Strategic Plan for Sustainable Supply Chain (Nike)

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StrategicPlan for Sustainable Supply Chain (Nike)

Universityof Affiliation

Department

Tableof Contents

Introduction 3

Supply Chain Strategy 4

Incorporating Sustainability with SCM (Supply Chain Management) 6

Iterative Approach and Tools for Developing Nike’s Supply Chain Strategy 7

a. Step 1: Stocktaking 7

b. Step 2: Nike’s Environment – Current, Future, and Potential Impact Factors 8

c. Step 3: Assessment – Identification of Potential Opportunities and Risks 8

d. Step 4: Action Plan – Extending or Re-designing the Strategy 9

e. Step 5: Execution with SSC- (Sustainable Supply Chain) Scorecard 10

f. Step 6: Implementation of Strategy 11

Business Value and Supply Chain Sustainability 12

Business Case for SCS 13

a. Managing Risks 13

b. Realizing Efficiencies 14

c. Creation of Sustainable Products 14

d. Creating an Organizational Culture of Responsibility 15

Conclusion 15

Bibliography 17

StrategicPlan for Sustainable Supply Chain (Nike)

Introduction

Long-standingtrends pose difficulties for supply chain executives. In addition,they cause increasing requisites on companies’ strategic managementknowledge. These long-term tendencies include the ongoingglobalization, the rising intensity of rivalry, resource scarcity,environmental protection, the increasing security demands, and thenecessity for flexible, cost-effective, and reliable businesssystems, which can support consumer differentiation (KIMET AL., 2014).More importantly, managers face complex and dynamic supply chainshence, with developments and trends, which are difficult to forecast.

Ofcourse, supply chain management (SCM) will in future assume the extrastrategic tasks and responsibilities that extend beyond contemporaryoperational scope. To respond to such alterations and maintaincompetitiveness, supply chain executives should be capable ofidentifying and understanding new issues of sustainability withintheir business environments or companies (CHRISTOPHER,2013).This calls for highly effective supply chain processes and networkingskills, which adapt to the demands of sustainability continuously inorder to generate long-term, sustainable, and consumer-focused supplychains.

Inaddition, it calls for the creation of sustainable strategies, whichproduce revitalized sustainable competitive advantage (CHRISTOPHER,2013).This paper will focus on how to formulate a detailed, strategic planfor implementing a revitalized sustainable, cost-efficient supplychain for Nike shoes and shoe products. The approach of Nike ofmanaging supplier accountability has immensely developed since the90s when media exposed claims of unpaid workers, poor workingconditions, and child labor within many Asian nations. As such, thispaper will explore the manner in which Nike’s plan to enhanceenvironmental and social conditions in its international supply chainhas developed through incorporated sustainability.

SupplyChain Strategy

Competitivestrategy refers to a long-term, holistic plan for an organization tofind a discrete method of competing with the aim of guaranteeingprofitability over a restricted time-span. Competitive strategies arespecified by bundles of objectives and aims for establishingcompetitive advantages, which allow organizations to outperform theirrivals within the same marketplace or industries (HEIZER&amp RENDER, 2014).One indicator of such an outperforming capacity is the profitabilityof Nike Inc., compared to the market average. As stated by Porter, acompany such as Nike Inc. may pursue two basic forms of competitiveadvantage: differentiation and low cost.

Portermerges the two forms of competitive advantage with a range ofoperations, which an organization seeks to follow. Furthermore, hederives three generic tactics for attaining marketplace success andexcellence: focus, leadership, and differentiation. The focus tactichas two variants differentiation focus and costs focus. In costleadership, Nike Inc. aims to become the least-cost producer in themarket (KASHMANIAN,2015).The cost advantage sources usually differ between industries: theyinclude proprietary technology, preferential access to raw materials,and economies of scale. With a differentiation tactic in place, NikeInc. seeks to develop services and products, which are perceived asexceptional within the marketplace.

Thedifferentiation strategy emphasizes the relevance of concentrating onone or multiple attributes, which consumers perceive as vital. Theseattributes normally result in higher costs. However, consumers ofsuch strong differentiated organizations like Nike are loyal ordevoted to their goods and services (MANGANET AL., 2012).Generally, we can differentiate three decisive aspects that determinethe business context and strategy of Nike Inc. They include Demand,Supply, and the General Environment. In the modern businessenvironment, all these three aspects are becoming progressivelyintricate, and they are changing with time (LEBRETON,2011).Furthermore, they jointly determine the marketplace players’behavior.

Fig.1: Supply Chain Strategy – Sustainability and Competitive Advantage

IncorporatingSustainability with SCM (Supply Chain Management)

Rewiringthe approach of Nike Inc. to the sustainability of supply chain hasinvolved alterations with its suppliers and at the organizationallevel. Within the firm, Nike altered its organizational arrangementto incorporate sustainability appropriately (MANGANET AL., 2012).The company utilizes an institutional matrix structure, where itsexecutives report to several divisions. Based on corporate unitobjectives, workers develop plans and strategies that detail theirmultidisciplinary tasks. Internal scorecards are utilized forreporting progress towards the objectives (SARKIS,2014).As a section of this move, the SB&ampI (Sustainable Business &ampInnovation) team is officially a part of Nike’s innovation team.

Theleadership of SB&ampI either works closely or reports to sourcingand production, product development, marketing organizations,strategy, and product design. With each department responsible forsustainability performance, the company can integrate sustainabilityinto the corporate decisions effectively. Nike’s top management isdriving this change with accountability and initiatives that are ledeffectively by the top management (CHRISTOPHER,2013).At the organizational level, while training the contractmanufacturers, Nike utilizes an integrated model, which addresses acomplete range of concerns affecting sustainability. Such issuesinclude HRM (Human Resource Management), lean manufacturing, energymanagement, environmental sustainability, health and safety, andenvironmental compliance.

Thelean principles of Nike are associated with best practices ofsustainability, such as reducing waste and resource use, reducingdowntime, and valuing the labor force, all controlled by a continualimprovement mechanism (MANGANET AL., 2012).The practices of Nike Inc. of encouraging lean production through itscontract manufacturers adopt the notion of continuous advancement,which aims to result in increased productivity. The contractmanufacturers of Nike are encouraged and trained to execute leansystems through empowering employees to develop innovative solutions,which enhance productivity (SCHNIEDERJANS&amp LEGRAND, 2013).It can result in both increased employee satisfaction and gains incorporate performance.

IterativeApproach and Tools for Developing Nike’s Supply Chain Strategy

Sustainablesupply chains involve more than just implementing popular processes.Instead, individual practices have to be organized to incorporatesensible or long-term sustainability values, along the end-to-endchain of supply. A systematic process to strategy integration anddesign can help Nike Inc. to develop a value proposition. Below is aniterative six-step approach, which is considered a cycle (PAGELL&amp WU, 2015).The approach must regularly be implemented in Nike’s supply chainbecause relevant conditions might change quite fast.

  1. Step 1: Stocktaking

Thisstep comprises the “as-is” analysis, which emphasizes thesustainability practices, the strategies, and the associatedcapabilities and resources of Nike’s supply chain (KASHMANIAN,2015).The assessment in this step focuses on the sustainability operations,the strategies, and the related capabilities and resources in thesupply chain of Nike Inc. Aiming to harmonize the holistic andstrategic plan of best practice, firms such as Nike Inc. require acomprehension of the current tactics (WISNERET AL., 2014).The incorporation of a sustainable strategy for the supply chain isnormally not an all-round advancement, and it would likely not resultin a complete restructuring of Nike’s strategy and supply chain.

Instead,systematic adaptation is recommended, unless the varying businesscontext threatens the company alongside its chain of supply(UMPFENBACH,2013).Therefore, stocktaking should be done on the existing competitive andcorporate strategies, the sustainability strategies, thecross-organizational collaboration, and supply chain strategies, andthe company-specific strategies of the supply chain.

  1. Step 2: Nike’s Environment – Current, Future, and Potential Impact Factors

Inthe case of Nike, the second step in this iterative approach dealsmainly with the things that are altering the business context, thetype of scenarios that Nike would encounter in the long-term andmedium, and lastly, the main drivers of change. This, alongside thestep 1 “as-is” analysis, will result in the description ofpotential opportunities and threats for Nike’s supply chain tacticin step 3 (SAJJADET AL., 2015).One of the most crucial topics to consider at this stage is the inputresources of the supply chain, like energy and fuel, shareholders,and stakeholders. Nowadays, these resources deserve keen attention inthe logistics of supply chain management. For Nike Inc., the tendencyof increasing scarcity and rising prices make the input resources keyfactors of risk management in an economic viewpoint, particularly ifit runs an energy- and cost-sensitive supply chain (PACKOWSKI,2014).Forecasting and understanding the input resource-linked informationhelps Nike to develop its sustainable strategy of the supply chain.

  1. Step 3: Assessment – Identification of Potential Opportunities and Risks

Basedon the evaluation of Nike’s chain of supply and its businesscontext, the company is able to identify potential opportunities andrisks. These would help in step 4 in re-designing or in changing thecurrent supply chain strategy of the company. Below is a frameworkthat can allow Nike Inc. to analyze its supply chain abilities in thecircumstance of the situations, which are prioritized from the secondstep. The evaluation then serves in determining Nike’s supply chaindefinite Threat-Opportunity-Profile (REES,2011).The company should know the cause-and-effect relations between theprospective success aspects in order to undertake this assessment.

Fig.2: Threats-Opportunity-Profiles for Nike’s Sustainable Supply Chaintactic

  1. Step 4: Action Plan – Extending or Re-designing the Strategy

Withregard to the Threat-Opportunity-Profile, Nike Inc. can now definethe strategic or tactical gaps on the path to a sustainable chain ofsupply – gaps between the business setting and its present supplychain strategy. The more relevant and greater the potentialopportunities and risks, the greater the gaps would be, and thehigher the necessity to act and create strategic changes (GOLIŃSKA&amp ANDRÉS ROMANO, 2012).The incorporation of sustainability values into the chain of supplyis not usually a comprehensive progress it must be a systematicapproach.

  1. Step 5: Execution with SSC- (Sustainable Supply Chain) Scorecard

Atthis point, it is important if Nike Inc. knows the status of itsiterative systematic approach with regard to the identified elementsof its SSC strategy. Ideally, by knowing the status of theiriterative approach, the company will have picked the suitable scopeof tactical vision and identified the right associated actions foraligning its supply chain tactic to the altering business environment(DUKOVSKA-POPOVSKAET AL., 2014).Many future scenarios and trends have been taken into consideration.Eventually, such findings have been integrated into the re-design orreformulation of Nike’s present supply chain tactic and the relatedgoals.

Atthis point, Nike is still experiencing the issues of making thesupply chain strategy ready for operation, and of harmonizing social,economic, and environmental objectives. Potential tradeoffs besidethe chain of supply are still invisible. The absence ofcause-and-effect knowledge is likely to result in imbalances in thethree sustainability dimensions (KASHMANIAN,2015).The ability to interpret the new strategy components into a framedKPI system, justifying cause-and-effect correlations and explainingimplemented operations, remains a future challenge. Step 5 of theiterative approach aids in addressing such issues (EMMETT&amp CROCKER, 2013).The Balanced Scorecard was created by Norton and Kaplan from 1990 totranslate strategic objectives into operations.

Fig.3: The Balance Scorecard of Kaplan/Norton

Thesystem (Balance Scorecard) refers to a concept of performancemanagement that provides a framework for translating a tactic intobalanced procedural terms via measures and objectives, organized intofour distinct perspectives: learning and growth, internal businessprocess, consumer, and financial. This system expands the businessunit goals beyond summary fiscal measures (DUKOVSKA-POPOVSKAET AL., 2014).Corporate managers can estimate how their departments create valuefor future and current consumers and how they have to promoteinternal abilities as well as the investment in systems, people, andprocesses necessary for improving future performance.

  1. Step 6: Implementation of Strategy

Thenext, last step is implementing the SSC-Scorecard and the strategy ata tactical level. Nike Inc. can concentrate on the action items andcomponents of strategic plan adoption. The strategy creation andincorporation methodology end with the sixth step (EMMETT&amp CROCKER, 2013).However, the necessity for early adjustment of Nike’s supply chainto dynamic alterations in the business setting requires thisapproach’s iterative application.

BusinessValue and Supply Chain Sustainability

Bydefinition, supply chain sustainability refers to managing thesocial, economic, and environmental impacts, as well as encouraginggood practices of governance, throughout the lifespan of products andservices. As such, the goal of SCS is to produce, protect, andnurture long-term social, economic, an environmental value for everystakeholder involved in bringing goods and services to themarketplace (LAÍNEZ-AGUIRRE&amp PUIGJANER, 2014).There are several compelling corporate reasons of taking action toenhance environmental and social impacts in the chain of supply.Frequently, though, the relationship between SCS and the totalbusiness value may seem weak.

Fig.4: Relationship between Total Business Value and Supply ChainSustainability

BusinessCase for SCS

ForNike, the business case for SCS depends on various issues includingthe region of operation, business strategy, past performance,organizational culture, industry sector, and stakeholderexpectations, to mention just a few (DRAGANET AL., 2016).However, there are many opportunities for using SCS operations toimprove corporate value – some of the business value driversinfluenced by SCS are shown in the figure below.

Fig.5: Business Value Drivers

  1. Managing Risks

Byresponding to and managing sustainability risks within the chain ofsupply, Nike Inc. is capable of controlling costs, protecting itsmarketplace share, and reducing the risk premiums (EMMETT&amp CROCKER, 2013).Nike can shield itself from prospective interruptions of the supplychain or delays linked to suppliers’ social, governance, andenvironmental challenges through ensuring that the suppliers haveregulatory compliance programs and robust management systems(CHRISTOPHER,2013).For firms having one source for primary inputs, reducingenvironmental and social risks is even more crucial to ensuringentrée to those resources. Managing such risks helps Nike to meetits consumers’ demands hence, protecting the company’smarketplace share.

  1. Realizing Efficiencies

Throughseveral activities of supply chain sustainability, Nike can developefficiencies in its supply chain and lower the costs of sourcing.Responsible managing of the operational inputs, like water, syntheticmaterials, natural materials, and water can greatly lower theprocurement costs of Nike while at the same time diminishing theenvironmental footprint. In addition, it can influence the supplychains’ health (GOLIŃSKA,2014).Taking time in order to comprehend these inputs often leads to anenhanced knowledge of supply chain roles, a decline of unnecessaryinputs purchasing, and enhanced risk management of prospectivedisruptions.

  1. Creation of Sustainable Products

Collaboratingwith the suppliers on issues of sustainability can as well nurtureproduct innovation to create (or meet) marketplace demand (EMMETT&amp CROCKER, 2013).With the increasing awareness of the environmental effects ofproduction like product toxicity and greenhouse gas emissions, aswell as the radical progression in transparency brought by theInternet, different consumers are progressively demanding morecommodities generated from more sustainable processes, workingconditions, and materials (LEBRETON,2011).In response, Nike is collaborating with its suppliers to add freshperformance characteristics and features to current shoe products andeven to create new shoe products.

  1. Creating an Organizational Culture of Responsibility

Finally,Nike has established that SCS can build business value throughbringing forth a corporate culture of accountability (LEBRETON,2011).As issues such as child labor and climate change have become moreprevalent in society, workers are frequently keen to getopportunities of bringing issues they are individually passionateabout in their job duties. Supply chain sustainability providesemployees with that opportunity and can enhance employee involvementand lower the costs linked to turnover and recruitment (CORDONET AL., 2012).Nike is making its workers informed of its efforts in SCS. As acrucial component of most companies’ overall organizationalresponsibility, SCS can as well help companies like Nike to buildcredibility and trust with the external stakeholders, includingactivist groups, investors, non-government organizations, andgovernments.

Conclusion

Theapproach of Nike Inc. to improve social, economic and environmentalconditions within its global chain of supply has evolved toconcentrate on increased supplier incentives, integrated managementof innovation and sustainability, and systems innovation meant todeter problems before they emerge (LEBRETON,2011).Although there is a minimal empirical study on the responsibleoperations resulting in improved environmental and socialperformance, Nike Inc. has commenced important changes, which itbelieves would enhance environmental and social performance withinits supply chain (BRANDENBURG&amp REBS, 2015).As more corporations build efforts in the sustainability of thesupply chain, our comprehension of the corporate value of suchefforts is enlarging immensely.

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