Power Users -- July 2004

In 1987, Nike started a revolution by unleashing The Air Max running shoe, the first of its type to incorporate Nike-AIR cushioning, which put a comfy new spin on athletic footwear and sent the industry-at-large back to the drawing board. To ensure the world would pay attention to this new concept, Nike ushered in the Air Max with the controversial "Revolution" ad campaign that integrated edgy imagery to the strains of The Beatles' legendary song of the same name.

In 1997, Nike started a revolution of a different type, deciding it was high time to optimize its global supply chain. After hatching a sound business plan, the Nike Supply Chain project (NSC) commenced in 1998, a company-wide initiative that has grown into the largest operations project in the company's 32-year history. Involving 350 manufacturing plants and a global distribution network, the goal of NSC, now more than 80 percent complete, is to integrate operations Ñ from long-range forecasts to product delivery at retail point-of-sale Ñ in a standard business process across the globe.

At the heart of the NSC infrastructure is SAP's Apparel and Footwear Solution (SAP AFS). At nearly 9,000 users strong, the AFS tool represents a significant building block for Nike's future growth by providing a complete enterprise management system, including capabilities for financials, order fulfillment and logistics. The solution's data structure, designed specifically to meet the unique requirements of the apparel and footwear industry, will also allow Nike to more effectively manage its inventory.

Deep Deployment

Nike's successful execution of a deployment of this size and scope affects the entire organization and clearly positions the company among the vanguard of the industry's most effective users of information technology. "We implemented all of the SAP modules at once Ñ we big banged it Ñ planning, order entry, financials, treasury, procurement, etc" says Gordon Steele, CIO, Nike. "When we go into a region or geography a very high percentage of the folks are affected by it."

One of the critical success factors of NSC project involved a close business/IT partnership. "This project had a healthy balance of full-time, dedicated business and IT people," says Steele. "When you've got natural leaders and business executives that have tremendous respect back in the business, that in and of itself, is huge in attaining user acceptance, as you move through the process and actually go live."

Steele admits that user acceptance is "always an issue" and also defers the high acceptance rates of the AFS tool to the power of testing and training. From day one, Nike AFS users were completely involved in the creation, development and configuration.

"Our user acceptance space is a very distinct phase of our whole effort and we spend an enormous amount of time with it," says Steele. "I would say the user acceptance is higher here than any place I've ever seen, partly because we did so much transition work. Early on there were people who heard the perception of SAP being rigid and inflexible and I think we overcame most of those concerns and issues as we went through the project."

Steele's business partner, from the time of the project's inception was Shelley Dewey, vice president, Nike Supply Chain. According to Dewey, the transition of business team members into IT savvy individuals and IT team members into business process experts was an unexpected bonus of the project effort. "We are a much stronger team for having done this work," says Dewey. "Business leaders of the future need to more fully understand their IT investment. This has helped create a larger population of business leaders with that type of experience and understanding."

Before the Revolution

Prior to the NSC project, Nike placed a lot of purchase orders before customers futures orders arrived. During this time about 30 percent of Nike's footwear products were "blind buys" where the company issues the purchase order for product without having the order in hand. Thanks to process changes behind the NSC project, Nike's blind buys for footwear now hover at around 3 percent.

"We have better information, better access to the information and better inventory management because of that information," says Steele. "It's really helped in terms of knowing that we're buying the right product that the retailers and consumers are going to want."

Under its prior process, Nike also purchased product about nine to 10 months before it actually hit retail shelves. Yet Nike's futures program requires orders from retailers only six months before products are to arrive. "NSC has allowed us to create a build-to-order supply chain where we now buy from partner factories based on actual customer demand rather than forecasts alone," says Steele. "It's all about the interaction with both retailer and factory partners through enhanced planning capabilities."

Auto Replenishment

Thanks to NSC, Nike will be piloting auto-replenishment with a variety of retailers incorporating point-of-sale (POS) data. Steele says this type of collaborative replenishment works best with large department stores or sporting goods outlets on products like socks, and t-shirts that have longer product life cycles. "For a product that is going to turn over three times a year, it doesn't really lend itself to that," says Steele. "We would not have been able to embark on this type of project under the old platform in a sophisticated way."

Integrating the Business

The NSC project has, through the implementation of a fully integrated systems and process platform, also helped to integrate the business. A supply chain represents the end-to-end set of activities from concept to consumption. Nike has traditionally operated, as many companies do, as a silo-based functional organization. Planners didn't coordinate their plans with Sales. Sales didn't collaborate with Delivery Logistics and so on.

With the advent of the new NSC systems environment, this has had to change drama-tically. SAP provides real-time visibility to the impact of trans-actions up and down the supply chain. This visibility has improved the level of decision-making and brought the organization together to better balance customer service and delivery with inventory and cost reduction.

A prime example of the impact of this can be found in Nike's Treasury department. By having real-time visibility to the cash implications of supply chain transactions Treasury estimates that it is saving millions of dollars per year through improved cash management decisions. This type of integration can now be found throughout Nike's new supply chain.

What's Next

This summer, Nike plans to go-live with NSC in Japan and four Asia-Pacific countries. Over the next three years, the balance of Asia-Pacific and the Americas will be implemented. Steele points out that as these regional rollouts take place, the functionality for the countries that have already gone live are being upgraded to support the growth that is taking place.

"The benefits are really beginning to kick in thanks to a combination of the project, technology and process," says Steele.

• SAP - ERP
• i2 - Planning
• Siebel - CRM
• PeopleSoft - Human capital management (HR systems)
• PTC - Product data management, Product lifecycle management
• See Beyond - Application Integration
• MARC Global - Warehouse management systems
• HP - Unix servers supporting all supply chain systems
• IBM - System integrators and a broad range of professional services