Inventory Problems at Nike

INVENTORY PROBLEMS AT
NIKE
CASE STUDY SOLUTION
VANDANA SINGH
R110307045
PRIYANKA RAMOLA: R110307030

PIYUSH YADAV:
MBA UAM (III SEM)
GROUP NO 8
R110307049
VANDANA SINGH
INVENTORY PROBLEMS AT NIKE

CASE STUDY SOLUTION
QUESTION 1: An effective supply chain system is of critical importance, especially to a manufacturing
company operating in a highly competitive and trend-based industry. Discuss Nikes inventory
management. What benefits did the company expect to achieve by implementing a new supply chain
system?
ANSWER 1: Nike, the leading manufacturer of shoes and other sports equipment in the world, was
dealing problems in implementing a new software application to streamline its supply chain and
manufacturing processes. Nike sourced its products from manufacturing facilities located in the
developing countries like Taiwan and Korean. Consequently, the company had a complicated supply chain
system where orders were placed by retailers six months ahead of delivery dates; this was named as
demand management system to introduce the more effective inventory management .These orders had to
be forwarded to the factories in Asia and the final product had to shipped back to the retailers. future
booking program was also introduced by the BRS (Blue Ribbon Shoe) which allowed production
forecaster to make to order and pre-finance while reducing of the over inventory.
PROBLEMS WHICH NIKE FACED:
1)
2)
3)
4)
5)
6)
7)
8)
Communication gap between i2 technology which was contracted to implement the supply chain
software.
Both companies didnt bother to test the software rigorously eventually the problem were solved
till 2003. They were moving too fats without taking any cautionary measures.
Next problem they were facing was the supply chain software that they had implemented was a
failure hence resulted in less profit.
They also faced the certain technical glitches.
Nike started blaming i2 for this. And i2 claimed due to the mismatch in using incomplete
system and its unwillingness to use i2 standard system and procedure. This resulted in
loosing the market share to their rivals (Reebok and New Balance)
Neither Nike nor i2 brought into 3-party integration to adapt the system to the organizational
processes as the 3rd party integrator was of importance in large scale project like the one at Nike.
Implementation of two major projects simultaneously i.e. supply chain and customer relation
management as they had to cover large no of suppler and customer of Nike, and it was creating
unnecessary complications for itself in the bargain.
I2 was also relatively inexperience in providing supply chain software for the apparel industry as
it had earlier worked with Dell corp., 3M etc. and Nike was the first apparel company that it
worked with.
Moreover i2 did not provide the quality service, and sometimes it also led to under manufacturing
and over manufacturing of the product.
VANDANA SINGH
Question 2: The failure of the new supply chain system affected Nike adversely. What were the
reasons for the failure and how did the breakdown harm Nike?
Answer2:
Reasons for the failure:
1) Communication gap between i2 technology which was contracted to implement the supply chain
software.
2) Both companies didnt bother to test the software rigorously eventually the problem were solved
till 2003. They were moving too fats without taking any cautionary measures.
3) Next problem they were facing was the supply chain software that they had implemented was a
failure hence resulted in less profit.
4) Neither Nike nor i2 brought into 3-party integration to adapt the system to the organizational
processes as the 3rd party integrator was of importance in large scale project like the one at Nike.
5) Implementation of two major projects simultaneously i.e. supply chain and customer relation
management as they had to cover large no of suppler and customer of Nike, and it was creating
unnecessary complications for itself in the bargain.
6) I2 was also relatively inexperience in providing supply chain software for the apparel industry as
it had earlier worked with Dell corp., 3M etc. and Nike was the first apparel company that it
worked with.
Consequences of the breakdown:

1) Loss of market share to rivals and self space to Nikes rivals, as Footlooker the biggest retailer of
Nike entered into contracts with Nikes rival i.e. New Balance.
2) Nike suffered its reputation.
3) Moreover negative publicity affected both the companies.
4) Complications caused by the implementation of i2 software led to
Late deliveries
Shortages and excesses of product
Question 3: What are the important elements to be kept in mind while implementing a new system in
an organization? What mistakes did Nike and i2 make? Also, comment on the future of Nikes supply
chain system.
Answer3:
Analysts also felt that both Nike and i2 moved too fast without taking the appropriate
cautionary measures. They also did not test the system, which would have revealed the glitches at a much
earlier. Nike extended the new system to its thousand of dispersed suppliers and distributors
simultaneously. Analysts felt that a piecemeal implementation of the system would have the magnitude of
the problem considerably.
Moreover Nike implemented two major projects simultaneous (CRM and supply chain)

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INVENTORY PROBLEMS AT

PRIYANKA RAMOLA: R110307030

INVENTORY PROBLEMS AT NIKE

Consequences of the breakdown:

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