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Information Technology in Supply Chain Management of Nike MANAGING THE GLOBAL SUPPLY CHAIN

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Information Technology in Supply Chain Management of Nike MANAGING THE GLOBAL SUPPLY CHAIN Powered By Docstoc
					MANAGING THE GLOBAL SUPPLY CHAIN




  March 23, 2004
Objectives

    •   Provide an overview of the key objectives, strategies, and
        performance measures for managing a global supply chain

    •   Discuss a selection of the key enablers:
                   - People
                   - Process / Technology
                   - Partnerships


    •   Get Specific: Describe the tangible operational challenges,
        risks, and opportunities in a global supply chain

    •   Promote discussion with this group:
                   - There is more than one right answer
                   - There is no finish line


    •   Have some fun, and…
              … promote idea sharing and provocative discussion




                                                                      2
  Managing the Global Supply Chain
   For Competitive Advantage

                        Brand Marketing


A GREAT GLOBAL BRAND…                          …A GREAT GLOBAL COMPANY
                        Product Innovation



                        Supply Chain Excellence



                        Corporate Responsibility



                        Financial Discipline




                                                                     3
  Managing the Global Supply Chain
   Connect Great Products with Consumers




Plan   Develop Forecast   Sell-in   Buy   Make   Allocate Deliver   Service   Merch.   Sell-Thru




                                                                                               4
  Supply Chain Management Objectives
   Precision
Objective:                 Delivery precision (full supply chain lifecycle)
                            •          Product development & commercialization
                            •          Manufacturing delivery performance
                            •          Freight consolidator
                            •          Customer service center
                            •          Customer delivery
  Satisfy customers
  through product           •          Customer satisfaction /
  delivery and                            Consumer delight
  information
  accuracy                1. On-time Commercialization (%)
                              -


                             Factory          3. GAC (Goods @ Consolidator) &
                             Order
                                                                                     5. Coverage (%)
Measures:                       Factory                Con-           Decon-      Nike          Customer
                                                     solidator       solidator    CSC              CSC
   Deliver in full, on-                   Finished
                                          Goods

   time (DIFOT)                         2. Ex-Factory Delivery (%)
                                            -                                            6. Customer
                                                                                           DIFOT        7.
                           Raw
                                                                                                       Fulfillment
                           Materials                      4-A. Air Freight ($)
   Time to customer                                       4-B. Ocean Fright ($)
                                                                                                       Rate

   query resolution


                                                                                                                     5
  Supply Chain Management Objectives
   Flow
Objective:                Manage multiple dimensions of flow throughout the
                             supply chain
                          •   SKU effectiveness
                          •   Replenishment strategies
                          •   Demand pull model
                          •   Sell-Thru data drives critical decisions
  Plan & flow fresh
  product assortment      Embrace the power of the consumer
  to match consumer
  needs & retail
  space                   Balance demand & supply
                          •   Increase forecast accuracy, or
Measures:
                          •   Enable rapid response
  Percentage of Nike
  controlled space with
  planned flow
  Number of customers
  with planned flow

                                                                          6
Supply Chain Management Objectives
 Flow




                                     7
Supply Chain Management Objectives
 Flow




                                     8
  Supply Chain Management Objectives
   Speed
Objective:                  Shorten lead times
                                      •     Rapid design and prototyping
                                      •     Demand pull /
                                               Material and component staging
                                      •     Direct shipment /
                                                direct store delivery

   Shorten lead
   times in the             Accelerate manufacturing flexibility with
   supply chain                Lean initiatives


                             Existing
                             Supply Chain
Measures:                    Model
                             Design   Development   Smpls   Sales      Manufacturing          Ship
  Time from sales order
  to customer delivery       2 mo.        5 mo.     2 mo.   2 mo.            6-8 mo.         1 mo.

  Time from purchase
  order placement to         Simplified
                                                                    Design     Development
  goods delivered at Nike    Model
                                                                    2 mo.         5 mo.      3 wks



                                                                                                     9
  Supply Chain Management Objectives
   Agility
Objective:                 Diverse consumer requirements drive the need
                               for multiple supply chain models
                                  •   Make-to-Stock (Futures)
                                  •   Demand Pull
                                  •   Auto Replenishment /
                                          Quick Turn

  Build responsive
  supply chains to         Reduce inventory through supply chain efficiencies
  support multiple
  business models
                           Increase direct shipments
Measures:
  Share of Nike business
  in replenishment (AR)    Bundled services agreements
  Profitability of AR
  Share of business in
  Quick Turn


                                                                            10
  Supply Chain Management Objectives
   Balance
Objective:                   Effective balance of supply and demand requires:
                                    •   Timely consumer insights
                                    •   Forecast accuracy
                                    •   Assortment planning and SKU management

                             Fresh, innovative product balanced against
   Match                         SKU proliferation
   supply with               “Just-in-Time” vs. “Just-in-Case”
   demand                        inventory positions


Measures:
   Days sales in inventory
   Closeout percentage
   Lost demand
   Pre-build percentage


                                                                                11
12
Supply Chain Management Objectives
   Voice of the Customer
 Balance


                         Listen, Listen, Listen
                         • Customer satisfaction
                           surveys
                         • Claims, returns and
                           charge-backs
                         • Customer facing
                           performance measures




                                                   13
  Supply Chain Management Objectives
   Control
Objective:              Full Lifecycle Cost Analysis:
                          •     Product / Manufacturing
                          •     Freight (Land, Sea, & Air)
                          •     Distribution / Customer Service Center
                                   - Processing, Storage, etc.
                          •     Duties/Tariffs/Commissions/Finance Charges
   Manage total                                                                   Cost of
                                                                              Product Delivery
   supply chain
   costs                                                        I.
                                                            Supply Chain Costs                             COCE
                                                                   (% of Net Revenue)             (Cost of Capital Employed)



                                                                                        II.
                                                                                        Inventory                           Distribution
Measures:                                 V.                                                                                    Assets
                                           Service                                      a.
                                                                                        b.
                                                                                                  In-line Days Sales in Inventory
                                                                                                  Closeout Inventory, (Days)
   Total Supply Chain                      a. Customer Satisfaction Surveys
                                           b. Delivered In Full On Time
   cost as a                                                                            Note: We will also track
                                                                                        - Total Inventory Valuation, ($)

   percentage of
   revenue              IV.
                        Style-Color Effectiveness
                                                                  III.
   Cost per Unit                                                  SKU Management in the CSCs


                                                                                                                                   14
   Global Storage & Objectives
Supply Chain ManagementProcessing
   Capacity
 Control




                                    15
      Global Storage &
   Supply Chain ManagementProcessing
      Capacity
    Enablers

People                  Process                     Partnerships




Skilled team leading    Disciplined processes and   Leveraging strong
cross-functional SCM    technology                  partnerships
agenda

Make the vision clear   NT + OO = EOO

Empower team to act

Accountability is a
must



                                                                        16
Supply Chain M anagement as a Competitive Advantage
     A G REAT G LO BAL BRAND…                                    Brand M arketing                              …A G REAT G LO BAL CO M PANY
                                                                Product Innovation
                                                              Supply Chain Excellence
                                                              Corporate Responsibility
                                                                Financial Discipline


 Plan        Develo p Fo recast                Sell-in          Buy            M ake        Allo cate Deliver Service                    M erch. Sell-thru


                           Connect great product with consumers
                                                                  O BJECTIVES
    Precision                     Flow                        Speed           Agility                              Balance                        Control




Satisfy customers          Plan & flow fresh             Shorten lead times         Build resp onsive          M atch sup p ly             M anag e to tal
throug h p ro d uct        p rod uct assortments         in the sup p ly chain      sup p ly chains to         w ith d emand               sup p ly chain costs
d elivery and              to match consumer                                        sup p ort multip le
Information                need s and retail                                        b usiness mo d els
accuracy                   sp ace

                                                                         M EASURES
Deliver In Full O n        Percentag e o f Nike          Time fro m sales o rd er   Share o f Nike b usiness   Days Sales Inventory        To tal Sup p ly Chain
Time (DIFO T)              co ntro lled sp ace w ith     to custo mer d elivery     in rep lenishment (AR)                                 co st as a p ercentag e
                           p lanned flo w                                                                      Clo se O ut Percentag e     o f revenue
Time to                                                  Time fro m p urchase       Pro fitab ility o f AR
Custo mer Q uery           Numb er o f custo mers        o rd er p lacement to                                 Lo st Demand                Co st p er Unit
Reso lutio n               w ith p lanned flo w          g o o d s d elivered at    Share o f b usiness in
                                                         Nike                       Q uick Turn                Pre-b uild Percentag e

                                                                         ENABLERS
                      People                                                  Process                                            Partnerships
                                  Skilled team                                             Discip lined                                            Leverag ing
                                  lead ing cross-                                          p rocesses                                              strong
                                  functional SCM                                           and                                                     p artnership s
                                                                                                                                                                     17
                                  ag end a                                                 techno log y
Managing the Global Supply Chain
    Balanced Scorecard
 The Balanced Scorecard: Fact-Based Decision Making
Basic Construct
                                                   Objectives:
   Financial             HRP                       1. Align the right performance
                         (Innovation/Learning)
    - Revenue            - Training $/Employee
                                                      measures with incentives to drive
    - Gross Margin/GM%   - Rev. / Employee            the right behavior
    - FOB/COGS           - # Employees
    - OpEX/SG&A          - etc.
    - CapEX/ROIC
   Process (Operations) Brand / Consumer
    - Cost               - Brand Strength          2. Ensure transparency throughout
    - Quality            - Customer Satisfaction      the system
    - Delivery           - Consumer Response
    - Corporate          - etc.
      Responsibility       Delivery
              Cost


                                                   3. Drive continuous improvement
            Quality        Corporate
                           Responsibility


                                                   4. Reward outstanding performance




                                                                                          18
Managing the Global Supply Chain
   Balanced Scorecard
  Open Discussion




                    Thank You!




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