Nike Main

Chapter 1: Introduction of the topic

Supply chain management is a vast area to be discussed. Its very hard to cover all the topics of SCM. So our group has chosen a vital part of SCM and that is Inventory. We choose the world famous company for athletic products Nike and we are going to discuss some segments of Inventory Management of Nike.

Scope

The report is all about the different matters of the Inventory Management system of Nike. By assessment and evaluation, we split it into four stages:

1) Introduction of the topic2) Discussion about inventory management3) Discussion and analysis of the inventory management system of Nike4) Conclusion and recommendation to Nike

Objectives

Broad objectives :

To learn about some key issues on the inventory management system of Nike.

Specific objectives :

To discuss about the types of inventories of Nike To learn about the functions of inventory of Nike

Chapter 2: Literature review

A brief discussion of inventory management is given below ---

What is inventory?

Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. That means, inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.

What is inventory management?

Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting.

Types of inventory

There are generally five types of inventories. They are described below ---

1. Raw materials and purchased parts: Everything the crafter buys to make the product is classified as raw materials. The raw material inventory only includes items that have not yet been put into the production process.

2. Work-in-process (WIP): Work-in-process (WIP) is made up of all the materials, parts (components), assemblies, and subassemblies that are being processed or are waiting to be processed within the system. This generally includes all materialfrom raw material that has been released for initial processing up to material that has been completely processed and is awaiting final inspection and acceptance before inclusion in finished goods.

3. Finished goods: A finished good is a completed part that is ready for a customer order. Therefore, finished goods inventory is the stock of completed products. These goods have been inspected and have passed final inspection requirements so that they can be transferred out of work-in-process and into finished goods inventory.

4. Transit inventory: Transit inventories result from the need to transport items or material from one location to another, and from the fact that there is some transportation time involved in getting from one location to another. Sometimes this is referred to as pipeline inventory.

5. Replacement parts, tools and supplies: Sometimes the replacement parts, different types of tools and supplies are inventoried. Maintenance, repair, and operating supplies, or MRO goods, are items that are used to support and maintain the production process and its infrastructure. These goods are not directly a part of the finished product.

Functions of inventoryThe functions of inventory are described below- To meet anticipated demand-If there is any kind of abnormal or unusual situation, inventoried goods will help to meet the anticipated demand. For example- Halloween, Christmas, labor strike etc. To smooth production requirements-Inventory for some goods are needed to smooth the flow of production. For example- MRO (maintenance, repair, operations) goods are needed to fulfill the production requirement. To decouple operations-Another important function of inventory is to decouple operations. When a machine is under maintenance, decouple operations helps to run the production process with the help of inventory.

To protect against stock-outs-Protection against uncertainties of supply and demand, and unpredictable events, inventory is a safe cushion which is an important function of inventory. To take advantage of order cycles-Cost minimization is another function of inventory. When large quantities are ordered or produced, inventory holding costs are increased, but ordering/setup costs decrease. This is how storing or inventorying products helps in cost reduction. To help hedge against price increases-Inventoried goods help hedge against price increases of the products. To permit smooth operations-All time adequate stocks of goods and products always ensure a good balance of supply and demand and smoothes all kind of operations.

Chapter 3: Discussion about the inventory management of NikeSome important segments of Nikes inventory management system are described below:Types of Nikes inventoriesNike has two types of inventories. They are-1) Raw material inventory2) Finished product inventoryThese are discussed below-1) Raw materials:The main raw materials are- Recycled rubber Recycled polyester Recycled wool Recycled leather Recycled cotton Renewable materials (e.g. Cashmere, Poly lactic Acid (PLA), Cork, Wool, Silk, Bamboo, Bamboo Rayon / Viscose, Hemp, Flax / Linen, Soy etc.) Chemically Optimized Materials (e.g. Nike Green Rubber, Solvent Reduced Synthetic Leather, Organic Cotton, Organic Wool etc.)

Some pictures of the raw materials are given below:

Recycled rubber Recycled polyester Recycled wool Recycled leather Recycled cotton Organic cotton Cashmere Bamboo

Flax Silk Synthetic leather

Nikes raw materials come from basically countries like China, Vietnam, Brazil, Indonesia etc.

Nike raw material warehouse2) Finished products:

Nike finished products are-

Shoes Jerseys Shorts Base layers Glasses, watches, bags Various kind of sports accessories (e.g. all types of accessories of football, tennis, cricket, baseball, basketball, skateboard, hockey, athletics, golf, combat sports, wrestling, cheerleading, aquatic sports, volleyball, auto racing etc.)

Some pictures of Nike finished products are given below-

Nikes finished products are mainly stored in their retailed shops and showrooms around the world. But in case of a sale on products, Nike transfers them to warehouses.Some images of Nikes showrooms are given below-

Page | 5

Inventory Management of Nike: AIUB Spring11

The number of Nike factories for raw materials and finished products is showed below-

Nike has contracted with more than 700 shops around the world and has offices located in 45 countries outside the United States. Most of the factories are located in Asia, including Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines, and Malaysia.

Nike is using supply chain software, implemented by i2 Technologies Inc. since 2001.Functions of Nike inventory

There are some important functions of Nike inventory which are described below-

To meet anticipated demand-

If there is any kind of abnormal or unusual situation, inventoried goods of Nike will help to meet the anticipated demand. For example- Football match season, labor strike etc. To smooth production requirements-Inventory for some goods are needed to smooth the flow of production at Nike. For example- MRO goods are needed to fulfill the production requirement.

To decouple operations-

Another important function of inventory of Nike is to decouple operations. When a machine is under maintenance, decouple operations helps to run the production process with the help of inventory.

To protect against stock-outs-

Protection against uncertainties of supply and demand, and unpredictable events, inventory is a safe cushion which is an important function of inventory. And Nike follows this concept.

To take advantage of order cycles-

Cost minimization is another function of inventory. When large quantities are ordered or produced, inventory holding costs are increased, but ordering/setup costs decrease. That is why Nike buys large number of raw materials from suppliers and store or inventoried them to reduce cost.

Chapter 4: Conclusion & recommendation

ConclusionNike is the largest sports equipment manufacturing company in the world. Their full supply chain management system is well organized. And this is one of the reasons of their sky high success.

RecommendationNike is already a huge company. So they have more scopes to increase their types of inventory management system (where they only follow two). This may create more effective and efficient inventory management in the organization.

ReferencesWebsiteswww.google.comwww.enote.comClass slides from the chapter Inventory Management