Introduction
Nike Incorporation was formed in 1968 in Oregon. The company is a well known global brand producing footwear products which are designed to satisfy specific athletic uses as well as certain products which can be worn for leisure and casual purposes. The corporation has operations in more than 51 countries and has over 20,000 retail accounts internationally (Nike, 2012). Nike has 16 distribution centers outside United States and in 2011, 57 percent of its total revenue came from its international operations (Annual Report, 2011). Since Nike is a global firm, it has to face a number of challenges which include making decisions regarding how to engage its global workforce in adopting its own values and norms, how to incorporate laws of different countries in its operations and supply chains and last hw to ensure that it maintains ethical conduct in all countries of operations (Daft, 2010; Kotler, 2009). The area of activity that has been identified within the case study of Nike is to what extent is the company focused on embedding corporate social responsibilities in its global operations and supply chains.
Area of Activity Identified
Supply chains for global corporations have to be managed effectively since it helps the company to reduce costs and competition, apply time compression techniques, use outsourcing techniques and achieve shorter product life cycles (Kotzab, Mikkola, Schary and Skjott-Larsen, 2007). Nike is one of those global corporations that have suffered criticisms on how it handles its labor in developing nations and certain unethical practices of the company could be witnessed within its global supply chain (Ferrell, Fraedrich and Ferrell, 2011). Nike’s decision to outsource its operations to developing nations is not the main issue: a number of global companies have relocated their processes to developing nations in the past 3 decades (Saage-Maab, 2011). The company’s management has been unable to operate in a manner that is acceptable to its stakeholders, however. Nike has been blamed for defying occupational safety and health administration in Vietnam to using under age employees in its factories of Pakistan and Cambodia as well as unable to control and monitor its suppliers globally (Connor, 2001). Despite, promising that Nike will curtail all these issues and problems in its global operations and supply chain, the company has not been able to do so as indicated by Zadek (2004). The major flaw that can be witnessed is the relationship that Nike has maintained with its suppliers which is affecting its operations and brand image. The company has been able to develop long term relationship with its suppliers that are producing footwear products which have given a chance to Nike to control and monitor the activities of these particular suppliers. The scenario is not the same with the suppliers producing apparel related products for the global company. The organization signs short term contracts with suppliers that best suit its requirements since suppliers need to be changed according to the changes in trends and fashion. These short term relationships limit Nike’s control over the suppliers and therefore, its authority to be in charge of and monitor them is limited in nature (Brause, Qin and Locke, 2006). The need to monitor the activities of its suppliers is essential for Nike since the company conducts a large portion of global trade through its supply chains in the form of contracting and sourcing agreements (Ferrell et al, 2011). Therefore, Nike has to take responsibility for production over long distances and inter firm workings over long distances. A case study which depicts Nike’s failure to control and monitor the working of its suppliers can be seen in the working of two factories located within Mexico. Despite being subjected to the same labor regulations, Nike’s code of conduct and that both interface with Nike’s regional office in Mexico City, there are vast differences in working hours, wages and the policies adopted within each factory (Romis and Locke, 2007). This clearly shows that Nike’s code of conduct is not working and the company is unable to control and monitor practices adopted by its suppliers within its global supply chain. If Nike has a limited control over its suppliers particularly those that are providing it with apparel products, it cannot implant green practices within its global supply system.
Proposed Operational Objectives
The business model that Nike follows is such that it wants to reduce its costs in producing the products and invest a larger portion of its investments in marketing and sales of its products (Romis and Locke, 2007). The management of Nike has therefore failed to understand that a company cannot attain its financial and social goals unless it does not take up the responsibility of integrating sustainable operations within its business processes (Rogers and Carter, 2008; Appendix A). Therefore, organizations should integrate their financial, social and environmental goals together to attain sustainability for its company. It has been witnessed that global corporations that have adopted greener and cleaner business operations and supply chains have received positive reviews from their stakeholders and have enjoyed increasing profits for the firm (Stimpson, 2002).
Nike’s proposed objectives are based on the model suggested by Slack, Chambers and Johnston (2009) who have successfully formed a relationship between corporate social responsibility and a company’s operations and supply chain (Appendix C). The model works along five dimensions namely operational economic dimension, social dimension, environmental dimension, voluntariness dimension and stakeholder dimension. All these dimensions help to form decisions regarding company’s operations strategy, design, improvement processes and planning and control strategies. The main thrust of this model is that if a company implements CSR activities within its operations, it will affect various decisions that it has to take regarding different areas of operations (Slack et al, 2009). To achieve the satisfaction of different stakeholders and to make sure that the company’s operations remain sustainable, this model should be implemented within a company.
The proposed objectives, therefore, after understanding the issues that Nike has are:
- select the best suppliers to ensure that they can form long term relationships with them
- monitor and control the activities of its factories, suppliers and distributors
- integrate cleaner and greener practices in its global supply chain
Tools and Models used to Implement the Objectives
The above mentioned objectives have been proposed for Nike because the company has not been able to implement its Code of Conduct within its global supply chain due to lack of its authority to control and monitor its suppliers. The first step therefore for the management is to select the suppliers which fit the ethical criteria that the company has developed. Selecting suppliers is a multi objective problem since suppliers are selected based on more than one attribute which can be low prices, higher quality or better delivery performances (Talluri and Sarkis, 2002). It has been deduced that selecting the right suppliers lead towards reduction of problems related to procedures and outcomes (Fredriksson and Gadde, 2002). The six variables on which suppliers are mostly selected include cost, quality, cycle time, service, relationship and organization (Ellram, 1990; Weber, Current and Desai, 2000; Appendix B). The criteria that Nike’s management should adopt while selecting its suppliers should be based on the six variables that are identified in Appendix B since it will enable the company to create a competitive advantage for itself in its value chain analysis (Porter, 2004). One of the strategies that can be made use of to evaluate the best supplier available within a particular location is through a buying specification. This will help the company’s management to list down the requirements that it wants within its suppliers and sort them out according to which one of them best fits the organization’s needs (Lindsay and Evans, 2004). Another strategy that the company can take up is to inspect the factories of suppliers before agreeing to give them a contract. In this manner, the supplier will make sure that all the ethical and safety requirements are fulfilled and there is less risk of depending on future to expect suppliers to change their practices and procedures within the firm (Kotler, 2009). Nike’s management should also consider making use of collaborative planning, forecasting and replenishment to assess the demand forecasts that the company will have in future and communicating these forecasts to its suppliers (Aviv, 2005). Sharing of information regarding the amount of end products the company desires and the time duration the company has beforehand will give a chance to suppliers to strategize their operations management to implement ethical practices within their production processes.
The limitations to supplier selection methodology are numerous. Firstly, due to changes in fashions and trends particularly in apparel, Nike cannot forecast demands or specify the requirements that it is looking for in a particular supplier (Kotler, 2009). Additionally, even f the company inspects the factories and processes of suppliers there is a risk that safety and environmental practices are not maintained. Furthermore, inspecting each and every supplier is time and resource consuming (Daft, 2008).
Another important aspect that Nike is missing within its supply chain management is the lack of strong relationships with its suppliers. One method through which the management can enhance its relationships with its suppliers is through simple and flexible contracts that can maintain relationships rather than specifying contingencies (Slack et al, 2009). This approach will result in long term relationships to be formed since contract can be changed when trends or consumer preferences change. However, it also increases the risk of demands not being met in the way that is preferred by Nike and delay in delivery times. Nike’s management should get involve with the suppliers by meeting periodically with them through cross functional teams. This will assist the management get in touch with the suppliers one-on-one and help them to understand the needs and requirements of suppliers while drawing up the contract with them. Nike can even conduct periodic monitoring of its suppliers by hiring a cross functional team (Stimspon, 2002). It will also give a chance to evaluate the weakest suppliers within the global supply chain and even provide evaluation results to suppliers to maintain their standards if required (Aviv, 2005).
The limitation to this approach is that evaluating 20,000 international retail stores and suppliers along with 16 distribution centers will be costly for Nike and there will be problems in setting a single standard to evaluate the processes of diverse suppliers since they are operating in different macro economic conditions (Stimpson, 2002).
As discussed earlier, Nike has been criticized for its unethical practices related to its global supply chain. Therefore the company needs to introduce cleaner processes within its global supply chain system. One approach is implementing lean production within several of its supply chains. Lean production will not only be implemented in operations of the different suppliers to reduce waste, delivery and cycle times but also in terms of workers (Zadek, 2004). This particular move towards lean manufacturing in terms of workers will result in reduction in the total number of workers employed and a move towards developing a more efficient workforce. Furthermore, through this strategy, Nike’s suppliers will be able to create better working environments for its employees, invest in nurturing their skills through training sessions and will be able to provide the remaining workforce with better salary packages (Daft, 2008). Hence, the company’s bad reputation associated with health and safety of workers will improve for good.
Even though Nike has a Code of Conduct for its suppliers to follow and several quantitative methods to evaluate their performance, the company still lacks definite goals to clean up its distribution and supply chains. The first initiative that the company’s management can take is to set goals which reduce the environmental impact that it is having on its stakeholders. The first scheme can be to reduce carbon footprint that the company’s suppliers produce by a certain percentage within a time period (Ferrell et al, 2011). Nike can also increase the efficiency of its fleet and reduce delivery times by implementing new technologies that depend less on natural resources like water and fossil fuels and create low levels of carbon footprint (Daft, 2010). One successful case study that the company should look up to is of Wal-Mart which has been able to achieve its operational objective in relation to CSR since it has reduced its fleet times by 60 percent and eliminated 100 million miles during its deliveries in 2009 (Walmart, 2010).
The management can even introduce techniques like just in time and theory of constraints. This is because through theory of constraint the company will be able to analyze the problems and inefficiencies that exist within its global supply chain and the issues that are preventing it to adopt cleaner practices (Blackstone, 2001). Along with that, it has also been identified by Balderstone and Mabin (2000) that through theory of constraints a company can reduce its cycle times by 65 percent and inventory levels by 49 percent; an advantage that can help the company to create competitive edged for itself. Just in time on the other hand will help the global corporation to achieve its quality objectives by reducing buffer stocks and eliminating problems in early stages in its operations (Kumar, 2010). If the company’s suppliers adopt these practices, they will be able to reduce their costs and therefore will not be inclined to adopt immoral practices like misuse of labor, no investment in ensuring health and safety in workplace and paying low salaries. Last but not the least; the company’s management should issue annual reports on sustainability to inform its customers where the company is heading towards with regard to implementing CSR practices and cleaner supply chains in its global network as well as highlighting the achievements that it has been able to attain (Bowens, Cousins, Lamming and Faruk, 2001). Lean production, theory of constraints and just in time strategies, however require technical support and large amounts of investments. The suppliers that Nike is dealing with are mostly situated in developing nations and therefore they do not have the resources to make this sort of investment along with training their employees new skills required to carry forward these strategies (Stimspon, 2002; Daft, 2008; Zadek, 2004). Furthermore, it has been highlighted that Nike has weak relationships with its suppliers; therefore, it does not have the control to ask them to follow these particular strategies unless it provides them with financial and technical support.
Conclusion
Despite being one of the well known brands in the world, Nike has had to face a number of challenges with regard to its operational strategies and techniques in its global supply chain. The company has to face these issues to lack of initiatives taken by its management. The operational objectives that have been recognized for Nike within this report indicate the need for the company to form good relationships with its suppliers so that it can exercise control over them and monitor their operations. This is one o the most important step that the organization has to take to create cleaner and greener global supply chain for itself.
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