Inventory Problems at Nike

            
 
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Case Details:

Case Code : OPER030
Case Length : 10 Pages
Period : 1991 - 2003
Organization : Nike
Pub Date : 2004
Teaching Note : Available
Countries : USA
Industry : Sports & Apparel

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Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Excerpts

New System's Teething Troubles

Nike built its original demand management system in the mid-1980s, as it moved towards becoming the number one sports shoes retailer in the world. During that period, Nike had also tremendously increased the number of its manufacturing units around the world. The demand management system was designed and implemented by over one hundred information specialists within the company. This system was designed to run the Futures program introduced by Nike in the 1970s, which was supposed to help Nike manage inventory more effectively. Under this system, Nike's retail partners placed orders with the company six months before the required delivery date. These orders were then forwarded to the manufacturing units around the world...

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

The Consequences of the Breakdown

The breakdown of the new system had several adverse consequences on Nike. It upset the supply chain system and caused the company to be bogged down by a large number of unpopular models, while not having enough of the popular ones. Not being able to cater to the market demands, Nike's reputation suffered and it lost considerable market share to rivals like New Balance and Reebok. New Balance especially gained on Nike in market share...

Conclusion

Both, Nike and i2 came out the worse for the supply chain failure. Analysts felt that, the negative publicity and the washing of dirty linen in public affected both companies even more adversely than the monetary losses and the production complications. However, Nike continued to work with i2 on the five-year long project and by the end of 2003 (the project was to end in mid-2004), had made considerable progress. In September 2003, the company announced that its ability to closely monitor the movement of goods from raw materials through factories to retailers was finally paying off...

Exhibits

Exhibit-I: The Swoosh Symbol
Exhibit-II: Income Statement (All Numbers in Thousands of Dollars)
Exhibit-III: Market Share of Major Sports Goods Manufacturers in the First Quarters of 1999 and 2000


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