Scm and Erp Software Implementation at Nike – from Failure to Success

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Introduction:

Nike was founded under the name Blue Ribbon Sports in 1964. In 1972 the first pair of sports shoes was sold and experienced enormous growth and achieved a 50% market share within the sports shoe market in the US only eight years later.

After sluggish focus and growth in the 1980ies, Nike experienced strong growth in the 1990ies and cemented the position as global recognizable brand. The increased international focus created strains on the supply chain, which was consider inadequate to cater efficiently to the organization and the rapid changes consumer demands . As a consequence of the afore mentioned supply chain problem Nike faced inefficient inventory management, problems in flow of goods and poor demand forecasting capabilities. In addition Nike was facing though competition in Asia, which as a region performed worse than expected. Given this it is clear that both external, internal and situational factors were the catalysts behind the Organizational Buying Behavior (OBB) of Nike catalyzing the mammoth project of implementing global supply chain management (SCM) software and an integrated ERP system.

Question 1: What are the failure factors for the first NIKE-i2 ERP-SCM implementation?

Using conventional project management measurements it is clear the implementation of i2 was a colossal failure . I analyze the failure using a combination for factors from the OBB and analysis based on the five phase implementation framework.

Nike states a clear vision of what they want to achieve with the i2 implementation: “Achieving greater flexibility in planning execution and delivery processes…..looking for better forecasting and more profitable order fulfillment" . However, I believe Nike overall underestimated the SCM project as I see some indications that the main focus and resources were on the general ERP framework and implementation of the Single Instance Strategy (SIS). As a consequence the project management turned out to be weak. The lack of prioritization of the SCM project is also visible in the lack of external consultancy services obtained. Both project management and appropriate usage of external consultants are evaluated as key critical success factors for successful implementation of large scale IT projects. (Appendix 3)

So I see the project being initiated on the wrong foot, but would consider phase 2, 3 and 4 as the phases where the project fell apart. I strongly believe external consultants with expertise knowledge would have challenged a number of the technical issue and decisions made by the project management. The implementation of i2 on the legacy system is such example. SIS required a large degree of integration and data migrations, so deploying the SCM software on the legacy system instead of as part of the SAP ERP is a strategic mistake. This specific decision later proves unwise when Nike begins to experience large problems in data integration as formats and outline of i2 didn’t match the other systems.

Also in the data specification and parameterization external experts would have stepped in and limited the vast number of customization enquiries from Nike. I believe this specific problem has its roots in the inadequate blueprinting of Nike. The missing blueprinting –the realignment of the long term business strategy with capabilities of the software – is not uncommon as it is estimated that 51 percent of failing IT projects, fail due to lack of understanding between IT and business departments” I believe there is evidence of that happening in this case as well. The fundamental idea behind the SCM software in terms of demand planning did not fit well with the business strategy of Nike. Nike used a bottom-up demand process where the retailers committed to an order in advance before manufacturing. With i2 Nike changed this core process as the demand now was forecasted using a top-down approach. The combination of the changed process and lack of proper data...
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