VALUE CHAIN OFVALUE CHAIN OF NIKE NIKE

Prepared by:Prepared by:

Hemali anadkat (2)Hemali anadkat (2) Banty haldhruwala (35)Banty haldhruwala (35)

Monica mota (57)Monica mota (57)Hiral Parikh (61)Hiral Parikh (61)

Nishra Shah (94) Nishra Shah (94) Amita GanavaAmita Ganava

Just do it!

What is value chain?What is value chain?• The network of firms that bring The network of firms that bring

products to market, from companies products to market, from companies that produce raw materials to retailers that produce raw materials to retailers and others that deliever finished and others that deliever finished products to consumer. Economic value products to consumer. Economic value is added through the coordinated is added through the coordinated management of the flow of phisycal management of the flow of phisycal goods and associated information at goods and associated information at each stage of the chain.each stage of the chain.

• We can say that a value chain is “a We can say that a value chain is “a string of companies working together to string of companies working together to satishfy market demand”satishfy market demand”

THE VALUE CHAIN:

FIRM’S INFRASTRUCTURE

HRM

PRODUCT DEVELOPMENT AND TECHNOLOGY

PROCUREMENT

INBOUND LOGISTICS

OPERATIONS OUTBOUND LOGISTICS

MARKETING AND SALES

SERVICES

MA

RG

IN

MARG

IN

PRIMARY ACTIVITIES

SUPPORT ACTIVITIES

NIKE ‘s Introduction:NIKE ‘s Introduction:• Nike means the greek goddess of victoryNike means the greek goddess of victory

• Major publically traded sports wear and Major publically traded sports wear and equipement supplier base in the U.Sequipement supplier base in the U.S

• Head quartered in the portland metro Head quartered in the portland metro politen area of oregon, near beaverton.politen area of oregon, near beaverton.

• World’s leading suppliers of athletic shoes World’s leading suppliers of athletic shoes and apparel and a major manufacturer of and apparel and a major manufacturer of sports equipments with revenue in access sports equipments with revenue in access of $16 billion USD in 2007.of $16 billion USD in 2007.

• Employed over 30,000 people world wide.Employed over 30,000 people world wide.

Contd…Contd…

• Nike markets its products under its own Nike markets its products under its own brand as well as nike gold, nike pro, nike brand as well as nike gold, nike pro, nike plus, air jordan , nike skate body,jeam plus, air jordan , nike skate body,jeam starter, and subsidaries including cole starter, and subsidaries including cole haan, hurley international, umbro and haan, hurley international, umbro and converse.converse.

Support activities:Support activities:1.1. Infrastructure:Infrastructure:

Diversify business portfolio with new acquisitionsDiversify business portfolio with new acquisitions Empowerment of top management.Empowerment of top management. Structure of matrix.Structure of matrix. Focus on key countries, key factors, critical Focus on key countries, key factors, critical

compliances.compliances. Drive a lean effective compliance process through Drive a lean effective compliance process through

strategic knowledge, remediations and varification.strategic knowledge, remediations and varification. Drive a shared accountability and work place Drive a shared accountability and work place

ownership of CR compliance.ownership of CR compliance. Encourage work ethics.Encourage work ethics. Financially decipilne.Financially decipilne. Calculate risk taking.Calculate risk taking. Strong financial position with minimal long term Strong financial position with minimal long term

debts.debts.

Contd..Contd..2. 2. Human Resource:Human Resource:

core values of the companies are honesty, core values of the companies are honesty, competitiveness and team work.competitiveness and team work.

Operates with minimum of hierarchy.Operates with minimum of hierarchy. Lot of collabration and consensus decision making.Lot of collabration and consensus decision making. Use matrix organisation.Use matrix organisation. Balances creativity with structure and decipline.Balances creativity with structure and decipline. Strong management team and good corporate Strong management team and good corporate

strategy in both north american and overseas strategy in both north american and overseas market.market.

SocializingSocializing Mix of new hires and promotionsMix of new hires and promotions

Promotions= consistency / company knowledgePromotions= consistency / company knowledgeNew hire employees= business mindedNew hire employees= business minded

Contd…Contd…Network structure.Network structure.Athelete management.Athelete management.Monetoring labour audit, compliance visit, brand Monetoring labour audit, compliance visit, brand

audits.audits.

Contd…Contd…

3.3. Technology:Technology:First mover advantage in E-Commerce.First mover advantage in E-Commerce.Diversity and variety in products offered on Diversity and variety in products offered on

the web (footwear, apparel, sporting the web (footwear, apparel, sporting equipments etc). equipments etc).

Innovative designs in footwear enabling Innovative designs in footwear enabling customers to design their own shoes online.customers to design their own shoes online.

AIR SOLE technology- specially used. AIR SOLE technology- specially used.

Contd….Contd….4.4. Procurement:Procurement:Just in time strategy. Just in time strategy. components arrive as they are needed.components arrive as they are needed. finished goods shipped after leaving assembly finished goods shipped after leaving assembly

line. line.Safety stockSafety stock buffer for lack of flexibility in supply chain.buffer for lack of flexibility in supply chain.Bullwhip effectBullwhip effect information about product demand gets distorted information about product demand gets distorted

as it passes from one entity to next across supply as it passes from one entity to next across supply chain.chain.

Role of Inventory in the Supply Chain:

Improve Matching of Supplyand Demand

Improved Forecasting

Reduce Material Flow Time

Reduce Waiting Time

Reduce Buffer Inventory

Economies of ScaleSupply / Demand

VariabilitySeasonal

Variability

Cycle Inventory Safety InventoryFigure Error! No text of

Seasonal Inventory

INVENTORY

PRODUCTION ABC DEMAND OTHERAPPLICATION ANALYSIS TYPE

Raw Materials A Items Independent MROComponents B Items DependentWIP C Items Sub-assembliesFinished Goods

Inventory Classification:

Primary Activities:Primary Activities:1.1. Inbound logistics:Inbound logistics: Low production cost.Low production cost. Outsource non-core activities.Outsource non-core activities. Focus on their core-competencies ofFocus on their core-competencies of

• Product designProduct design• MaketingMaketing• AIR SOLE Tech.AIR SOLE Tech.

Due to virtual relationship with the companies Due to virtual relationship with the companies who assemble nike products allows them to who assemble nike products allows them to switch to companies that provide low labour cost switch to companies that provide low labour cost & a quality product.& a quality product.

Worldwide supply chain project used by nike help Worldwide supply chain project used by nike help it to reduce inventories and investment risk.it to reduce inventories and investment risk.

Contd…Contd…

• Shared process through a wholly owned Shared process through a wholly owned subsidiary called nike. In house manufacturing subsidiary called nike. In house manufacturing ( Nike IHM) produces many of specialized ( Nike IHM) produces many of specialized rubber, foam and plastic components used in its rubber, foam and plastic components used in its products.products.

• Nike IHM’s primary facilities are located in Nike IHM’s primary facilities are located in portland oregon and st. louis, missain.portland oregon and st. louis, missain.

Contd..Contd..2. 2. Operations:Operations:

Centralisation of R&D in oregon.Centralisation of R&D in oregon.Application of NSRL.Application of NSRL.Nike requires manufacturing partners to devote Nike requires manufacturing partners to devote

environmental resources.environmental resources.Nike provides technological resources to its Nike provides technological resources to its

resources centre such as R&D centres, resources centre such as R&D centres, laboratories.laboratories.

Nike personnel in each factory to assist factory Nike personnel in each factory to assist factory management.management.

working on low and no packaging options.working on low and no packaging options.• reduce box styles from 18 to 2.reduce box styles from 18 to 2.

• Corrugated card board.Corrugated card board.

• 100% post consumer content. 100% post consumer content.

Contd…Contd…• No heavy metal inks.No heavy metal inks.

• no glues or solventsno glues or solvents

• Boxes manufacture in zero net discharge Boxes manufacture in zero net discharge facilities.facilities.

Contd…Contd…3. 3. Outbound logistic:Outbound logistic:

Strong control over its own distribution channel.Strong control over its own distribution channel.Powerful suppliers one company is producing 40% Powerful suppliers one company is producing 40%

of worldwide shoes.of worldwide shoes.Ability for forward integration.Ability for forward integration.Due to virtual relation with suppliers.Due to virtual relation with suppliers.

• Reduce administrative cost.Reduce administrative cost.• Reduce pay roll cost.Reduce pay roll cost.• Can increase the speed their product flows through Can increase the speed their product flows through

supply chainsupply chain• This allows them cut down on the amount of time This allows them cut down on the amount of time

required from the initial design to, production and required from the initial design to, production and then distribution.then distribution.

Contd..Contd..• Nike is using HP servers , software and Nike is using HP servers , software and

consulting service to run their new supply chain consulting service to run their new supply chain project.project.

Contd..Contd..4. 4. Marketing and sales:Marketing and sales:

Brand recognisation and reputation.Brand recognisation and reputation.Higher allocation of marketing budgets.Higher allocation of marketing budgets.Use endorser in every sport.Use endorser in every sport.Emerging brand name.Emerging brand name.Strong customer base.Strong customer base.Diversity and variety of products offer on the Diversity and variety of products offer on the

web.web.Ecommerce reduce the cost of good sold thus Ecommerce reduce the cost of good sold thus

improving the “bottom line”.improving the “bottom line”.

Contd..Contd..5. 5. Services:Services:

Improved service to meet customer/consumer Improved service to meet customer/consumer needs through the use of the technology.needs through the use of the technology.

Improved process , information & product Improved process , information & product quality.quality.

Provide customize shoes for customers.Provide customize shoes for customers.A company called planner has installed touch A company called planner has installed touch

screen system in nike stores to allow screen system in nike stores to allow customers to build their own shoes.customers to build their own shoes.

Nike also allows customers to order Nike also allows customers to order customize shoes online through their customize shoes online through their company web sitescompany web sites

Thank YouThank You

““Real leadership is not about Real leadership is not about prestige,prestige,

power or status.It is about power or status.It is about responsibility.”responsibility.”