Operation Management of Nike

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Operation management

Nike's Operations management concerned about forecasting, controlling, designing, operating, and scheduling business operations in the production of Nike foot ware. Its excellent management that has been developed and ameliorated during the long term operation has enabled that business operations to be efficient and at the same time using as few resources as required. It is also effective in terms of satisfying customer demands, and thus it has become one of the key issue that Nike develop prosperously despite the fierce competitions with other foot ware giants such as Adidas, Reebok, Puma, etc. The operation management system includes manufacturing and production systems, equipment maintenance management, production control, industrial labor relations and skilled trades supervision, strategic manufacturing policy, systems analysis, productivity analysis and cost control, and materials planning.

Nike started with dispersed production strategy as it is too small to construct its own production line and cannot support to recruit a large number of staff as well, especially in USA.. Every thing has both sides, and such strategy become its superiority in later time. It invited European designers to design for Nike sport shoes, then produce them through Asian manufacturers. It was its utmost objective to minimize its cost at that time in order to survive. The management strategy had been successful, and has greatly reduced the production cost. Nike had no more than 48 staff in 1972, compared with 3000 in Adidas at that time. However, the sales volume has increased nearly 1000 times during 12 years based on such operation management, from 1 million to 10 milliard dollar. The forward-looking operation management strategy had been an effective support for the brand to become the biggest foot ware company in USA.

After the explosive development, Nike started to expand through merger and acquisition, and thus increased the divergence of product line. After it acquired progressively Cole Haan, Bauer, Hurley International and Converse, it started to restructure the organization of the company, and changed the management strategy. It splited the general shoe department into several more specialized ones, and each of them is in charge of one kind of sport shoes.

Changes in company volume lead to changes in operation management. Nike thus started to create a more disciplined operation management system for its better sustainability in the foot ware industry. The main pressure of competition is to keeping costs low and delivery time short on to suppliers. The company decided to develop the spirit of the previous strategy, and then it is mainly driven by lean manufacturing in order to eliminate waste, reduce cost and achieve improved labour conditions while creating highest quality products. In this way, it realized the minimal holding of materials and stock, and produce based on actual production need. With the elimination of wastes of material and time, it become possible for Nike to provide best products at lowest price. Such management strategy reveals its increasing advantage with the help of information management system, and enabled better control of each order. However, Nike also adopts a rather flexible strategy in certain situation, that allows distributor to choose whether they prefer the "make to stock", "assemble to order" or "build to order" way for their own order. For example, if they decided to reserve 80% of the total amount 6-8 months in advance, they can get a 10% discount. In this way, it balanced the risk and cost of the production, and assumed the best control of time for both producer and distributor. The distributor can get its ideal manufacturer's price according to its own situation.

Being a global company who benefits from its exclusive brand recognition, is also an important issue to provide better labour conditions for worker, as this is an important part of expectations of...
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