Table of Contents

I. Introduction .......................................................................................................................... 3
1. About Nike ..................................................................................................................... 3
1.1. General information .............................................................................................. 3
1.2. Competitor ............................................................................................................. 3
2. Elements in Nike's supply chain .................................................................................. 3
2.1. Supplier................................................................................................................... 3
2.2. Manufacturer ......................................................................................................... 5
2.3. Distributor .............................................................................................................. 7
2.4. Final customer...................................................................................................... 11
3. Nike's supply chain model .......................................................................................... 11
3.1. Material flow ........................................................................................................ 12
3.2. Cash flow .............................................................................................................. 13
3.3. Information flow .................................................................................................. 13
4. Nike's products ............................................................................................................ 13
4.1. Footwear ............................................................................................................... 14
4.2. Apparel ................................................................................................................. 14
4.3. Equipment ............................................................................................................ 14
5. The problem of Nike's distribution system ............................................................... 15
II. Methodology ...................................................................................................................... 16
III. Solution and recommendations ...................................................................................... 20
1. Possible reason for the problem................................................................................. 20
2. Recommendations ....................................................................................................... 21
2.1. Opening Nike retail stores .................................................................................. 21
2.2. Online transformation ......................................................................................... 21
2.3. Automation ........................................................................................................... 22
IV. Contribution form ........................................................................................................... 23
References ............................................................................................................................... 24

2
I. Introduction
1. About Nike
1.1. General information
Nike is a well-known sportswear business that sells shoes, apparel, accessories, and sports
equipment worldwide. Bill Bowerman and Phil Knight launched Blue Ribbon Sports on
January 25, 1964, and it was officially renamed Nike on May 30, 1971. It opened its first direct
sales outlet two years later, and in 1972, it became the brand we know today. Nike now presents
in more than 170 countries worldwide, with almost 77,000 employees, and estimated at $ 28
billion, with net revenues of $ 36.4 billion in 2018. At the beginning of the 21st century, it
attempted to grow into new areas and target new demographics by adding clothes and sporting
goods to its basic shoe business. Nike has created ground-breaking technology in production
and network platforms to expand consumer habits. With the mission of expanding human
potential, this is the reason why Nike has a wide range of products to meet the age, the demand
of customers. Undoubtedly, Nike still presently retains its brand name among many
competitive shoe brands.

1.2. Competitor
Adidas, a German footwear and sportswear company, founded in 1949, is Nike's biggest
competitor. It is ranked second in the worldwide market, behind Nike, with $15 billion in
revenue and over 57,000 people. Nike leads the sports footwear industry with 27.4% of the
worldwide market share and 77,000 workers and is the most valuable brand in the market.
Adidas and Puma, Fila, Asics, New Balance, Rothy, Sketcher are among the top competitors
of Nike in 2021.

2. Elements in Nike's supply chain

2.1. Supplier
Nike implements an outsourcing strategy using overseas manufacturing located worldwide,
including factories in Vietnam. The whole production line is located in these facilities and
monitored by Nike personnel. Hence, they would keep track of the supplier's performance and
quality. Nike only gets involved in the process of researching, prototyping, promoting, and
distributing products to consumers.

Nike will send a shoe model to their manufacturing partners for assembly once a shoe model
has been completed. After that, if the sample product fulfills all requirements, they could
execute a contract with that facility for mass commercial production.

3
Then, the manufacturer chooses suppliers that provide raw materials based on output demand,
consistency, and the company's operation. Some basic raw materials, such as soles, glue,
thread, and fabric, may be imported or provided by local vendors. Hence, Nike suppliers' list
for processing could be up to hundreds, and two of the most prominent partners are Buwon and
Far East New Century Corporation.

Buwon Industry Limited Company is a Korean enterprise specializing in shoe components and
chemicals. In 1994, the company began producing plastic beads and shoe materials under the
name Buwon in Gimhae. Buwon Vina factory was operated at Thuan Thanh 3 Industrial Park
in Bac Ninh province, Vietnam, in 2005 and instantly gained customers satisfaction due to this
localization.

Figure 1: Buwon Industry Limited Company

Therefore, in 1997, Buwon Vina was declared an official supplier for Nike, which engaged in
producing rubber and EVA additives used in shoe soles while also supplying other well-known
brands such as Adidas and Asics. On the other hand, Buwon has still been extending its
factories to create and provide more high-quality midsoles and outsoles.

Figure 2: Far Eastern New Century Textile Corporation (FENC)

Far Eastern New Century Textile Corporation (FENC) is one of Taiwan's top textile material
producers. In 2006, FENC launched its first garment factory in Binh Duong province at the
Vietnam-Singapore Industrial Park. Far East Polytex Company Vietnam transitioned from
manufacturing chemical fibers to fabric in Bau Bang Industrial Park in 2015. Thus, the

4
company became a provider of fabric, leather, mesh, and other apparel based on modern textile
technology for several global companies, including Nike, Under Armour, and Adidas.

Outsourcing strategy enables Nike to assess both the pricing and quality of the materials. It
recognizes cooperation as one of the crucial criteria for supply chain management to bridge the
gap between suppliers and retailers. As a result, Nike successfully overcame the challenge of
coordinating hundreds of suppliers in Vietnam and more than 19,000 retailers to distribute
products globally.

2.2. Manufacturer
According to BTIG, 43% of Nike's products are made in Vietnam. In addition, Nike's
production data shows that, by the end of August 2021, there are 138 manufacturers and
suppliers of this company located in Vietnam. The structure focuses on three main products:
garments, equipment, and footwear. According to CNBC, Nike claimed that factories in
Vietnam produced about 50% of all footwear for the Nike brand in 2020.

Pouchen Vietnam Enterprise LTD

Pou Chen is currently one of the largest footwear processing manufacturers globally, supplying
Nike and other major brands.

Pouchen Group has located countless factories in Vietnam, from the parent factory to the
smaller sub-factories distributed throughout the country so far. The official and the first factory
of this company in Vietnam is located in Bien Hoa city, Dong Nai province. It can be said to
be the largest factory for Nike shoes in particular and Pouchen Group in general.

Address: Nguyen Ai Quoc Street, An Hoa Quarter, Hoa An Ward, Bien Hoa City, Dong Nai.

Figure 3: Pouchen Vietnam Enterprise LTD

5
Changshin Vietnam Co., LTD

Changshin Vietnam specializes in manufacturing Nike sports shoes for export with a scale of
144 million pairs/year. Changshin Vietnam is the first of the Nike factories to be ranked gold
level due to meeting the Nike Manufacturing Index criteria.

Address: Lot C, Loc An - Binh Son Industrial Zone, Long Thanh District, Dong Nai.

Figure 4: Changshin Vietnam Co., LTD

Taekwang Corporation

Taekwang is a typical Korean shoe manufacturing enterprise. As a partner of Nike, a global

sports shoe brand, Taekwang produces 72 million pairs of shoes per year at overseas factories
in Vietnam, China, and Indonesia. Taekwang is in the worldwide second rank in terms of
revenue among Nike's shoe manufacturing partners and is in the third rank globally in terms of
production quantity. Until now, Taekwang constructed a total of 3 factories in Vietnam. Each
year, the full scale of shoe production of all three factories is more than 50 million pairs of
shoes.

Address:
● Taekwang Vina: No. 8, Road 9A, Bien Hoa 2 Industrial Zone, Bien Hoa City, Dong
Nai.
● Taekwang Can Tho: Hung Phu 2B Industrial Park, Phu Thu Ward Cai Rang, Can Tho.
● Vietnam Moc Bai: Hiep Thanh Commercial Area, Loi Thuan Commune, Tay Ninh.

6
 Figure 5: Taekwang Vina

2.3. Distributor
2.3.1. Distribution channel

Nike is well-known for having a tightly controlled and direct distribution network.

Figure 6: Nike's distribution system

From analyzing the environment of the global market, along with becoming a sustainable
development corporation in the world, Nike uses two forms of the penetration market: Contract
Manufacturing and Direct Production. These two forms of penetration market are combined as
follow:

- For the inter-country channel:

Today, Nike employs approximately 612 contract manufacturing companies globally to
manufacture products. Under Nike's direction, the finished products are shipped to Nike's 17

7
giant distribution centers worldwide. From these distribution centers, on-demand, or from
orders placed 5-6 months in advance under the pre-order policy, a large volume of Nike
products will be exported directly to more than 679 retail stores all over the world. Finally, the
product will be transported to the consumer.

- For the domestic channel:

Local stores will import goods from Nike contract companies or from distribution centers (if
any) in that country. Additionally, the customers can purchase through the e-commerce channel
(nike.com) in their country. The form of e-commerce is only available in 23 major countries
like the U.S., the U.K., Australia, France,...

In Vietnam, Nike's distribution channel is operated on a smaller scale.

Figure 7: Nike's distribution system in Vietnam

2.3.2. Distribution center

Nowadays, Nike owns 17 distribution centers, including three distribution centers in the U.S.:
2 centers in Memphis, Tennessee, and 1 in Wilsonville, Oregon; The remaining 14 distribution
centers are distributed in some parts of the world, of which ACFC - Atlantic Central Football
Conference is currently known as the official distributor for Nike in Vietnam.

8
Distribution centers serve as logistics hubs, among other things. In addition to collecting and
managing Nike orders, distribution centers either take on the function of Logistics or partner
with significant logistics and transportation companies like UPS and Maersk. Nike items have
since been delivered to every part of the globe.

Figure 8: Nike distributor

2.3.3. Contract company

Currently, Nike has contracted production at 612 contract companies in 46 countries. These
companies operate according to the requirements of the quantity and quality of products and
the management process requirements, production, and labor safety conditions. In addition to
using available raw materials for production, the Nike company also supplies some Nike-Air
shoe parts and soles.

Nike uses two main types of contract companies: "Inline and local factory" and "Inline factory."
In addition, Nike enters into manufacturing agreements with several independent companies
(Local Factory models) in Argentina, Brazil, India, and Mexico to manufacture products
primarily for supply in these countries.

There are 42 contract companies in Vietnam, 5 in the North, 35 in the South, and 2 Hoa Tho
textile companies in Da Nang.

9
 Figure 9: Contract companies in Vietnam

After completing the production of products, these contract companies will distribute to
authorized retailers in the region and ship to Nike distribution centers. Products will be shipped
to retail stores in Vietnam or exported to other distribution centers worldwide at Nike's request
from these places.

2.3.4. Nike retail store

This type of store is Nike's largest number of stores worldwide. These retailers are directly
under Nike's control and usually sell the most official Nike prices. Genuine products, quality
assurance, service provision, customer care, import process through Nike, goods, and prices
are guaranteed to be standardized on the requirements set by Nike.

Some of Nike's authorized retail stores in Vietnam are:

● Hanoi Capital
○ 1st floor, Trang Tien Plaza, 24 Hai Ba Trung.
○ Ground floor, Vincom Towers, 191 Ba Trieu.
● Ho Chi Minh City
○ Tax Center, 39 Le Loi.
○ Ground floor, Parkson Hung Vuong Plaza, 126 Hung Vuong.
● Danang City
○ 1st floor, Indochina Riverside Towers, 74 Bach Dang.

2.3.5. Factory outlet store

Factory outlet stores, which are medium-size, handle large inventories or sell outdated
products. However, the quality, quantity, and size of goods are guaranteed and still properly
invested, creating many choices for customers. This place is where customers can buy many
suitable items with a 20-60% price reduction.

10
Some of Nike's factory outlet stores in Vietnam are:
● Ho Chi Minh City
○ 327 Cong Hoa.
○ Gigamall Thu Duc, 240 Pham Van Dong.

2.3.6. E-commerce
The nike.com website was born in August 1996, but it was not until June 1999 that it officially
completed the expanded e-commerce function. The completion of the website has made Nike
more attractive to customers because they can shop anywhere. Then, in October 2016, nike.com
opened an online sales distribution channel in Vietnam. With the help of technology, nike.com
is now Nike's most powerful and main shopping website.

2.4. Final customer

The target customers of Nike are every single individual that usually uses retailing points as
the central place to obtain goods of this brand. Their customers are often in the 15-45 age group.
Recently, Nike has put their effort into digital marketing to demonstrate their goods and
increase sales and brand awareness during the quarantine due to the Covid-19 pandemic. Since
catching the trend of online shopping in this period, this company has become high-tech with
its navigation into E-commerce.

3. Nike's supply chain model

Figure 10: Nike's supply chain model

− Upstream: Moving materials inwards

11
Material suppliers (3rd tier: raw materials) → Component makers + Subassembly providers (2rd
tier: Buwon) → Contract Suppliers (1st tier: Manufacturer (Pouchen)) → Nike

− Downstream: Moving materials outwards

Nike → Distributors (1st tier) → Wholesalers/Retailers (2nd tier) → Customers (3rd tier)

The diagram above shows that Nike mainly utilizes the traditional model, widely known as the
Forward supply chain. Its function follows the sequence of efficient planning, execution, and
management of product movement from raw materials to finished product, storage, and
distribution to end users to meet customer needs.

Recently, however, in order to protect the environment, Nike has also implemented a Backward
or Reverse logistics strategy, which is the process of planning and managing the flow of
products that are recovered from the point of distribution to the place of production and
activities related to reuse or recycle of materials. In addition, this type of supply chain may
enable customers to return defective products.

3.1. Material flow

Nike shoes start with new designs that are sent to the manufacturers. As the first company to
outsource manufacturing, Nike has a difference in that it does not invest in a direct factory, but
100% of the production process is located in outsourcing factories. Most manufacturing
processes are placed in Asian countries such as China, Indonesia, and Vietnam. The raw
materials from local or Chinese suppliers must follow Nike's standards and go through a
manufacturing system from cutting, pressing and sewing, soling, and packaging. The company
is also known for its hyper-fuse technology, which uses heat and pressure to fuse distinct fabric
layers for a level of precision not possible with typical cut-and-sew procedures. After
assembling, the manufacturers will transport the products worldwide to the distribution centers
(D.C.). In Vietnam, DAMCO is a forwarding company responsible for consolidating goods
from the factory to D.C. in Singapore. Then, Kerry Logistics will be accountable for the
shipment delivery to importing countries. After going through customs procedures and being
transported to Geodis warehouse in Binh Duong, Nike shoes will enter the import-inspection
department. The process includes unloading, checking, inbound process (scanning the product
code into the system with WMS barcode software and labeling it in Vietnamese), allocating,
and outbound process (picking goods according to the order, scanning, exporting, and packing
in boxes). Then the carriers deliver Nike shoes to the sellers through 2 channels from the
warehouse, namely the wholesaler and the retailer. Out-of-reason items will be returned to the
warehouse, transferred to another store, or waited for the promotion.

12
 3.2. Cash flow
The retailers transfer their sales revenue to ACFC - Nike's exclusive distributor in Viet Nam.
The ACFC will retain the profits after paying for the goods to Nike. Nike pays for shipping
and factory operations, with its revenue coming in worldwide. At the same time, Nike pays
suppliers for indirect (non-product) goods and services using two basic invoice processing
techniques. Nike has collaborated with Coupa, a web-based business network for e-
procurement and eInvoicing. For vendors ineligible to use Coupa eInvoicing, Nike uses
standard mail and email to receive invoices. On the side of Geodis, as a 3PL service provider,
it pays for shipping costs, customs clearance, insurance, and the warehousing service. Every
month, Geodis sends an invoice to ACFC for service fee payment.

3.3. Information flow

From various sources of information, including customers' needs or periodic reports from
retailers, ACFC drafted a new order. From these orders, Nike conducts self-research based on
demand forecasting and trend to develop new designs and a production plant for the factory.
Suppliers are connected with the factory through the material sustainability index system (MSI
software) to ensure the quality of the input materials. Finished products are managed and
distributed at the distribution center. The distribution center and Geodis notify the shipment
information on export orders to Vietnam. After receiving the goods, Geodis makes unloading
of discrepancy reports, store requests, outbound, and the delivery timeline. Merchandise
management is performed by ISC 2000 software. The shipping cycle begins when ACFC
aggregates orders from the store and sends them back to Geodis. Geodis schedules the delivery
towards stores and contacts the transportation company for truck booking. Retailers promote
information about new products to customers, who are also required to access ACFC, and they
provide feedback to retailers.

4. Nike's products
NIKE is the world-leading retailer of sports footwear and clothing. In over 120 countries
throughout the world, Nike offers their products to retail customers through a combination of
independent distributors, licensees, and subsidiaries. Independent contractors produce almost
all items. Most of Nike's footwear and clothing goods are manufactured outside of the United
States, whereas equipment is manufactured both in America and overseas.

13
According to Statista, in 2021, footwear accounted for 66 percent of Nike's total revenues.
Also, Nike had global footwear sales of 28.02 billion U.S. dollars while apparel and equipment
account for 12.865 billion and 1.382 billion, respectively. In conclusion, Nike is amongst the
world's largest sports footwear and apparel manufacturers.

Figure 11, 12: Nike's 2021 worldwide revenue illustrated by dollars and by percentages

4.1. Footwear
Nike's flagship product is shoes. Basketball, football, golf, soccer,
baseball, snowboarding, hockey, tennis, and volleyball are among
the sports the business produces shoes. It also produces Mary Janes
and flip-flops for the general public. Nike sneakers are designed
for efficient performance in sports and an attractive appearance.

Figure 13: Nike sneaker

4.2. Apparel
Besides producing shoes for the aforementioned wide range of sports, Nike also supplies those
activities and other ones such as dance and yoga with apparel for men and women. It features
several garment collections, including Livestrong, Nike Pro, Nike Free, and SPARQ. Several
people wear Nike clothing not only for sports but also due to brand recognition.

4.3. Equipment
Aside from shoes and clothes, Nike also sells sports equipment, such as baseball bats, balls,
swimming caps, rackets, or golf clubs. Gloves, yoga mats, agility cones, or sports guards are
also among Nike's products.

The wholly-owned subsidiary of Nike, Bauer NIKE Hockey Inc., headquartered in Greenland,
New Hampshire, specializes in manufacturing and distributing ice skates, skate blades, inline
roller skates, protective gear, hockey sticks, hockey jerseys. It is licensed apparel and
accessories under the Bauer® and NIKE® brand names. Bauer also offers a full selection of
products for street and roller hockey.

14
Under the Hurley® brand name, another Nike wholly-owned subsidiary, Hurley International
LLC, based in Costa Mesa, California, is responsible for designing and distributing action
sports apparel for surfing, skateboarding, snowboarding, and youth lifestyle apparel and
footwear.

5. The problem of Nike's distribution system

In general, many challenges and controversies at Nike during its time in Vietnam have yet to
be resolved. One of those comes from the outsourcing strategy, which brings the company's
annual profit of billions of dollars contrasted drastically with the extremely low average wage
paid to workers in processing facilities. For instance, many human rights organizations, Global
Exchange, have also criticized businesses like Nike for selecting manufacturing site partners
based on cheap costs while spending much money on marketing and media, such as inviting
celebrities to promote their products.

In fact, factories in Vietnam contribute more than half of shoe output and a third of garments
production worldwide. Unfortunately, according to the report of S&P Global Market
Intelligence 2021, Nike is currently suffering a low holiday inventory because there are no
longer sports shoes produced in Vietnam. Consequently, that leads to several other difficulties
in the global supply chain, such as a scarcity of shipping containers and warehouses in ports,
causing transportation fees to increase dramatically. Nike's actual production and delivery time
are now around 80 days, which is twice as long as before the crisis.

However, even though the circumstance is in the new normal issued by the government, those
disruptions severely affect Nike's supply chain and have not been found recoverable. Another
consequence of covid-19 is that the sales growth of Nike has been abruptly halted in the
summer of 2021. Therefore, the major problem which our team must find a solution is how to
sustain stable revenue growth in a crowded urban location such as Ho Chi Minh City. To clarify
that, we should have proper location planning to ensure inventory levels and choose the best
one to satisfy the customer's requirements.

15
 Figure 14: Nike's Revenue (in $B) suffered losses between 6-8/2021

II. Methodology
The method that we apply in this problem is the covering problem method, which has been
taught in the Principles of Logistics and Supply Chain Management course. We apply this
method to determine the main retailers among existing distribution channels. The purpose of
using this method is to find an ideal location that has the shortest delivery time and freight cost
to fulfill the huge wave of demand for Nike's shoes after the quarantine.

First, we need to list all Nike's distribution channels throughout Ho Chi Minh City. These
channels are chosen based on customers' practicality and necessity (All the information is
represented on the distributor's pages and reliable sources).

Order Name Address

89Q National Highway 1A, Tan Tao, Binh

A Pouyuen Factory
Tan District, Ho Chi Minh City

6th floor, Saigon Royal Building, 91

ACFC Company –
B Pasteur, Ben Nghe Ward, District 1, Ho Chi
Distributor
Minh City.

101 Ton Dat Tien, Tan Phu, District 7, Ho

C Supersports Wholesaler
Chi Minh City

Nhat Son Street, Ward 15, District 10, Ho

D Saigon Sneaker Retailer
Chi Minh City

16
 3rd Floor, Parkson Hung Vuong Plaza, 126
E Nike Parkson Hung Vuong, Ward 12, District 5, Ho Chi
Minh City

120/76 Thich Quang Duc, Phu Nhuan

F Hypefun Retailer
District, Ho Chi Minh City

327 Cong Hoa, Ward 13, Tan Binh District,

G Nike Outlet Store
Ho Chi Minh City

A4.14 Millennium Building, Tower A, 132

Emers Limited Liability
H Ben Van Don, Ward 6, District 4, Ho Chi
Company
Minh City

160 Nguyen Oanh, Ward 7, Go Vap

I Nike Factory Store
District, Ho Chi Minh City

Warehouse 16B, ICD Tan Cang Song Than,

J ACFC Warehouse Binh Hoa Ward, Thuan An City, Binh
Duong Province

Table 1: Location of facilities

We used Google Maps to find the location of each distributor/retailer and the distance
between them. The figure below illustrates the matrix of Nike's facilities in Vietnam. The unit
we used for the number is minute.

Figure 15: Location matrix

17
There are many different channels that Nike is using to sell its products, such as third-party
distributors, wholesalers, and retailers also. Thus, the business planning department needs to
fulfill all requirements and feedbacks from the customers as this part plays the most important
role in maintaining enterprise sales. Customers' experience is the core factor that directly
affects one single brand's number of orders.

Based on the covering problem method calculation, to satisfy all of the customers' demands of
Nike's product, we will suggest two ways to help Nike with deducing channels of distribution
stages but still keep its supply chain working properly. The first table below has been created
to compare 10 locations regarding delivery time. Easily can we see that location C - which is
Supersports Wholesaler, holds the shortest maximum delivery time. Therefore, we decided to
suggest Nike's staff should concentrate on dealing directly with Supersports Wholesaler and
make this wholesaler be the main distribution center to deliver Nike's products to other places
since this location has the minimum shipping time (just within 41 minutes to all places located
in Ho Chi Minh City). Hence, providing more products for Supersports Wholesaler is a possible
way to minimize shipping costs, raise customers' satisfaction and cope with the huge demand
for Nike's products after lockdown due to the outbreak of the Covid-19 pandemic.

Furthermore, as Nike takes notice that just one distribution center could not face the huge
workload, we suggest that they consider the combination of two locations to make them main
distribution centers. To cover all locations in the city, we propose the combination between
pairs such as ACFC Company – Distributor & Nike Factory Store; Nike Parkson & Nike
Factory Store; Nike Outlet Store & Nike Factory Store; and Nike Outlet Store & ACFC
Warehouse. Those first three pairs could deliver to other destinations within 33 minutes, 8
minutes slower than the single location Supersports Wholesaler. However, Nike Outlet Store
& ACFC Warehouse takes a maximum of 35 minutes on delivery time, which is 6 minutes
slower than just using a single location and 2 minutes more than the first three location pairs.

18
 Distance
A B C D E F G H I J
matrix
A 0 33 41 26 22 40 30 33 55 74
B 33 0 27 51 11 12 16 36 36 51
C 41 27 0 28 38 21 11 13 9 38
D 26 51 28 0 48 45 35 15 32 61
E 22 11 38 48 0 23 27 47 41 52
F 40 12 21 45 23 0 10 30 36 39
G 30 16 11 35 27 10 0 20 20 49
H 33 36 13 15 47 30 20 0 22 69
I 55 36 9 32 41 36 20 22 0 29
J 74 51 38 61 52 39 49 69 29 0
Maximum
74 51 41 61 52 45 49 69 55 74
time
Single
C
location

Table 2: Nike's covering locations time (single location)

33 minutes

Distance
A B C D E F G H I J
matrix
A 0 33 41 26 22 40 30 33 55 74
B 33 0 27 51 11 12 16 36 36 51
C 41 27 0 28 38 21 11 13 9 38
D 26 51 28 0 48 45 35 15 32 61
E 22 11 38 48 0 23 27 47 41 52
F 40 12 21 45 23 0 10 30 36 39
G 30 16 11 35 27 10 0 20 20 49
H 33 36 13 15 47 30 20 0 22 69
I 55 36 9 32 41 36 20 22 0 29
J 74 51 38 61 52 39 49 69 29 0
2 distribution centers: B&I, E&I, G&I

Table 3: Nike's covering locations in 33 minutes (double locations)

19
35 minutes

Distance
A B C D E F G H I J
matrix
A 0 33 41 26 22 40 30 33 55 74
B 33 0 27 51 11 12 16 36 36 51
C 41 27 0 28 38 21 11 13 9 38
D 26 51 28 0 48 45 35 15 32 61
E 22 11 38 48 0 23 27 47 41 52
F 40 12 21 45 23 0 10 30 36 39
G 30 16 11 35 27 10 0 20 20 49
H 33 36 13 15 47 30 20 0 22 69
I 55 36 9 32 41 36 20 22 0 29
J 74 51 38 61 52 39 49 69 29 0
2 distribution centers: B&I, E&I, G&I, G&J

Table 4: Nike's covering locations in 35 minutes (double locations)

III. Solution and recommendations

1. Possible reason for the problem
Nike chooses an outsourcing strategy since all its manufacturers are located relatively close to
the source of raw materials, saving the cost of transporting the article. However, its facilities
are further away from the consumers resulting in the high cost of distribution. Nike hires people
from that country to run the facilities to achieve the highest profits and the foreign facilities,
but the wage is extremely low. From the perspective of business ethics, relying on the cheap
labor price to attain its revenue while spending much money on marketing and media, such as
inviting celebrities to promote their products, is criticized. Moreover, if Nike's outsourcing
facility is out of material, it can lead to a significant shortage of supplies.

Nike is currently suffering a low holiday inventory because sports shoes are produced in
difficulty in Vietnam. The explanation is given from Nike's two significant suppliers, Chang
Shin Vietnam and Pou Chen Corp, which had to suspend manufacturing in approximately ten
weeks due to lockdown. Besides, Mr. Matthew Friend said Nike is facing the issue of time
transportation in Europe, the Middle East, and Africa because transit times in North America
are now almost twice as long as pre-pandemic levels.

To deal with the main problem, we need to find a solution to maintain stable revenue
development in a crowded urban area like Ho Chi Minh City. During the social-distancing
period, shopping behavior witnessed a sharp decrease. Ho Chi Minh City began to reopen for

20
business in the upcoming time. At this time, the shopping needs of customers have not changed
much. Nike must find ways to make its products accessible to customers as possible. If there is
an unexpectedly huge demand, what should Nike deal with its manufactures in Vietnam and
the others?

2. Recommendations
2.1. Opening Nike retail stores
Nike can forecast the demand will go up dramatically and distance the provision in the next
quarters. It means that Nike needs to have a new strategy in storing their products such as shoes,
sport wears, accessories. Understanding the difficulty of the situation, we highly recommend
that Nike distribute their products to its stores/distributors instead of third-party ones/contract
companies. "As long as stock is limited, it would be fair to assume that the pivot to control will
accelerate," said Simeon Siegel, an analyst at BMO Capital Markets. "They prioritize their
product channels first."

Before the attack of the Covid-19 pandemic, Nike has been on its way to developing a direct-
to-consumer market. It has cut partnerships with many wholesale retailers while also building
an online business and opening Nike stores worldwide. Over the past three years, Nike has
withdrawn about 50% of its unsolicited wholesale accounts. In the fiscal year 2021, the direct
sale of Nike covers approximately 39% of sales from its brand, increasing from 35% compared
with the previous year. Building more of its stores is vital to obtain more revenues and brand
awareness. This method is being used by Nike pretty well and should be maintained in the long
run. It helps Nike minimize the middle expense incurred and reduce some middle risks. Even
though it ruins its usual supply chain worldwide, not only in Vietnam, the double development
such as increasing sales, revenues, and profit will occur if they apply it radically.

2.2. Online transformation

Digitalization has become an important trend for many businesses in the 4.0 era to succeed.
Nike should change their way of thinking and implement a transformation to restructure the
corporation's supply chain due to decelerating growth and an obsolete business model.
Specifically, Nike can engage directly with customers through a website system, social media
for better connection and services. Moreover, they can robustly build their digital ecology, like
an integrated library of workouts for free and shopping, rather than through intermediary
entities (3rd parties). Besides that, instead of solely supplying through exclusive distributors,
they also may start partnering with e-commerce firms like Lazada, Shopee, Tiki, or other
platforms. Furthermore, these aforementioned online approaches enable them to more simply
acquire and analyze digital information from customers, allowing them to access a larger

21
market. This strategy, in particular, accelerates the product development cycle and gives it more
integration into the supply chain.

2.3. Automation
In the current trend, many other large companies are willing to take a technological leap with
domestic partners in production methods by constructing a nearshore automated factory that
will employ just over 100 people, most of whom will be experts to supervise the robot's
operations. Furthermore, this model has enhanced productivity by eliminating production costs
(materials, labor) and the time to complete a specific product. If operating this type of model
into mass production, Nike would reduce their standard delivery from 40-60 days to a few days.
Therefore, they could make significant progress in responding to customer expectations and
modifying preconceptions of traditional supply chains, innovating technology and procedures,
and establishing strong partnerships with manufacturers.

Figure 16: Robot arm in shoe manufacturing

22
IV. Contribution form

Name ID Contribution Signature

Nguyễn Huy Cảnh IELSIU20008 100%

Nguyễn Kim Chi IELSIU20009 100%

Nguyễn Khánh Hà IELSIU20024 100%

Đoàn Duy Tân IELSIU20121 100%

Nguyễn Vũ Tiến IELSIU20074 100%

23
References

NIKE COMPANY. (n.d.). ABOUT US. NikeCompanyBlogspot,

<https://nikecompanyblog.wordpress.com/about-us/>

Britannica, The Editors of Encyclopaedia. "Nike, Inc.". Encyclopedia Britannica, December

16 2019, viewed October 23 2021,

<https://www.britannica.com/topic/Nike-Inc>.

Supply Chain Management At Nike, EssayHub.net, viewed December 2 2021,

<https://essayhub.net/essays/supply-chain-management-at-nike-assignment>.

WCS 2021, Top 10 Nike Competitors In 2021, Whatcompetitors,

<https://whatcompetitors.com/nike/>.

Doing business with Nike, About Nike, viewed December 2 2021,

<https://about.nike.com/pages/doing-business-with-nike>.

The Manufacturing Process of Nike Shoes, UKEssays, viewed December 2 2021,

<https://www.ukessays.com/essays/marketing/the-manufacturing-process-of-nike-shoes-
marketing-essay.php?vref=1>.

JammykCric, Technologies in Nike Basketball Shoes Technology in 2016, Khelmart, viewed

December 2 2021,

<https://khelmart.org/technologies-in-nike-basketball-shoes-technology-in-2016/>.

ADEW - Nike Supply Chain - Vietnam Supply Chain Management Challenge, YouTube,

September 13, VSupplyChain, viewed December 2 2021,

<https://www.youtube.com/watch?v=MiwEjoY47N8>.

Nike Product Information, SportRec, viewed December 2 2021,

<https://www.sportsrec.com/nike-product-information-5417106.html>.

Elias Grondal, Cementing - The footwear construction, Linkedin, viewed November 19 2021,

24
<https://www.linkedin.com/pulse/cementing-footwear-construction-elias-gr%C3%B6ndal>.

Nike Inc. Business description, CSIMarket, viewed December 2 2021,

<https://csimarket.com/stocks/NKE-Business-Description.html>.

D. Tighe, Revenue share of Nike worldwide in 2021, by product category, Statista, viewed

September 20 2021,

<https://www.statista.com/statistics/412760/nike-global-revenue-share-by-product/>.

D. Tighe, Nike's revenue worldwide in 2021, by segment (in million U.S. dollars), Statista,

viewed September 20 2021,

<https://www.statista.com/statistics/888707/nikes-revenue-by-major-product-segment-
worldwide/>.

부원비나 2017, Company introduction And History, Buwon, viewed December 2 2021

<http://www.buwon.com/en/company/>

Giới thiệu chung, Fenc, viewed December 2 2021, <http://www.fenc.vn/vi/about/>

Đông A 2021, Chuỗi cung ứng khổng lồ của Nike tại Việt Nam: Thuê 138 nhà máy với gần nửa

triệu lao động sản xuất lượng quần áo, giầy dép trị giá cả chục tỷ USD, Cafef,

<https://cafef.vn/chuoi-cung-ung-khong-lo-cua-nike-tai-viet-nam-thue-138-nha-may-voi-gan-
nua-trieu-lao-dong-san-xuat-luong-quan-ao-giay-dep-tri-gia-ca-chuc-ty-usd-
20210927170405459.chn>.

Baodautu.vn 2019, Sau 25 năm đầu từ vào Việt Nam, Taekwang mở rộng hoạt động sang phát

điện và kinh doanh phân bón, Baodautu.vn,

<https://baodautu.vn/sau-25-nam-dau-tu-vao-viet-nam-taekwang-mo-rong-hoat-dong-sang-
phat-dien-va-kinh-doanh-phan-bon-d100664.html>.

Oberoi, M. (2020), Nike's Target Markets: Everything You Need to Know, Marketrealist,

viewed October 19 2021,

<https://marketrealist.com/2019/10/nikes-target-markets-everything-you-need-to-know/>.

25
'Section 9.1: Supply Chain Management Systems', Paginas, viewed October 19 2021,

<https://paginas.fe.up.pt/~als/mis10e/ch9/chpt9-2bullettext.htm>.

Q&A: Streamlining Analytics for TCFD Reporting, Spglobal, viewed December 2 2021

<https://www.spglobal.com/marketintelligence/en/news-insights/blog/qa-streamlining-
analytics-for-tcfd-reporting>.

Thomas, L. (2021), Nike could run out of sneakers made in Vietnam as Covid crisis worsens,

S&P Global warns, CNBC, viewed December 2 2021,

<https://www.cnbc.com/2021/07/19/nike-could-run-out-of-shoes-from-vietnam-as-covid-
worsens-sp-global.html>.

Understanding customer experience, Hotjar, viewed November 28 2021,

<https://www.hotjar.com/customer-experience/>.

Lauren, T (2021), Nike can turn its snarled supply chain to its advantage to boost its direct-to

consumer business, CNBC, viewed November 28 2021,

<https://www.cnbc.com/2021/09/24/nike-can-turn-its-snarled-supply-chain-to-its-
advantage.html>.

Fioravanti, R. (2020), Nike: Just do it. Differently!, Digital Innovation and Transformation,

Digital, viewed November 28 2021,

<https://digital.hbs.edu/platform-digit/submission/nike-just-do-it-differently/>.

Churchill F. (2017), Nike will use robots to nearshore production, Supply Management, Cips,

viewed November 28 2021,

<https://www.cips.org/supply-management/news/2017/november/nike-onshoring-
manufacturing-in-north-america/>.

Tìm hiểu về mô hình chuỗi cung ứng của Nike, Als, viewed 2 December 2021,

<https://als.com.vn/mo-hinh-chuoi-cung-ung-cua-nike>.

Ky T. (2018), ACFC - nhà phân phối của Nike và nhiều nhãn thời trang cao cấp, VNExpress,

viewed 2 December 2021,

26
<https://vnexpress.net/acfc-nha-phan-phoi-cua-nike-va-nhieu-nhan-thoi-trang-cao-cap
3857923.html>.

UKEssays (November 2018), Nike Using Outsourced Labor and the Effects on Their Prices,

viewed December 5 2021,

<https://www.ukessays.com/essays/economics/nike-using-outsourced-labor-and-the-effects-
on-their-prices.php?vref=1>.

27