Case Study: Nike ERP Implementation

Nike shoe division grew and spread rapidly around the globe from its inception in 1972 through 1998. Yet in 1999, Nike realized that in order to keep up with the growing demands of their products, and specifically their Air Jordan line of basketball shoes, they would have to make changes in the way they forecasted and projected demands and distributed their products. Eventually it was decided that these changes would take place in the form of the implementation of a new supply chain and Enterprise Resource Planning (ERP) software system. This paper will examine the supply chain problems Nike was trying to fix with the new system, the problems that arose from the implementation of the new system,
Nike manufactures athletic shoes for multiple sports including, soccer, running, basketball, and tennis, as well as athletic apparel
Frances J. Rey
Bus205

and fitness equipment, which are sold in over 160 countries around the globe and employs over 30,000 workers. Nike has over 600 factory contracts which employ over 800,000 workers that manufacture Nike products. It is headquartered in Beaverton, OR. In 1975, Nike implemented what was called the “futures” program to manage its supply chain. This program would guarantee delivery on orders placed six months in advance while also guaranteeing a fixed price at a time when inflation was high. This gave them an edge on their competitors and worked well through 1997 when Nike stock prices went up as high at $76 per share. As Nike’s market grew in the United States and spread around the world, Nike looked to outsourcing its manufacturing to the People’s Republic of China, Indonesia, Vietnam, Thailand, Italy, The Philippines, Taiwan, South Korea, Argentina, Brazil and Mexico to increase profits, and using contract labor as opposed to owning the manufacturing plants and employing the workers, again to keep costs down. As market share and demand grew, Nike found that its futures system was not able to keep up with the retail orders. By 1998, Nike found itself in a nine month manufacturing cycle. This meant retailers had to place their orders nine months before the expected delivery of products. This was a