Nike Case Study

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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 failure and this led to a further downslide in the share price of both the companies. Analysts pointed to lapses in project management, too much customization and an over reliance on demand forecasting software. Nike insiders raised doubts about the 'Single Instance Strategy'4 being followed by Nike. However, the company remained firm and relentlessly pursued its Single Instance Strategy for SAP implementation. The guiding instruction as put across by Gordon Steele (Steele), CIO of Nike was that the "Single Instance was a decision not a discussion."

By 2004, the company had successfully implemented its Nike Supply Chain (NSC) project, indicating that its centralized planning, production and delivery processes were right for the Single Instance Strategy. With this success, Nike's Single Instance Strategy became the desired approach for many companies implementing ERP software. Nike used SAP for 95% of its global business. An AMR Research5 survey of 110 companies of annual revenues of $500 million or more using ERP revealed that only 23% had adopted a single instance strategy while 36% were planning to put it in place, while another 17% were trying to get the instances down to one per major global region and were investing considerable funds to achieve this. Analysts acknowledged that Nike had indeed taken a bold step when it adopted the single instance strategy with its first ERP rollout. During the late 1990s, most companies avoided it due to its huge costs and bandwidth problems. Christopher Koch, Executive Editor, CIO Magazine, remarked, "If it was easy, everyone would just do it."6

Nike's Supply Chain
Founded in 1957 by Philip Knight (Knight), Nike manufactures high quality athletic shoes for a variety of sports including baseball, athletics, golf, tennis, volleyball and wrestling. In addition to footwear, Nike also manufactures fitness equipments, apparels and accessory products. The company's products are sold in over 140 countries around the world. All product development factory contracting and marketing activities were carried out at the company's headquarters in Beaverton, Oregon in the US. Nike's global operations were broadly divided into five geographic regions – United States; Europe, Middle East and Africa (EMEA); Asia Pacific and Americas (includes Canada, Mexico and other Latin American countries of Chile, Brazil and Argentina). Since the mid-1970s, Nike has outsourced its manufacturing activities. The company's products were manufactured in factories owned and operated by its business partners commonly known as contractors around the globe. In 1975, Nike introduced the Futures program to manage the market for its footwear products. Under this program, Nike's retailers placed orders with the company six months before the required delivery date with the guarantee that 90 percent of their orders would be delivered within a set time period at a fixed price. These orders were then forwarded to the manufacturing units around the world... The system worked well in the initial years. Retailers were assured of sales even on 6., month advance orders as customers were not very demanding. Runners just wanted a steady supply of quality shoes irrespective of style. However, as Nike...
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