SETU DIGITAL ECONOMY

Explore a company using Enterprise systems and identify the key challenges they faced during Covid 19.

Nike is the world’s largest seller of running shoes and sportswear. As one of the most recognizable brands in the world, the American multinational is arguably the most influential player in the modern textile industry. Behind the hundreds of millions of shoes and other products Nike sells each year lies a highly complex supply chain. Although there are undoubtedly significant challenges involved in managing this complexity, Nike’s proactive approach to supply chain management has been credited by many as a significant contributor to its phenomenal success.

How Nike transformed supply chains to survive Covid

1) Greater regional diversity

Prior to the pandemic, in North America Nike operated through an almost entirely centralised national distribution centre in Memphis, Tennessee. However, the company has since deployed a multi-node network, including new regional service centres near Los Angeles to serve the west of America, in Pennsylvania to serve the east, and in Texas to serve the south to better respond to regional needs. The company has expanded its European distribution as well, developing a regional service centre in Madrid to expand its distribution network outside of its European Logistics Campus in Belgium.

2) Investing in inventory optimisation technology

The company improved its ability to predict, plan and shape one-to-one consumer demand through advanced demand-sensing and inventory optimisation technology platforms, which operate at its multi-node regional distribution networks. As Nike continue building a digital-first supply chain globally to serve consumers more directly at scale, they have already tripled their capacity to serve digital consumers in North America and Europe, the Middle East, and Africa.

3) Accelerating automation

Adversity has always been a catalyst for innovation and fuelled Nikes competitive separation. The challenges and constraints imposed by the pandemic have driven Nikes teams to transform how they serve consumers through the implementation of new technology platforms, automation, and process improvement in their operations. Nike has used AI and machine learning technologies to predict and order the products that will be popular among consumers, and to deliver products faster and more accurately. The company also incorporated over 1,000 “cobots” – collaborative robots – within distribution centres. These robots can sort, pack and move products, increasing speed in order processing, alleviating physical challenges and allowing Nike employees to focus on “higher-value activities”.

4) Mixing up freight methods and increasing sustainability

Nike mixed up its freight and packaging methods to not only aid its supply chains, but to aid the planet. The company utilised ground-only shipping across the US, which is a less carbon-intensive option than air freight. It has also looked to make circular supply chains by introducing initiatives which take damaged shoes and refurbish them by hand to sell at selected stores. Nike said it has reduced the number of split packages it sends out and has begun using packaging which is made of 65% recycled content and 35% virgin material. 

5) Investing in people

During the pandemic, Nike introduced enhanced Covid protocols and Covid sick leave for essential workers in manufacturing, distribution centres and retail stores in order to protect employees and create stability across supply chains. It has since extended these protocols to include investment in career development, training and community volunteer opportunities. Today Nikes teams are fuelling a supply chain and technology transformation that will enable Nike to more directly serve consumers over the next 50 years.

Impact of the Covid-19 crisis on the brand

The wholesale business, through which Nike sells merchandise to other retailers, came to a halt amid the health crisis. That led to a 50% fall in shipments, increased inventory and higher costs due to order cancellations. As a result, gross margin fell when company-owned stores and other retailers were closed. However, the pandemic didn’t worry the brand too much as consumers’ appetite for Nike products has only grown with online sales through the roof! In fact, the company’s revenue increased 5% to 10 billion dollars in February 2020. It also offset some of its losses with a 75% rise in online sales, which overtook in-store sales by over 30%.