Nike Case Study Essay

5174 Words Feb 18th, 2009 21 Pages
Nike Case Study
The US-based Nike Corporation announced that it had generated profits of $97.4 million, around $48 million below its earlier forecast for the third quarter ended February 28, 2001. The company said that the failure in the supply chain software installation by i2 Technologies3 was the cause of this revenue shortfall.

This admission of failure also affected the company's reputation as an innovative user of technology. The supply chain software implementation was the first part of a huge project to install an integrated ERP system from SAP, and customer relationship management (CRM) software from Siebel Systems.

For over a year, Nike reeled as a result of this failure. i2 and Nike blamed each other in public, for the
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The increasing product sophistication also made the manufacturing process more complex. For instance, some of the popular models of Nike like Air Jordan sneakers required over 130 individual steps to manufacture.

Nike had been modifying its demand management system periodically to make adjustments to accommodate busier manufacturing schedules, tighter shipping dates and growth in customer lists. However, these constant adjustments made the system more complicated and susceptible to breakdown. In the light of these developments, Nike decided to optimize its global supply chain and overhaul its business processes in 1997.

In 1998, Nike's profits dropped by 50% from US$ 795 million to US$ 399 million, despite a revenue increase of 4%, as compared to the previous year. In a bid to cut costs, the company laid off around 1600 employees. Nike figured out that its inventory forecasting along with the existing supply chain management system problems had contributed to the decline in profits. To remedy the problems at hand, the company launched the NSC project. The idea was the initiative of Shelley Dewey, (Dewey) Vice President, Supply Chain and Steele and was approved by Knight when he was convinced of the potential of the project. The project thereafter had the full backing of Knight. Nike aspired to turn its Supply Chain System into a system par excellence. It was a massive global operations centralization initiative to

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