Nike's New Supply Chain Project

Nike’s New Supply Chain Project

Introduction: Nike’s Value Chain and Competitive Forces

In 1984, Nike owned just 16% of the athletic-shoe market, and for much of the 1980s it was running neck-and-neck with Reebok (Wilson 1). Now, with somewhere between 43-47% of that market, Nike is the undisputed leader. However, things are not perfect with the company. In the late 1990’s, Nike began to see the results of many unresolved issues concerning competitive forces exterior to the company and a value chain, unrepresentative of its marketplace and enormous growth, interior to the company. Both issues affected its bottom line negatively. One significant issue was simply a function of poor inventory management and demand forecasting, coupled with the ongoing and dramatic slump in Asian sales. Nike had anticipated a doubling of Asian revenues, but saw instead a decline (Karpinski 1). Nike also had recurring problems managing the flow of goods from manufacturers to retailers. Finally, Nike's competitors, most notably Rebox, New Balance, Adidas and Fila, were copying much of the look of Nike's advertising campaigns, making its image projection much less effective (Karpinski 1).

Problems with the Implementation of i2

Perhaps the biggest challenge facing deploying the i2 e-business app for Nike was balancing speed-to-market vs. customization. E-business vendors have an extremely low tolerance for customization, however Nike pursued strenuous customization. Nike also failed to use the vendor's implementation methodology and templates, which contributed to the problem (Wilson 1). i2 did not go through the process system development completely and Nike did not do its job of monitoring and checking the data outputs as they occurred, in order to ensure usable documents. Finally, Nike rushed into implementation and cut over to the new system without proper verification and without doing any dry runs of the software.

Roles in the Fiasco

When a company is in the midst of a large supply chain software implementation, a number of steps have to be executed simultaneously, including converting massive amounts of data and changing many business processes. Companies that undertake multiyear supply chain implementations should reassess plans periodically in order to really understand the scope of their complexity. During standard implementation, i2 recommends that customers follow guidelines. They have a specific methodology and templates for customers to use to ensure success. Nike found i2's recommended methodology and templates too rigid and chose not to use them. Nike also failed to follow i2’s recommendations to minimize customization, to rollout the system in stages, and to take other measures that would help ensure a smooth deployment. Nike rushed the implementation strenuously, making a project that normally takes two years and squeezing it to implementation in one year. Nike decided to use data from a variety of back-end systems and failed to bring in a third-party integrator to oversee the final outcome. “Implementing a supply-chain management solution is like crossing the street,” Tom Harwick, research director for the Giga Information Group told Network World. “High risk if you don’t look both ways, but low risk if you do.” (Heller 1).

The Blame

In my opinion, both companies are at fault. Customers have a responsibility to know what they are buying and to have the technical staff on board to be able to answer questions and make critical business decisions that should not be left in the hands of the vendors. Vendors have a responsibility to ensure that the customers understand the technology and the impact on the business process. If the customer is not adequately educated, they should make it a point to request that information from the vendor, forcing their own staff to acquire the expertise so that there is a minimum of finger pointing when there are delays. It's much better for both parties when they are able to make joint decisions about how to approach bottlenecks and delays. Nike’s significant blame is for not testing the application in a real world environment. Also, it was Nike's decision to run parallel systems, which was responsible for part of the problem (Wilson 1). The vendor is at fault for not disclosing problems that I'm sure that they saw or knew about to Nike during implementation. It appears the project managers on both sides of this implementation were very weak.

While Nike needed to understand that the software is only as good as people implementing and using it, i2 needed to be able to provide enough support