Nike Supply Chain Analysis

Supply Chain/Distribution Channel Analysis of Nike

1. Introduction

Nike is an American multinational corporation whose main sales includes footwear, apparel, equipment, accessories and services. It is one of the world’s largest suppliers of athletic shoes and apparel. This Supply Chain/ Distribution Channel Analysis will go into detail on Nike’s previous supply chain dynamics, it’s effects on Nike’s brand image and how this led to a dramatic change in Nike’s logistics, which has now put them in a position of market dominance whilst ultimately increasing their profits. It will also elaborate on how Nike’s drive for sustainable innovation, throughout its supply chain, has evidently reduced their costs and increased growth, whilst also benefiting

Nike provided a clear lesson on how supply chain ethics are made visible and can impact a brand. Nike initially had hyper-growth in the 1970’s and early 1980’s. At this time, Nike outsourced the assembly of it’s products to third parties in Asia in order to both drive efficiency and lower labour costs. When asked about their questionable business practices with some of these third-parties, Nike publicly stated that they couldn’t be expected to be responsible for the practices of its suppliers. This statement led to national media and activist groups sharpening their focus on the business practices of Nike suppliers and by extension Nike. Problems started in 1991, when activist Jeff Ballinger published a report documenting low wages and poor working conditions in Indonesia. Then in 1992, Ballinger published an exposé of Nike. His Harper's article highlights an Indonesian worker who worked for a Nike subcontractor for 14 cents an hour, less than Indonesia's minimum wage, and documented other abuses. Protests at the Barcelona Olympics in 1992, CBS' 1993 interview of Nike factory workers, and Ballinger's NGO "Press For Change" provoked a wave of mainstream media attention, which began Nike’s realisation that they must

The company became one of the very first international brands to introduce a Supplier Code of Conduct, which was launched in 1992 and opened for external audit in 1994. The code was desperately needed because, as Nike CEO Phil Knight noted in a 1998 speech to the National Press Club, “the Nike product [had] become synonymous with slave wages, forced overtime and arbitrary abuse”. At the time of his speech, Nike’s stock had more than doubled in value. The company has since gone from a virtual dead heat with rival Adidas (market caps of $3.97B and $3.59B, respectively) in 2001 to a position of dominance sixteen years later, with a market cap that has ballooned to over $86B vs. Adidas’s $17B. (Mulroy, 2016). In 1999, Nike began creating the Fair Labor Association, a non-profit group that combines companies, and human rights and labor representatives to establish independent monitoring and a code of conduct, including a minimum age and a 60-hour work week, and pushes other brands to join. From 2002-2004 Nike performed some 600 factory audits, including repeat visits to problematic factories. In 2005 Nike published a detailed 108-page report revealing conditions and pay in its factories and acknowledging widespread issues, particularly in its south Asian factories and became the first in its industry to publish a complete list of the factories it contracts