Supply Chain Management - Nike & Adidas

Topics: Supply chain management, Management, Supply chain Pages: 15 (4194 words) Published: September 8, 2008
Supply management is a complex function that’s critical to business success, responsible for delivering efficient costs, high quality, fast delivery and continuous innovation throughout companies’ entire supply chains. The strategic contribution of supply management is measured not only in savings made, but also in increased shareholder value (Niezen, Weller & Deringer, 2007). Nike and Adidas are two global companies try to improve their competitive advantage through strategically managing and utilizing their supply chain. The purpose of this report is to compare and evaluate the supply chain management practices of Nike & Adidas.

2.1 Nike Corporate Profile
Based in Beaverton, Oregon, and employing approximately 29,000 people worldwide, Nike Inc. is the world's leading designer and marketer of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities (Comtex, 2002; Nikebiz, 2007a). Nike holds a 32 percent worldwide market share, a $20 billion market cap (Koch, 2004), has 40,000 stock-keeping units of goods (Mongelluzzo, 2002) and sells over 120,000 products in four cycles per year (Koch, 2004).

2.2. Adidas Corporate Profile
Adidas is a leading producer of sportswear and sports equipment, offering its products primarily through four brands: Adidas, TaylorMade-Adidas Golf, Maxfli and Reebok (Datamonitor, 2007) The Adidas group and its 150+ subsidiaries are directed from the headquarters in Herzogenaurach, Germany, and employ 26,376 people (Adidas, 2007) The Adidas product line includes more than 20,000 items, with thousands of product variations. To keep up with market demand, the company changes its product range twice a year; more often if new technologies are available and in demand (Webex, 2004).

Nike and Adidas are global players across a number of product categories. Supply chain management practices vary as the different products across the portfolios work towards different objectives. Due to the wide scope of product categories, the following report limits itself to analyzing the supply chain management practices of Nike and Adidas within the context of the global footwear market. Key supply chain processes under analysis include;

manufacturing flow management
supplier relationship management,
demand management,
order fulfillment
customer services and relationship management
(Lambert, 2007).

4.1 Outsourcing as procurement strategy
The international sports shoe industry is typified by the large scale vertical disintegration of functions and high levels of subcontracting activity. Multinationals such as Nike and Adidas no longer manufacture products, relying strongly on outsourcing all production in low-cost overseas labor markets, invariably resulting in the majority being manufactured in Asia. Outsourcing practices allow Nike and Adidas to focus on their core competencies; marketing, design and product innovation, areas in which they can best achieve a competitive advantage (Anderson, 2005). The trade-off to outsourcing to offshore manufacturers is that companies face substantially longer lead-times for delivery - typically taking six to eleven weeks to receive products from Asia (Sahling, 2007). Efficiencies gained in terms of reduced wages are countered by the increased difficulty of monitoring the product and the actual working conditions in the factories (Van Dusen, 1998). Also, Nike & Adidas’ production capabilities are governed by the economic state of emerging markets; as countries prosper, there is a need to find new, low cost opportunities. Conversely, production could also be affected by external factors such as natural disasters or political instability.

4.1.1 Nike Approach
Asia provides the majority of Nike’s manufacturing and distribution, delivering to more than 80 destinations throughout the...
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