Scm And Erp Implementation At Nike Commerce Essay

Nike, Inc. is an incorporated company which designs, progresses and markets worldwide athletic, footwear, apparel, equipment and accessories. This company is a large publicly traded sportswear and equipment supplier which is based in United States. And it is the world’s leading supplier that supplies athletic shoes and apparel and it is a major manufacturer of sports equipment with revenue over $18.6 billion in year 2008. In that year Nike employed more than 30 000 people worldwide. [1]

In 1964 the company started Blue Ribbon Sport which was founded by athlete Phil Knight and his coach Bill Bowerman.

PRODUCTS

Nike produces a wide range of products, such as shoes and apparel for sport activities like football, tennis, running, basketball, golf, combat sports, and American football for men, women and children. The first product of Nike was track running shoes which ware released by Nike in 1987.

Some of the company’s shoes reduce weight because they contain Fly wire and Linarite Foam.

In 2010 Nike collection were worn by university teams like Miami, Alabama, Florida, Oregon, West Virginia, Pittsburgh etc.

NIKE’S SUPPLY CHAIN MANAGEMENT

Supply Chain Management or (SCM) is the management of the entire value-added chain, from the supplier to manufacturer right through to the retailer and the final customer. Three primary goals of SCM are: Reducing inventory, increasing the transaction speed by exchanging data in real-time and increasing sales by implementing customer requirements more efficiently. [3] Shortly, SCM is a business network converting from buying, making, moving, and warehousing to selling.

The aim of Nike was to do their products different or unique from other shoe producers that’s why the supply chain management of Nike focused on that by maintaining its relationship with its suppliers in order to be able to do its production process better. Nike’s supply chain includes all the activities, such as goods and services from the raw material stage, assembly, manufacturers, warehouse, parts suppliers, and distribution to the end-user whose primary goal is to maximize the value and shareholder wealth of the company.

Supply chain management brought certain benefits to the company. Costs from outsourcing allowed Nike to focus on its core competencies such as product design, marketing, and Air Sole technology. Relationship of company with its suppliers made it contingent for them to have better quality product with low costs through reduced administrative and payroll costs. Nike’s variety of 860 suppliers let them flexibility, also allowed them faster service in cases of emergencies and quality standard. The technologies of Nike like transferring data, orders, communication via internet and databases let them perform and meet the demands of customers in a timely manner and at the same time allowed them to have a good inventory and monitoring control.

Nike’s supply chain was confronted with many obstacles. One of the reasons was an expensive implementation of technical components; another reason was having too many suppliers which can lead them losing control of inventory and operations management. A fault of some shoe parts suppliers can result delay in its supply chain process; non implementation of suppliers of Nike’s can once again dispose of the public perception of the company and also trend forecasts and unstable economy may affect consumers need.

I2 SOFTWARE IMPLEMENTATION

In 1999, Nike Inc. decided to implement the first part of the supply chain strategy. So they decided for demand and supply chain planning application software from i2 technology. [4] The cost of this strategy was $40 million. The strategy of Nike using i2 software was to help the company to enable them resolve and detect any problems effectively, to perform effective business planning, and help them to match the supply with demand by mapping out the manufacturing of specific products.

REASONS FOR I2’S SOFTWARE FAILURE

The failure was heart when the company announced that they had profits of $97.4 million and this sum was 48 million below from their earlier forecast for the third quarter ended February 28, 2001.They also mentioned that this revenue short fall was caused from the supply chain software that was installed form i2’s Technologies. By the way this failure affected company’s reputation as an innovative user of technology. Some problems that were caused from the i2 software were as follows:

Integration: it couldn’t integrate with SAP ERP, the integration was required to be with ERP, SCM and CRM but this didn’t happen in i2 SCM that was working so isolated.

Customization: there was a high customization demand forecast which caused system operations to be very slow.

Deployment using legacy system: the complexity for entering input information by the lack of integration in several languages and also subsystems results in crashes, bugs, enormous delays.

There was no realistic time of goals: because there was an extreme pressure In timelines , this result in low level of testing before going alive and may be pushing the probability of errors.

And the following problems were that the software was giving inadequate information, the market condition begins to change and NCS project complication and as a result of all this review of meetings.

After all this problems the Nike and the company that produced software were pointing finger at each other. Software Company said that they had some specific templates and methodology for use and we always recommend to our customers to follow them but Nike instead chose not to do that. Also she added that Nike’s problem is isolated incident and the other 1000 companies are not in risk.

IMPLEMENTING SAP AFS

This time Nike decided to implement specifically developed software for apparel and for footwear industry the software called AFS which was a variant of the SAP R/3. With the single Instance Strategy, Nike begin using SAP AFS application across all the geographies where Nike is sold and ,on the other hand they also decided to chose to implement the other SAP applications which include Supply Chain management (SCM) and Business Information warehouse which was considered a pilot test of SAP Net Weaver platform for the near future. The company thinks that the single Instance Strategy would result in better integration and also provide a competitive edge by enabling holistic view of its business.

BENEFITS

Nike spent six years and $500 million on the project. In 2004 the 80% of the project was completed, and the company gained several benefits from the project. The benefits were dividing:

better financial management

improved their  revenue of  forecasting

decreased the inventory level

quick manufacturer and design process

Direct Benefits:

Better integration between departments

Improved level of decision making

Better visibility into costumer order transactions

Non-quantifilable benefits

CONCLUSION

As a conclusion we can say that every company leers by their mistakes even though this mistakes cost a lot. As we discussed below one of the biggest mistake of the Nike was choosing a poor quality company that had never designed such big software and tried first time on Nike and when the problem occurred they weren’t able to accept their faults. By the way also we learned the importance of pilot test because of the pressure they couldn’t test the software and they faced a problem such that the lose was felt 9 months in the company. There was a vision gap in the company, where the role of forecasting wasn’t clearly defined and it had a hard influence on supply chain management. And finally if there existed any experienced external consultant, both previous problems would have been managed.