SCM and ERP Software Implementation at Nike: From Failure to Success

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Case Details:

Case Code : OPER049
Case Length : 18 Pages
Period : 1996 - 2005
Organization : Nike
Pub Date : 2005
Teaching Note : Available
Countries : United States Industry : Footwear & Apparels

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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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"We became a poster child for failed implementations."¹

- Roland Wolfram, Vice-president - Global Operations, Nike Corporation, commenting on the i2 software implementation failure in 2000.

"The lesson of Nike's failure and subsequent rebound lies in the fact that it had a sound business plan that was widely understood and accepted at every level of the company. Given that resiliency it afforded the company, in the end the i2 failure turned out to be just a speed bump."²

- Christopher Koch, Executive Editor, CIO Magazine in 2004.

Introduction

The US-based Nike Corporation announced that it had generated profits of $97.4 million, around $48 million below its earlier forecast for the third quarter ended February 28, 2001. The company said that the failure in the supply chain software installation by i2 Technologies³ was the cause of this revenue shortfall.

This admission of failure also affected the company's reputation as an innovative user of technology. The supply chain software implementation was the first part of a huge project to install an integrated ERP system from SAP, and customer relationship management (CRM) software from Siebel Systems.

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For over a year, Nike reeled as a result of this failure. i2 and Nike blamed each other in public, for the failure and this led to a further downslide in the share price of both the companies. Analysts pointed to lapses in project management, too much customization and an over reliance on demand forecasting software. Nike insiders raised doubts about the 'Single Instance Strategy'⁴ being followed by Nike.

However, the company remained firm and relentlessly pursued its Single Instance Strategy for SAP implementation. The guiding instruction as put across by Gordon Steele (Steele), CIO of Nike was that the "Single Instance was a decision not a discussion."

By 2004, the company had successfully implemented its Nike Supply Chain (NSC) project, indicating that its centralized planning, production and delivery processes were right for the Single Instance Strategy. With this success, Nike's Single Instance Strategy became the desired approach for many companies implementing ERP software. Nike used SAP for 95% of its global business.

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1] Christopher Koch, Nike Rebounds, CIO Magazine, June 15, 2004.

2] Christopher Koch, Nike Rebounds, CIO Magazine, June 15, 2004.

3] i2 technologies is a leading provider of demand-driven supply chain solutions designed to enable business agility. In 2004, the company reported revenues of $389 million and losses of $3 million.

4] Single Instance Strategy refers to one ERP application with one data store that serves the entire company. Everything a company needs from financials, order entry, supply chain to CRM comes from a single vendor. There is one giant database and one application processes everything.