Nike and I2 Technology Case Study

Nike claims that the problems with its i2 demand-planning software were tactical and therefore fixable. It was too slow, didn't integrate well, had some bugs, and Nike's planners were inadequately trained in how to use the system before it went live. Nike says all these problems were fixed by fall 2000. And the company asserts that its business wasn't affected after that quarter. Indeed, at press time, Nike had just announced that its third-quarter 2003 profit margins were its highest ever.

If there was a strategic failure in Nike's supply chain project, it was that Nike had bought in to software designed to crystal ball demand. Throwing a bunch of historical sales numbers into a program and waiting for a magic number to emerge from the algorithm—the basic concept behind demand-planning software—doesn't work well anywhere, and in this case didn't even support Nike's business model. Nike depends upon tightly controlling the athletic footwear supply chain and getting retailers to commit to orders far in advance. There's not much room for a crystal ball in that scenario.

Indeed, Nike confirms that it stopped using i2's demand planner for its short- and medium-range sneaker planning (it's still used for Nike's small but growing apparel business) in the spring of 2001, moving those functions into its SAP ERP system, which is grounded more in orders and invoices than in predictive algorithms. "This allows us to simplify some of our integration requirements," says Nike CIO Gordon Steele.

Wolfram says Nike's demand-planning strategy was and continues to be a mixture of art and technology. Nike sells too many products (120,000) in too many cycles (four per year) to do things by intuition alone. "We've