Question

Case Study: Operations management at Nike

Delivery precision is important for a multi-product and multi-jurisdictional company like Nike. It improves margins, lowers inventories, minimizes price markdowns, and makes sure that the customer receives the right product on time. Nike’s manufacturing network has over 525 factories in 40 countries. Products move from several distribution centers across a network of thousands of retail accounts.

Nike owns no factories for manufacturing its footwear and apparel. The company’s footwear and apparel make up about 96% of Nike’s branded revenues. Instead, Nike outsources its manufacturing to third parties. It’s a huge cost advantage. Nike’s supply chain sources most of its raw materials in the manufacturing host country by independent contractors. The strategies of Under Armour, VF Corporation, Lululemon Athletica, and Adidas also include overseas manufacturers.

Nike is one of the pioneers of the manufacturing outsourcing strategy. It optimizes the manufacturing and production processes. Plus, continued innovation and product quality are keys to success. The company’s lean manufacturing improves efficiency, optimizes production, and lowers waste. Also, it drives quality and productivity. Material consolidation, manufacturing innovation, and modernization support the manufacturing process.

Nike has license agreements that permit unaffiliated parties to manufacture and sell Nike-owned trademarks, apparel, digital devices and applications, and other equipment for sports activities.

Nike has six primary distribution centers in the US. Notably, four are located in Memphis, Tennessee. Among those four, two are owned and two are leased. The company had 67 distribution centers outside the US at the end of the fiscal year 2019.

Keeping a tight grip on costs is important for any company’s profitability and for shareholder returns. Nike’s gross profit margin is lower than some of its competitors, including VF Corporation and Lululemon. However, Nike, through its Consumer Direct Offense strategy, is growing its digital business. The digital business will speed up revenue growth and supports margin expansion. Plus, the channel mix shift (direct-to-consumer) will support the margins of athletic footwear and apparel companies.

NIKE enjoys large pricing power in the marketplace. This is due to its ability to innovate and provide a different product. Also, the company plans to expand its top line.

Nike’s also been investing a lot in expanding its Nike Direct operations. This includes Nike-owned retail stores and digital platforms. Currently, revenues through Nike Direct operations make up about 32% of the sales mix. Nike Direct sales have high margins. Additionally, growth in the ratio of Nike Direct sales could positively impact Nike’s gross margin.

Nike’s manufacturing operations are concentrated in lower-cost countries such as China, Vietnam, and Indonesia. Since Nike’s manufacturing strategy is based on outsourcing and contract manufacturing, growing protectionist actions could hit its supply-chain process.

Question 1: Operations strategy and the five performance objectives (35 marks, 300 words)

Discuss the operations strategy and any five of the performance objectives at Nike.                     

Question 2: Nike’s supply chain (35 marks, 300 words)

1. Discuss the meaning of supply chain management.
2. As completely as possible, discuss the supply chain for Nike from raw materials to consumer purchase.

                                                                       

                                                                       

Question 3: Outsourcing (30 marks, 200 words)

Discuss the advantages and the disadvantages of outsourcing for Nike.

                                                                       

Answer 1

(1)

Nike's operation plan requires only a large amount of manufacturing lines. It re-appropriates the raw materials by self-employed companies for products such as boots and garments for assembling devices. The costs of production are thus reduced. The re-appropriating strategy has culminated in lower unemployment and more revenue-generating cost-reserve assets. Therefore reduced operating costs are sustained. Redistributing to small nations also culminated in lower overheads and increased performance. It re-appropriates the creation of attire and footwear from industrial premises located in different parts of the world. It moves items from the assembly unit to the dispersal habitats they possess. This transfers the product from certain environments in sale to shopping locations. The corporation requires a plan with activities to hold down the prices by redistributing and retaining a high quality. Through its strategy of activities the organization focuses on effectiveness and profitability. The company empowers the use of creativity to organize, integrate the goods, and produce through the network. The organization also makes use of advanced stages to legitimately sell the product to consumers and extend the appropriation of its items. The corporation plans to expand its relations to improve profitability across Nike 's reported distribution stores and advanced platforms. Nike's activity strategy has a magnificent supply chain that continually encourages skilled creation to help the global interest in sports shoes , clothing, and gear in its business. Throughout the task plan management area, the critical decision allows the company to change the supply chain to the ultimate strategic objectives of the organisation. Nike 's success targets are spoken about creating earth breaking games production products that are strongest on the market; products need to be maintainable to allow specific Global goods that fit individuals according to their needs; items need to reflect on consumer demands to give them compelling feedback through various channels; goods need to be of extremely reasonable standard

(2)

Supply chain administration covers the brand 's operations from purchasing raw materials to packaging and distributing to customers. This requires merchandise from source up to endpoint production. Warehousing, management, and consumer distribution was an innovative aspect of the supply chain. Nike was founded as an company that designed and developed the light and sturdy running shoes and associated embellishments, helping to bring one of the world's largest apparel manufacturers. Control of the supply chain is used as a defense system toward contestants. The supply chain includes exercises related to flux and asset change, raw materials, finished products to the end (client). Making customer esteem is a part of Supply Chain Management. The approach is intended to strengthen the interaction between the customer and the organisation. The organization has implemented some improvements in wording planning for the shoes, materials used, and assembly and promotion of their items. Nike has built excellent supply chain connections everywhere in the world. Nike's supply chain strategy revolves on ensuring the levelled advancement of products by accepting the actual need for store position. Nike's supply chain from raw materials to customer purchase consists of re-appropriating the product for efficiency and adaptability gains within a few manufacturing facilities. The acquisition of raw materials for those production lines is completed by self-employed entities. The material from these industrial installations is then steered to the focus of appropriation. The distribution places at that stage supply it eventually to customers to the stores nationwide.

(3)

Nike 's brand estimate consistently commands dependent on the marketing projection according to the current money-related review is worth more than a couple of trillions, with this two-digit trillion worth being the main brand on the rundown, the favorable circumstances more than inconvenience. Behind the triumphs there are so many factors that certainly recognize the company, speaking of it as the most significant product business on the globe as well. The upsides to re-appropriating Adidas are that it saves on manufacturing expenses by redistributing production to areas where the cost of labor is small. It aims to reduce the risks associated with assembly. It has scope for focusing on the nature of the item and the use of fine innovation. Nike 's weaknesses to re-appropriate are that it has a hazard to the brand's licensed innovation. Additionally, it has the weight of dealing for human rights abuses. Coordination and screen quality management requirement is a high expansion of the expenses. Advantage such as extra time Re-appropriating tasks such as organisation functions free money helping in working on the business' key elements; reduced job and mission costs lowered expenditures. Overhead costs can be reduced along these lines; Ability to ensure a higher caliber of redistributed assignments; Expanded skills — A re-appropriating Nike acquires well-informed and experienced information that leads to increased profitability and efficiency. Disadvantage is the lack of managerial control; it will affect the reputation of the organization; production failures and quality concerns can trigger a high malformation level.

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