You are currently viewing Reinventing the Supply Chain Game: Four Dynamics from Nike

Reinventing the Supply Chain Game: Four Dynamics from Nike

Nike, Inc., headquartered near Beaverton, Oregon, dominates the sports apparel, footwear, and equipment industries with diverse offerings, ranking among the foremost providers globally. Benefiting from a robust brand, efficient distribution methods, and an appealing product range, Nike has strengthened its supply chain in recent years, recognising it as a key competitive advantage.

As new competitors with faster service and lead times, alongside fashion brands, enter the market, Nike remains the largest manufacturer of sportswear and running shoes globally. Its proactive approach to supply chain management is widely credited as pivotal to its remarkable success, solidifying its position as a leader in the industry. In this way, financially, Nike enhanced its profit margins by $50 million through sustainable material use and supply chain improvements when Nike’s commitment to Lean Manufacturing principles resulted in reduced waste and costs, estimated at $0.15 per unit. Here are four key insights into Nike’s transformative impact on the supply chain landscape:

Benefiting Both Consumers and the Planet through Sustainable Manufacturing, Packaging, Shipping, and Refurbishment Efforts:

Nike has made significant strides in sustainability, sourcing 93% of its products from sustainable factories and is aiming for 100% within 2025. Under the Supplier Climate Action Program, Nike’s North American facilities and 48% of global operations run on 100% renewable energy. Besides, suppliers that collectively account for approximately 60% of strategic supply-chain emissions are also participating in this program. Moreover, manufacturing operations successfully achieved a 30% reduction in freshwater consumption, while tier 1 suppliers effectively diverted 99.9% of waste away from landfills.

Additionally, Nike prioritises sustainability by optimising packaging with pop-up cartons made of 65% recycled content and 35% virgin material, reducing split packages. Besides, the company collaborates with UPS to simplify the process for customers returning Nike products purchased online. Customers can conveniently drop off their Nike items at UPS locations for free return shipping to Nike. Additionally, Nike partners with Best Buy to facilitate the recycling of old Nike products. So, now customers can drop off their used Nike items at Best Buy locations for free recycling services. Moreover, ground-only shipping in the U.S. reduces carbon footprint, with a no-rush option allowing thorough order preparation.

Enhanced Sustainability, Capacity, Speed, and Precision through New Regional Service Centers

Before winter 2020, Nike relied on centralised distribution centers in Memphis, TN, in North America. Today, it has transitioned these centers into omni-channel facilities while establishing new regional service centers in Los Angeles, Bethlehem, and Dallas, alongside in Europe, & China. These centers are powered by Nike’s proprietary digital platform, facilitating swift and efficient communication across its global supply chain. Driven by advanced technology, this multi-node network enhances demand prediction and inventory management. Moreover, Nike has tripled its digital consumer capacity in key regions, signaling a commitment to a digital-first supply chain to meet evolving consumer needs.

In addition, Nike has a suite of game-changing mobile apps linked to its membership program, with more than 150 million active members, serving as the foundation of its sticky experience ecosystem. Nike’s digital platform meets customers and allows them to get what they want when and how they want it.

From opening its 68,000 sq. ft. six-level House of Innovation concept store in NYC to the responsive digital Nike Live concept launched in LA in 2018 and the Nike Rise concept in Guangzhou, China, in 2020, Nike has placed a high premium on rolling out new engaging and exciting retail environments.

Statistics show that in fiscal 2023, Nike accelerated direct consumer relationships across its digital platforms, achieving YOY digital growth of 24% fueled by double-digit increases in traffic on mobile and apps. This increased the overall digital share to 26% in FY23, compared to 10% in FY19.

Adapting Consumer-Centric Operations with Automation and Technology

Nike has embraced adversity amid the pandemic, driving innovation through technology like AI and machine learning. This includes regional service centers and services like BOPIS and No Rush Shipping for sustainability. Over 1,000 “cobots” have been deployed in distribution centers, aiding in sorting and packing to enhance speed and efficiency while easing physical strain. This transformation ensures consumers receive products faster and more precisely.

Besides, in November 2021, Nike introduced the world to Nikeland, its Roblox-hosted metaverse. Since then, 7 million people have visited to browse merchandise, build and style avatars, design sneakers, play games, and roam its immersive 3D landscape.

Later that same year, Nike also acquired a digital sneaker company, RTFKT, to help them expand into the NFT space and, so far, the partnership has proven to be successful. For example, in April of 2022, Nike and  RTFKT Studio launched CryptoKicks Dunk Genesis, a collection of 20,000 non-fungible tokens (NFT) shoes that can be purchased and worn by your avatar in the metaverse. A total of 600 pairs of NFT sneakers were sold out in just 6 minutes, generating a total revenue of $3.1 million.

However, in this journey, the company has outlined a strategy aimed at achieving up to $2 billion in savings over three years. This plan involves various measures such as streamlining product supply, optimizing the supply chain, trimming management layers, and ramping up automation. As a result, over 1,600 jobs, approximately 2% of the workforce, will be eliminated.

Empowering the People Who Power Nike

At Nike, the supply chain is more than just business—it’s personal. Over the past five years, they developed and implemented the Engagement and Well-being (EWB) Survey to measure the level of engagement and experiences of factory workers, which has already reached 500,000 workers across 15 countries in its supply chain. By 2025, they expect 100% of their strategic suppliers to be measuring and improving the engagement of the people making their products.

Besides aiming for skills & leadership development, Nike, Inc. collaborates with USC and Northwestern University to introduce inclusive diversity training, starting with leaders from NikeUNITED and ConverseUNITED. Over 350 leaders have participated, aiming for company-wide involvement. Additionally, Nike partners with Lane Four and the University of Memphis to offer accessible education to distribution centres and Air MI employees. This unique program covers tuition costs directly and provides Prep Academy access, laptops, and 24/7 tutoring. Since its launch in December 2020, 130 employees have enrolled to pursue their bachelor’s degrees. Besides, around the globe, all Nike employees and their eligible dependents have access to 20 free sessions of counselling a year.

Additionally, as the five-year plan was launched in 2017, the company aims for 50% women and 35% racial/ethnic minority representation. And now, 51% of employees (up 1% vs. 2022) and 44% of leadership, while racial and ethnic minorities represent 39% of employees (up 4% vs 2022). The company invests 2% of pre-tax income in the community development program.

Author: Golam Rabbani

Leave a Reply