{"id":26372,"date":"2017-11-15T22:16:23","date_gmt":"2017-11-16T03:16:23","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/striding-forward-nikes-quest-to-reinvent-its-supply-chain\/"},"modified":"2017-11-15T22:16:23","modified_gmt":"2017-11-16T03:16:23","slug":"striding-forward-nikes-quest-to-reinvent-its-supply-chain","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/striding-forward-nikes-quest-to-reinvent-its-supply-chain\/","title":{"rendered":"Striding forward: Nike\u2019s quest to reinvent its supply chain"},"content":{"rendered":"<p><strong><u>Why does Nike care about supply chain digitalization?<\/u><\/strong><\/p>\n<p>Consumer expectations have shifted dramatically. Ten years ago, Nike dictated its own product cycles, with retailers placing 94% of their wholesale orders at least six months in advance. [1] Today, consumers have adopted the \u201cbuy now, wear now\u201d mentality. With the internet, consumers have access to whatever they want whenever they want it, making the traditional retail calendar obsolete. Social media has also accelerated the fashion cycle, as consumers are constantly searching for the next \u201chot\u201d item. [2] Not only do consumers want new products faster, but they also want to be able to customize them. 70% of consumers say that they would be \u201cmore loyal\u201d to brands that gave them the ability to customize products. [3]<\/p>\n<p>Nike\u2019s established supply chain, with long product lead times and large batch production, is no longer able to meet consumer demands. As a result, Nike needs to transform its capabilities with technology. This will enable the Company to 1) shorten product cycles, 2) reduce labor and material costs via automation, and 3) efficiently produce customized footwear. A digitized supply chain is table stakes for Nike \u2013 it\u2019s main competitor, Adidas, has already invested in a \u201cspeedfactory,\u201d where robots are producing customized designs.<\/p>\n<p><strong><u>Management\u2019s short-term and medium-term initiatives<\/u><\/strong><\/p>\n<p>Today, customers can choose one of ~10 shoe models on NIKEiD and customize the color and fabric. Nike\u2019s current manufacturing processes are set up to produce large runs, but their goal is to have complete production flexibility (i.e., use the same amount of time to produce 1 SKU 20,000 times and 20,000 different SKUs). [4]<\/p>\n<p>In the near-term, management wants to increase automation of the entire manufacturing chain, including pre-production, material preparation, stitching, and assembly. In addition to reducing operating costs, these innovations will help deliver NIKEiD products 5-10x faster (in a matter of days vs. several weeks) [5] Specifically, Nike has partnered with Flextronics to develop and roll out the following technologies:<\/p>\n<ul>\n<li>Laser-cutters: Lasers follow a \u201cdigital recipe\u201d and can easily switch between cutting different SKUs without additional set-up time.<\/li>\n<li>Roboticized bolt holders: Each shoe model requires different fabrics to be moved and handled. A roboticized bolt holder automatically feeds the line based on the shoe\u2019s fabric requirements. [6]<\/li>\n<\/ul>\n<p>In the medium-term, Nike\u2019s goal is to provide consumers with custom-fit, 3D-printed shoes in a scalable manner. Nike and Adidas are in a race to mass-produce 3D printed shoes. Nike has established a partnership with HP but has not revealed any public targets; Adidas has announced a goal of selling 100,000 pairs of shoes by 2018. [7, 8] The two main challenges with 3D printing are:<\/p>\n<ul>\n<li>Inability to scale due to high costs: soles take ~10 hours to print and machines are expensive.<\/li>\n<li>Unappealing aesthetics: 3D printers have more much limited colors and textures compared to traditional manufacturing. [9]<\/li>\n<\/ul>\n<p><strong><u>My recommendations<\/u><\/strong><\/p>\n<p>Almost all of the press around Nike focused on its technological innovations (i.e., laser cutters, bolt holders, 3D-printing), but I believe that in the near-term, increasing supply chain transparency is equally as important. In order to achieve faster fashion cycles, Nike needs to understand what products retailers are selling. To the extent it can, Nike should integrate into retailers\u2019 data systems and run predictive analytics. This will help Nike 1) forecast demand and replenish products in a shorter timeframe and 2) provide immediate feedback to the product development team.<\/p>\n<p>In a similar vein, Nike should partner with retailers who can handle faster fashion cycles (i.e., retailers who are willing to hold more styles for shorter time periods and can market them effectively).<\/p>\n<p>In the medium-term, 3D-printed shoes will require just-in-time production. To limit inventory costs, Nike should integrate with suppliers, so that the suppliers can see what orders are received in real-time and arrange for just-in-time delivery of materials.<\/p>\n<p>3-D printing will also cause a shift towards the direct-to-consumer (D2C) channel and fundamentally change Nike\u2019s business model. I believe that growth in the D2C channel will benefit Nike, as D2C 1) allows Nike to own the relationship with the customer and 2) has higher margins vs. traditional retail. That said, management should carefully evaluate what resources will be needed to scale D2C (i.e., customer service and logistics).<\/p>\n<p><strong><u>Open Questions<\/u><\/strong><\/p>\n<ol>\n<li>How much of Nike\u2019s supply chain needs to be transformed? Digitalization makes sense for producing customized shoes, but is the investment worth it for products that Nike has produced consistently over the past decade?<\/li>\n<li>Producing customized shoes (both NIKEiD and 3D-printed) requires significant upfront investment in R&amp;D, IT and machinery. Is this a market that only large, well-capitalized incumbents like Nike and Adidas can win, or can start-ups like Feetz break in?<\/li>\n<\/ol>\n<p>(780 words)<\/p>\n<p><strong><u>Sources<\/u><\/strong><\/p>\n<ol>\n<li>Nike, Inc., May 31, 2007 Form 10-K (filed July 27, 2007), via Capital IQ, accessed November 2017.<\/li>\n<li>CPP-Luxury, \u201cMillennial Consumers are Keen to \u2018See Now, Buy Now, Wear Now,\u2019\u201d http:\/\/www.cpp-luxury.com\/millennial-consumers-are-keen-to-see-now-buy-now-wear-now\/, accessed November 2017.<\/li>\n<li>Cotton Incorporated Lifestyle Monitor, \u201cKeeping the Supply Chain Running Smoothly,\u201d http:\/\/lifestylemonitor.cottoninc.com\/mining-the-data\/, accessed November 2017.<\/li>\n<li>Morgan Stanley, \u201cThe Need for Speed Hits Athletic Wear,\u201d June 6, 2017.<\/li>\n<li>Flextronics, \u201cNike Case Study\u201d, https:\/\/flex.com\/insights\/case-studies\/nike, accessed November 2017.<\/li>\n<li>Flextronics, \u201cRecoding the Run,\u201d https:\/\/flex.com\/intelligence\/manufacturing\/recoding-run, accessed November 2017.<\/li>\n<li>Nike, \u201cAt Nike the Future is Faster, and it\u2019s 3D,\u201d https:\/\/news.nike.com\/news\/nike-hp-3d-printing, accessed November 2017.<\/li>\n<li>TechCrunch, \u201cAdidas\u2019 Latest 3D-Printed Shoe Puts Mass Production Within Sight,\u201d https:\/\/techcrunch.com\/2017\/04\/07\/adidas-latest-3d-printed-shoe-puts-mass-production-within-sight\/, accessed November 2017.<\/li>\n<li>\u201c3 Reasons You Won\u2019t See Mass Produced 3D Printed Running Shoes \u2013 For Now,\u201d https:\/\/www.solereview.com\/3-reasons-you-wont-see-mass-produced-3d-printed-running-shoes\/, accessed November 2017.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>Can Nike succeed in its mission to mass-produce customized shoes?<\/p>\n","protected":false},"author":9900,"featured_media":26373,"comment_status":"open","ping_status":"closed","template":"","categories":[4102,646,2123,159,158,1598],"class_list":["post-26372","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-3dprinting","category-customization","category-digitalization","category-footwear","category-nike","category-usa","hck-taxonomy-organization-nike","hck-taxonomy-industry-apparel-and-accessories","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - 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