The growing demands for new products, customization, quality and high level of service have challenged large companies around the world. To serve its customers, Nike has invested in strategic partnerships and innovation throughout its supply chain.
The complexity and size of Nike's logistics has already been discussed here on our blog, in a post by Alexandre Lobo. To give you an idea of the scale of its operations, Nike will ship 1,3 billion products in 2018, through 566 factories and 75 distribution centers, to 30 points of sale in 190 countries. A company of such dimensions constantly needs innovations to remain at the forefront of its market, and this is what is observed in several areas of the company.
As you might expect, Nike invests heavily in automation and robotics in its manufacturing plants. Not only is the speed to manufacture your products important, but also the scalability that allows such innovations to be applicable to multiple SKUs and in different locations. One example is the manufacturing process for the soles of pairs of sneakers, which, through innovation, reduced production time from 50 minutes to 2,5 minutes, which reduced energy consumption by 75%, tooling costs by 50% and 60% of labor costs.
In addition, Nike has partnered with specific companies, such as manufacturer Flex for production within the United States. Through this strategic partnership alone, Nike will deliver more than 3 million pairs in the country in 2018 and with expectations of tens of millions in 2023, with more than 25% of this volume being sold directly to the consumer. With this partnership, Nike was able to reduce its lead time between production and delivery of the product from 60 days to just 10. Despite the lead time benefit that proximity offers, bringing production from traditional Asian factories to American soil has its cost. To reduce the cost of labor, for example, Flex uses automation on a large scale.
This partnership also allows a to market more agile, like what happened with the Nike Flyknit model. With partner manufacturer Flex, this model reached the market 12 weeks earlier than the same model arrived with a traditional manufacturer. In addition, Flyknit can be fully customized on the company's website and delivered to the customer's home in less than 10 days.
Figure 1 – Nike Flyknit footwear model
Source: Disclosure
Not only is creating partnerships a goal for Nike, but also reducing the number of retailers in its supply chain. Greater focus on strategic partners and online sales would bring about drastic changes in the sector. In addition, Nike intends to bring greater visibility to its stocks, but not for retail, but for the consumer. That is, the customer could see whether or not the footwear he is looking for is in stock at the store of his choice.
Innovation, partnerships and supply chain collaboration have allowed Nike to stay on top. The configuration of its new operations strategy allows it to serve this increasingly demanding market.
In order to better understand the company's operations, ILOS annually organizes the International Logistics Mission in Europe, whose script incorporates a visit to the Nike Mega CD that serves the entire European continent, located in Belgium.
Figure 2 – Visit to the Nike Mega CD in Flanders, Belgium, held at the Mission
Source: ILOS archive
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Henry Alvarenga
He has been working in consultancy for 7 years, with experience in more than 20 Demand Planning and S&OP projects, Logistics Network Design, Logistics Master Plan, Inventory Policies, Operations Strategy and Market Intelligence
