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ANAND M.A DIVYA D. 12006 12016


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Hi-Story of Nike:
In 1962- knight met- Onitsuka company- manufacturing- high quality athletic shoes-TIGER-sold in US as BLUE RIBBON SHOES (BRS) In 1964- started a business with his coach in the basement of knights house.

In 1965- hired 1st employee- Jeff Johnson (salesman in ADIDAS)

In 1966- 1st exclusive store in California. In 1970- BRS- ended with 20 employees and started own line of athletic shoes. Carolyn Davidson- was paid with $35 for swoosh symbol.

In 1972- entered into apparel business, printed T-shirts at pre-Olympic trialsfollowed make-to-order. 1st one to allow retailers to pre-order inventory In mid-1970s- sales- 10mill to 270mill- waffle sole, air cushioned sole aka Nike air. In 1978- BRS officially changed to Nike Inc., In early 1980s- different varieties of shoes for different games- ended up to 200 models. In 1980- 2 mill shares of common stock- R&D @ EXETER, new Hampshire, US. By 1981- manufactured in 11 countries- 3000 employees In 1984- 58 Nike players got 65 medals- Immense publicity.

In 1985- Michael Jordan NBA player- successful celebrity to endorse Nike- Introduced range of shoes- Air Jordan. In 1986- revenue- 1 billion In 1987- new product- cross training shoes In 1988- Punch Line- Just Do It In 1991- worlds largest- revenues of 3 billion- Nike Town near Chicago. In 1999- New SC System and applications for CRM. In 2001- system experienced Teething troubles. In 2003- Nike bounced back- revenues exceeded $10 billion.

Nikes Profits Fall

In Feb 2001 Knight stated- companys profit in 3rd quarter would fall short by almost 24%. Reason- failure of supply chain software implemented by i2 Technologies Inc. - Technical glitches

During a press meet Knight complained against i2. i2 claimed- Nikes haste in using incomplete system and its unwillingness to use standard systems.
Nike lost considerable market share to rivals New Balance and Reebok.

Nike manufactured high quality athletic shoes for various sports and fitness equipment, apparels and accessory products sold in 140 countries. Head quartered at Beaverton, in the state of Oregan. Production facilities scattered around the world and had a complicated SC System

Nike and i2
Partnership with i2 for building Supply chain management Software.
Software built to support Forecasting and Demand of the Products Reduces amount of Rubber, canvas and other materials used to manufacture Total Cost of Project was $400 million. Amount paid to i2 was $40 million.

Cause for Failure

Nike refused to use the templates and methodology developed by i2.
Introduction of third party integrator for implementation was missing. Implementation before testing of the software Depletion of Software to Distributors and Suppliers i2s inexperience in the footwear industry coupled with Nikes demand of a high degree of customization created problems.

Failed to communicate with the existing systems and could not analyze large amounts of product information accurately. Heavy customization slowed the software. Huge number of products strained the system further and the software became vulnerable to crashes. Overestimation of Demand for some Products and Underestimate of Demand for others. Manufacturing of too many shoes of certain models and not enough for others. Decline in profit margin of 24% than estimated.

Consequences of the Breakdown

Upset the supply chain management Nikes reputation suffered Decline in profits
- Huge number of unpopular models manufactured had to be sold at highly discounted price

Additional Cost incurred especially shipping cost Spoiled relation with retailer

Lost considerable market share to rivals New Balance especially gained on Nike in market share

Operating Expenses increased by 11% Net Income decline by 29% from 2002-03

Negative Publicity and blame game affected both NIKE & I2 even more adversely than monetary losses.

However, NIKE continued to work with I2 on the five Year long project.
In Sep 2003 ,Nike announced that the Investment was finally paying off. By 2003 Nike had managed to reduce the inventory levels and boosted the gross margins and profits.(43%)

Conclusion cont.
According to BusinessWeek
About 30% of Nikes orders were based on speculation before the implementation of ERP system By 2003 when system was 75% complete the orders based on speculations reduced to just 3% The future orders increased by 10% over the previous year in mid 2003

Q1:Importance of SCM In trend based industry

Trends change very quickly in the market Aim of supply chain management is to gain an advantage in terms of customer service and cost over competitors. Planning, purchasing, manufacturing, and delivery are important factors in SCM. Demand for the products should be estimated quickly and informed to suppliers and distributors. Integration of vendors & distributors on single platform.

Q1:Benefits Nike expected from SCM

Enhancing the companys ability to respond to changing conditions Reduce the amount of raw materials required for production. Reducing inventory and capital investment risk Improving service to meet customer needs Improving process, information and product quality Providing an efficient global supply chain with local implementation

Q2: Reasons for failure & harm to Nike

Nike refused to use standard templates & Modified the applications in an indiscriminating manner. Absence of a third-party integrator. The application was implemented in a hurry. Testing of system was not done and was extended to suppliers and distributors. Nike implemented two major projects simultaneously (Supply chain and CRM)

I2 was relatively inexperienced in Providing SCM for the apparel industry.

Q2: Continued
Lost considerable market share to New balance & Reebok. Lost valuable shelf space. Lost reputation in the market. Nike's stock dropped from over 48% to about 39%. Profits came down because of
Additional shipping cost (Nike had to Airfreight the shoes) Heavy discount on slow moving inventory.

Lessons Learned from Nike's i2 Debacle

Enterprise software implementations cant be rushed and they take time to demonstrate benefits. Getting software up and running is not a goal; remaking the business is.
"Blank sheet" reengineering can lead to unrealistic business process designs that cant be implemented through enterprise software.

Just do it over.
After the failure of SCM ,Nike redoubled its efforts in those areas to avoid similar problems when it began rolling out its fully integrated ERP system