Nike will update supply chain tech and rely on consumer feedback.
The world’s top sneaker brands are in a race as their efforts to surpass each other continue. Nike believes it will gain an advantage over its competition by improving its supply chain.
The Nike supply chain operations team can reduce lead times by 83.3 percent by combining process and technology innovations.
Improving the Nike Supply Chain
By redesigning its logistics network, improving contact manufacturer relationships, nearshoring more facilities, and investing in automation, lead times for the Nike supply chain can be reduced from 60 days to ten days.
Work has already started to help the company reach its goal and one of these ways has been to move the Nike supply chain to a “nearshore, purpose built footwear factory with Flex that will deliver over three million pairs to North America in fiscal year 2018 alone,” said Eric Sprunk, COO of Nike. “By 2023, together with Flex, we plan to produce tens of millions of pairs near shore,” he added.
The move to nearshore manufacturing makes sense considering North America is not only Nike’s biggest group of consumers, but the world’s biggest buyers of sportswear in general. Over 25 percent of the shoes produced nearshore will be made on a responsive model with short lead times, according to Marc Bain of Quartz.
The responsive model is another way in which manufacturing is being redesigned for the Nike supply chain. In the past, manufacturing would start when Nike got a futures order—an order needing to be delivered in the next six months. The futures orders would lead to over one million workers at 566 factories to produce roughly 1.3 billion units and ship them through 75 distribution centers to over 30,000 retailers in 190 countries. However, through the new model manufacturing will be done quickly and driven by consumer interest.
In regards to investing in automation, Nike will have over 1,200 new automated machines installed at its Asian suppliers’ factories by the end of the fiscal year. These machines will handle cutting, cementing, shoe assembly, and the making of soles.
When looking at the changes Nike is making to its supply chain, it’s clear that its focus is delivering on consumer preferences in real-time. However, this is not new to the company, according to Andrew Campion, Executive Vice President and CFO at Nike.“We have implemented new consumer-focused strategies several times in our company’s history, and in each instance, we have ignited Nike’s next horizon of long-term growth.”
In this instance, Nike will need to upturn how their Nike supply chain functions in order to give consumers what they want, when they want it, and where they want it.
“The consumer today expect a premium experience, with innovative product and services delivered faster and more personally,” said Mark Parker, Chairman, President, and CEO of Nike. “Fueled by a transformation of our business, we are attacking growth opportunities through innovation, speed, and digital to accelerate long-term, sustainable, profitable growth.”