Supply Chain: Nike, Inc.
Mariapaz D. Ruiz
University of Phoenix
Supply Chain: Nike, Inc.
The supply chain plays a critical role in the transformation and global growth of a company especially in the current economic situation. The global supply chain is the transformation flow linking the raw materials, parts suppliers, manufacturers, and service support operations into products and services and distributing these products locally for consumers (Chase, 2005). According to Sridharan, Caines, and Patterson (2005), difficulties encountered in the implementation of supply chain management software designed to maximize the value of a company can result in a disruption of its supply chain, causing losses and a decline in its value thus resulting in the shareholders’ disappointment. Nike’s concept for its supply chain management are process innovation (do it different), continuous improvement (do it better), and execution discipline (do it right) (IBM and Stanford University, 2006). Nike, created in 1971 began outsourcing in mid 1970s. Currently, Nike is largest athletic shoe company in the world, controlling more than 36% of the US athletic shoe market and has more than 33% of the global athletic footwear market. Nike’s products include apparel and sports equipment (Nike, Inc, 2009). Out of Nike’s 830 suppliers, 70 of it produce shoes. Nike employs more than 600,000 workers in 51 countries in 2004, manufacturing Nike products. Nike has direct employees of 24,291 with vast majority in the US and had about $12.2 billion in revenues of which $6.5 billion came from footwear sales and $3.5 billion from apparel in 2004 (Locke and Romis, 2007). Nike’s supply chain started in the1990’s when Nike was a criticized involving underpaid worker in Indonesia, child labor in Cambodia and Pakistan, and poor working conditions in China and Vietnam. Further allegations of wage law violations, excessive overtime, physical abuse, and unsafe working conditions surfaced from its suppliers and in 1992, Nike responded to its sweatshop labor image by developing its Code of Conduct and labor practices in the company’s Safety, Health, Attitudes of Management, People Investment and Environment program. Nike’s suppliers were obligated to comply with the basic labor, environmental and health and safety standards. Nike’s suppliers were required to observe, sign and post within their factories this Code of Conduct. Nike conducted trainings with suppliers and assembled a team of 90 compliance staff based in 21 countries to monitor suppliers and about 1,000 production managers were working with suppliers ((Locke, Kochan, Romis and Qin, 2007). Nike’s restructuring in global supply chain led to significant improvements in working conditions. In 1996, Nike faced stockholder criticism for labor conditions of its contractors and its subcontractors’ treatment of women workers, high-paid celebrity endorsers and low-paid laborers. Nike’s Vietnamese factories reported that in 1997, its workers were subjected to unsafe heat, exhaustion, poor nutrition and beatings. Anti-Nike rallies and protests were reported in 50 cities and 11 other countries. In 1998, Nike introduced a revised Code of Conduct and instituted the “Future Vision” and embedded Corporate Social Responsibility (CSR) values to address the issues on working and environmental conditions at subcontractors’ factories, then restructured again to Global Production Network. To improve CSR compliance, Nike stirred from a market relationship to a collaborative partnership where suppliers have a deeper and securer relationship with the buyer (Lim and Phillips, 2008). Nike’s supply chain management focused on its process innovation to do their products different from other shoe producers, continuous improvement by maintaining its relationship with its suppliers to be able to do its production process better, and execution discipline by doing...
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