ProfessorLyrebird954 What competitive challenges arose in Nike’s supply chain? … What competitive challenges arose in Nike’s supply chain?
Identify the main technologies that impact their supply chain
What capabilities might be enhanced through these technologies?
Describe two key aspects of Nike’s digital transformation Journey?
What was prioritised in Nike’s digital transformation?
Knowing what we know today about Nike, did the plan described in the case study succeed?
The average sporting goods shopper is changing. Consumers are increasingly foregoing the mall to shop through digital channels and they expect a personalized shopping experience and product assortment. Combining these two trends sends shocks through a company’s supply chain, forcing them to manufacture and deliver in a new reality. Nike, the largest sporting goods company in the world, is taking this challenge head-on, proving a company doesn’t need to be small to be agile. Through manufacturing innovation, re-evaluation of logistics and transportation, and a re-organization to set the company up for success over the long term, they’re embracing digitization and its impact on their supply chain.
The case for change
E-commerce penetration in the sporting goods industry has steadily increased in recent years. On average between 2010 and 2015, e- commerce sporting goods sales have grown above 20% per year1, compared to overall industry growth of 1-2%2. Consumers are increasingly shopping through both online and mobile channels, using company websites and proprietary applications as paths to purchase. For Nike, this means a shift in their channel mix towards direct-to-consumer, through Nike.com and online applications. With that shift comes an expectation – not only do consumers want to shop anywhere, they want quick and convenient delivery to come with it.
Personalization – customizing product assortment and shopping experience for individual customers based on their historic behavior and preferences – is also changing the game for consumer brands. According to research from the Boston Consulting Group, brands that are creating a personalized experience are seeing revenue increases between 6-10%, growing two to three times faster than their peers who don’t3. Nike is going headfirst into personalization, using the customer data they collect via their digital channels, allowing customers to make one-of-a-kind custom shoes and register for events catered to their specific interests.
Nike makes moves
How is one of the world’s largest consumer organizations reacting to a new reality where they have to deliver customers customized products faster than they ever have before, without letting costs spin out of control? In the near-term, Nike is investing in manufacturing innovation. They have joined forces with leading robotics and automation companies to re-design how they produce footwear4. They are investing in digital printing to enable custom artwork at the absolute last stage of the manufacturing process, while using advanced robotics to leverage economies of scale on the standardized parts of the shoe. At their October 2017 Investor Day, company executives shared that they will have deployed over 1,200 new automated machines in their manufacturing facilities by the end of the fiscal year4. They have also established a strategic partnership with contract manufacturer Flex to build more flexibility and localization into their manufacturing footprint.
Realizing efficient custom manufacturing is useless without delivery, Nike has re-evaluated their distribution strategy, establishing 12 key cities prioritized based on significant growth potential where they will fulfill same-day delivery5. They have openly de-prioritized their presence with retail partners in favor of digital channels and own stores6. This move allows Nike to have fuller control over the consumer experience, leveraging their digital channels and proprietary data to give consumers a truly personal shopping experience.
Playing the long game?
Looking longer term, Nike has made several strategic organizational moves to set the company up for the new digital reality. They have created the new Nike Direct organization, which will unite Nike.com, Direct-to-consumer retail stores, and Nike+ digital products5. This organization brings together all of the consumer touchpoints to enhance the company’s ability to plan for and optimize the personal shopping experience for the consumer, and make the related operational changes required to make it real. They have also created the Advanced Product Creation Center at the company’s Oregon headquarters, to serve as a development and testing ground for future manufacturing innovation, as well as opening a digital studio in New York City, a ‘mini start-up’ focused on staying on the cutting edge of digital innovation4.
A call to action remains for Nike to further re-evaluate their brick and mortar retail footprint, both their own stores and their remaining retail partners. They have a large footprint in an environment where the economics of brick and mortar retail are getting less attractive by the day, suggesting store closures may be a logical route.
While Nike is clearly on the front foot of their industry with respect to handling the impact of digitization on their supply chain, big questions remain. What does personalization look like in store? How will they manage the omni-channel experience so that consumers experience the brand in the same way whether they are using an app or in-store? As they look further out, how will they roll out the innovations they have established to a truly global supply chain, once they have saturated their 12 key cities?BusinessBusiness – Other
