
1984 and was designed by Peter C. Moore. The red and black colorway of the
Nike Air Ship, the prototype for the Jordan I (one), it was later outlawed by
then NBA Commissioner David Stern for having very little white on them.
Jordan’s shoe, the first ever Air Jordan was a stunning piece of footwear. It
debuted boasting many of Nike’s signature basketball features, compressed
air pocket in heel, additional ankle support, and an overlay on the toe. It’s
high-cut and made of premium leather, and unlike most basketball shoes of
the era, its individual pieces allow for unique color blocking, something
typically only running shoes provided at the time. It’s inaugural logo the
swoosh is displayed prominently, and toward the top sits the now-famous
original Air Jordan logo, wings on the shoe’s side, set the bar high for what
was to follow in terms of design. The initial shoe design lacked the
technology of many that would follow, but it certainly did not lack the
excitement. The shoe’s biggest claim to fame was the controversy that

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surrounded it. Every time Jordan stepped on the court wearing his black, red,
and white sneakers, he was fined $5,000 for violating the uniform policy. Nike
was happy to pay the fine, in order to fuel the fire and reap the promotions.
Jordan wore the red and black Air Jordan’s when he scored 63 points against
Larry Bird’s Boston Celtics in the 1986 playoffs and the shoe took off like a
great phenomenon. Nike has since made over thirty different signature Air
Jordan’s in hundreds of different variations. These shoes now regularly sell
for two hundred dollars or more per pair, while certain models can fetch
thousands of dollars when they’re released in low supplies. In 2016, the
Jordan brand alone brought in close to $3 billion in revenue for Nike. That’s
good enough for roughly 35% of the total revenue of the entire company.
Backed by an up and coming all-star and a rock-solid marketing strategy,
Nike’s Air Jordans quickly became the most sought-after shoe in the world.
Today, Nike releases shoes pretty regularly, their August 2019 lineup is
already stacked with 10 new sneakers, but none have quite the impact of
any Nike-Jordan combo. After more than 20 years, Air Jordans are still the
greatest sneaker of all time. On December 19th, 2019, Nike CEO Mark Parker
said “The Jordan brand, on a wholesale equivalent basis, just earned its first
$1 billion quarter”.

Current Operations Management Challenges

Organizations across the world must constantly adapt to new trends and
under-go a lot of organizational changes to keep expanding as a business.
Consumers today demand quality products and an efficient system to get the
product fast. Nike is an iconic footwear and apparel manufacturer that
operates in over 180 countries with reported revenues of $25.3 billion in
2013. Nike currently has 719 factories, employing 990,325 workers in 44
countries around the world. With such a large organization you know there
will be challenges that will affect the productivity of the company. In the past
Nike face numerous challenges with their operations and supply chain. Nike’s
global supply chain is an extremely complex network that impacts a wide
range of stakeholders around the world. The supply chain was initially built
through the outsourcing of manufacturing directly to suppliers. In 1975, the
company introduced the Future Program which divided Nike’s operations into
five geographical regions with the goal of improving operations. Due to the
ineffectiveness of this program, by the 1990s the company’s supply chain
had many problems such as ineffective forecasting and an inability to keep
up with changing consumer trends. As a result, Nike launched the Nike
Supply Chain (NSC) project in 2000 with goals of implementing enterprise
resource planning (ERP) and customer relationship management (CRM)

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software into an integrated platform. This project proved to be a disaster for
Nike. In 2001 Nike reported lowered earnings due to a problem with i2
technology which is the demand-forecasting and supply chain management
software. This would waste 25% of operating costs, before changing to the
“JUST IN TIME” strategy. The changes made were demand forecasting,
inventory management and scheduling. Forecasting most important because
procurement, production, distribution, ordering, scheduling, and inventory
are determined based. Nike does not have its own manufacturing plant, they
outsource the work to contractors in the Philippines, Vietnam, China,
Indonesia and Taiwan. Five hundred thousand people worldwide are involved
in the production of the Nike footwear. This saves Nike 60% of cost.
The current challenges Nike now face is a material impact on its business in
North America and parts of Europe and Asia due to the global pandemic.
Although Nike’s stores and more than 95% of its partner stores in Greater
China and South Korea are back up and running. It said traffic is
“progressing” in those regions, however store traffic remains below prior-
year levels. Nike’s business took a hit because of the store closures, product
shipments to its wholesale partners have stalled, resulting in significantly
lower wholesale revenue and higher inventory. Nike saw continued strong
demand from consumers online, offsetting some of those losses. Nike has
seen that they were able to maintain a strong digital foundation, brand
momentum and financial position, the company believes this will be a
catalyzing moment that strengthens Nike’s long-term future.

Nike Supply Chain

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 Nike’s Productivity Levels and Variables
Operation's Managers must constantly make critical decisions to keep up
with the demand of the industry. The following are some of the major critical
decision an Operation's Managers must make
I. Design of Goods and Services
II. Managing Quality
III. Process and Capacity Design
IV. Location Strategy
V. Layout Strategy
VI. HR and Job Design
VII. Supply-Chain Management
VIII. Inventory, MRP, JIT
IX. Scheduling
X. Maintenance
Nike’s distinctive competency lies in the area of marketing, particularity in
the area of consumer brand awareness and brand power. While the reasons
that Nike is successful in marketing our products are numerous, this key
distinctive competency towers over our competitors. As a result, Nike’s
market share is number-one in the athletic footwear industry. Catch phrases
like, "Just Do It," and symbols like the Nike "Swoosh," couple with sports
icons to serve as instant reminders of the Nike empire. With Nike Inc. being a
leading global manufacturer and seller of sports shoes, apparel and
equipment. This market position is partly a result of effective and efficient
operations management (OM). Nike’s operations managers must continually
examine and improve strategies and approaches.
Nike Inc. operations management supports maximum productivity of
corporate offices, the supply chain, distribution network, and company-
owned retail facilities. There are a variety of measures applied to determine
actual productivity levels. In this case, Nike uses the following criteria to
measure productivity in some business areas:
I. Revenue per square foot (Productivity of Nike’s retail stores)
II. Pair of shoes per hour (Productivity of Nike suppliers)
III. Items per day (Productivity of inventory personnel)
IV. Documents per day (Productivity of Nike’s corporate offices)
Nike improves profit margins, reduces inventories, minimizes price
markdowns, and ensures that the customer receives the right product
assortment on time. Nike moved nine hundred million units through its
supply chain last year. Its manufacturing network consists of over 700
factories in 42 countries. Each product moves from 57 distribution centers
across a network of 18,500 accounts and 140,000 retail doors. Nike is now
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exploring innovative ways of manufacturing so it can customize products on
an unprecedented scale. The key manufacturing thrusts would be,
I. Lean manufacturing – By the end of fiscal year 2013, between 70% and
76% of its apparel and 85% of its footwear products were
manufactured on lean lines. This delivered additional savings of $0.15
per unit through better labor productivity and lower waste.
II. Material consolidation – Reducing the number of vendors through
which Nike sources materials and also reducing the materials used in
manufacturing products.
III. Manufacturing innovation and modernization.
Our recommendation for improving productivity level would be to double
productivity while cutting environmental impact in half. Also, to reduce
energy use, carbon emissions, water use and waste throughout their value
chain. Nike should ensure safe and decent work conditions along with decent
wages. Workers are important elements in the production factories and
should be treated as such. It should be about changing the culture and
transforming attitudes. Hannah Jones, Nike's chief sustainability officer states
“Nike will work with the factory managers who understand lean
manufacturing and embrace sustainability and the ones who put workers at
the center of all their operations".

The Quality of Air Jordan

Nike Air Jordan is stunning! It is great in terms of leather and overall quality,
with a smooth blend colours. The neat finishing simply puts Air Jordan in a
class of its own. However, a careful and thorough review of the shoes reveals
a slight difference in the leather texture of the same brand. Similarly, there
were a few complaints by some customers that the leather changed colours

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after some time. Though Nike gave the affected customers new shoes in
replacement, there is a need to address these quality issues.
We therefore recommend Check Sheets as a TQC tool to Nike. A check sheet
is any kind of form that is designed for recording data. Check sheets help
analysts find the facts or patterns that may aid subsequent analysis. An
example might be a drawing that shows a tally of the areas where defects
are occurring or a check sheet showing the type of customer complaints.
This tool will help Nike address the quality complaint which is quite untypical
of them.

Recommended Process Strategy for Nike

We recommend the Mass Customization strategy for Nike. It refers to rapid,

low-cost production that caters to constantly changing unique customer
desires. Mass customization sees to the production of vast array of goods
and services. It is not just about variety; it is about making precisely what
the customer wants when the customer wants it. Being a huge, multinational
company that produces a high variety of products, this strategy affords Nike
the organization and platform to meet the ever-changing preferences of their
customers. Evidence
According to the top 10 list of best-selling sneakers in 2019 as released by
NPD analyst, Matt Powell, Nike and its other brands like Jordan Brand,
Converse, Vans showed clear dominance in the industry. This data justifies
the recommendation of Mass Customization as a strategy to keep Nike up
there.
The top 10 list is as follows:
1. Nike Air Max 270
2. Nike Air Force 1 Low
3. Nike Tanjun
4. adidas NMD R1
5. Air Jordan 4 Retro
6. adidas YEEZY BOOST 350 V2
7. Vans Ward
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8. Converse Chuck Taylor OX Low
9. Nike Air Max 97
10. Air Jordan 11 Retro

Dealing with Nike’s Constraints

Having reviewed the operations of Nike and some literature on their

processes, the major constraint faced by Nike has to do with its inventory
management. According to Supriya Kumar (2012), Nike suffered $100 million
less profit in sales as a result. The reason behind this issue was their drive for
cost-effectiveness which led them to deploying a newly designed software
for inventory management without testing. This, however, resulted in wrong
productions and deliveries along with a surplus of products, quality majorly
depending on technology, management, and the huge investment.
Recommendations:
In order to forecast the precise demand, Nike has to implement appropriate
solutions. For instance, the use of different relevant algorithms and
forecasting models are a proper solution for the inventory management and
comprehending the demand (Gilliland, Sglavo and Tashman 2015).
Inventory management problem as well as the software discrepancy can also
be managed by having efficient workers or staff.
Finally, it is necessary that the company follows a proper approach of testing
system before receiving the orders. In this way, it would be possible to
remove the mechanical errors. Similarly, skilled labour testing is also
essential, which is required to check forecasted demand and desired
production by revising the process map.

References
Operations Management third Canadian Edition
Google Images
https://www.britannica.com/topic/Nike-Inc
https://en.wikipedia.org/wiki/Nike,_Inc.
https://about.nike.com/

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https://www.theringer.com/nba/2020/5/4/21246027/air-jordan-1-nike-michael-jordan-
sneaker-king-legacy-the-last-dance
https://yis.org/betting-on-a-legend-the-story-of-nikes-air-jordan-shoe/
http://panmore.com/nike-inc-operations-management-10-decisions-areas-
productivity
https://finance.yahoo.com/news/

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