Operational management is an enterprise management system, which is connected with a focus on supply and demand of consumers, the widespread use of innovations, and the regulation of inter-firm relationships. The goal of this paper is to investigate operations management and to make an overall evaluation of Nike’s performance. To achieve this goal, the paper has been divided into the several sections, where the following issues will be explored: the operations and productivity of Nike, operations strategy in the global environment, project management, decision-making tools, forecasting, design of goods and services, supply chain management, inventory management, and material requirements planning, enterprise resource planning, aggregate planning, time management, lean production systems, management of quality, capacity planning, and human resources policy.
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The Nike Company performs a complete operations management policy, which should be investigated.
The company was founded in 1964, by the two students, Phil Knight and Bill Bowerman. Initially, the company was known as Blue Ribbon Sports; it specialized in ordering of shoes in the Asian countries and reselling them in the U.S. market. In 1966, the company opened its first retail store. In 1971, the brand was first introduced as Nike; under this name soccer shoes have been released. In 1978, Blue Ribbon Sports was officially renamed into Nike, Inc. (it is taken from the name of the goddess of victory, Nike).
Operations and productivity
Nike is one of the largest sports goods manufacturers in the world. Its products are manufactured under the brands Nike, Total 90, Air Jordan, Team Starter, and Nike Golf. Nike also controls the companies that produce products under the brands Converse, Hurley International, Cole Haan, and Bauer.
Table 1. Major goods of Nike
|Shoes||Shoes, cleats, sandals, boots|
|Clothing||Track suits, jackets (sports, jackets), sweatpants, T-shirts, shorts|
|Accessories||Sunglasses, watches, bags, balls|
Total staff of Nike consists of 26.7 thousand people. The company’s turnover amounted to 22,3 billion dollars, net profit to $7,5 billion. The company is the largest manufacturer of sportswear and accessories.
Operations strategy in a global environment, and project management
Currently, the strategies of the company in a global environment shift from risk management, philanthropy, and compliance, to the long-term strategies focused on collaboration, advocacy, transparency, and innovation. This reorientation should prepare the company to be successful in terms of sustainable economy.
The increased focus on the sustainable business development and innovation will be seamlessly integrated into all business’ strategies. Nike will provide a more balanced approach, which aims to increase the results for the business, the general public, employees, consumers, and for the planet.
In terms of environmental protection, Nike is aware of the consequences that will result in reduction of the natural resources. To move to a low carbon economy, Nike developed the concept of the transition. The purpose of this model is absence of waste in the process chain. The company plans to achieve this by providing the clean output of products, and recycling the products and materials to achieve the absence of waste before and after consumption. Such a concept is designed in order to encourage innovation and to create the sustainable business processes.
In general, operations strategy consists of the following components:
1. Considered Design
Initiative “Intelligent design” takes the principles of sustainable development of innovative high quality products for the athletes reducing or eliminating toxics and waste and increasing the use of materials that are preferred in terms of ecology.
2. Lean and Human Resource Management
Nike teaches enterprise-contractors on the ways to implement specific principles of production and personnel management. The principles of good manufacturing decision-making process is closer to the employees by the formation of practical skills, working in a team, and developing an understanding of the fact that quality is more important, than quantity. Personnel management ensures the formation of managerial capacity.
GX is the online marketplace for the exchange of the intellectual property. It can lead to the development of the new models of sustainable businesses and innovation. Providing the opportunity to see and to use private intellectual property aims at accelerating the development of “green” innovation.
4. Sport for Social Change
Nike continues its strategy of using sport as a force that can lead to the social change. A striking example of an initiative involving Nike is Grassroots Soccer in Africa. This public program directly addresses serious social problems, increasing people’s awareness and education about AIDS, and gives the young people an opportunity to make informed decisions.
5. Energy and climate strategy
In 2009, Nike launched the formation in the consumer goods segment called “Business for Innovative Climate and Energy Policy” (BICEP). This formation lobbies for the effective climate and energy legislation in the U.S. and for the creation of a level playing field through the use of the price of carbon emissions and release of innovative capacity, which are extremely important for technology and infrastructure solutions. Nike wants to stay ahead of the changes in legislation, the rise and fluctuation in energy prices, and consumer pressure.
Nike managers use many tools in the decision-making process, but in order to get a clear assessment of the forces of the company «Nike» and the market situation, the latest SWOT analysis is carried out.
Table 2. The SWOT analysis of Nike
Strengths. Nike is one of the leading manufacturers of the sports products. It faced the competition in this segment of the market and could become one of the leaders in it. This fact only confirms its competitive advantage and endurance;
Weaknesses. These products are not always available in all markets due to the lack of a strong distribution system;
Opportunities. The emergence of the new technologies in production reduces costs and time of production. Moreover, a new generation of the models that meet technical specifications and latest requirements of athletes, forces demand to grow, which allows to extend the product line;
Threats. The increase of the number of competitors in the market may deprive the company of consumers. Increased demand of the state institutions (import quotas were increased, as well as control of business activity and income taxes). In addition, many consumers buy counterfeit goods, despite the worse quality, but because of the lower price. The company may incur large losses due to the huge amount of fraud.
It is carried out by different methods. The expectancy matrix is one of them.
Table 3. Expectancy matrix of Nike
Probability of opportunities using
Influence of opportunities for the company
|High||The development of online retail||Expansion of the range of products||–|
|Medium||Entering new market segments||Reduction of production costs||–|
Basing on the forecast in 2012, the company will use the opportunity of online retailing, expanding the range and gaining new segments. This will help it to strengthen its position in all its markets and make the product more affordable for the consumers.
Design of goods and services
In order to maintain its own competitive advantage, the American manufacturer uses advertising. “Nike” turned its logo (image wing Nicky, the Greek goddess of victory, or “The Swoosh”) in the most famous trademark of the planet. This brand is well-known that the name of the company hardly has to be mentioned in the advertisements. The degree of knowledge of the trademark is evidence of exceptional achievements in the use of the corporate marketing.
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The Nike Company is an example of a successful outsourcing strategy. The company has selected the following path: Nike licensed the production and sale of sportswear, leaving a management patents and trademarks for the development of the original design.
Outsourcing in foreign trade transfers a number of the non-core functions of business, such as logistics and foreign operations, for the service of another organization.
Nike was also one of the first companies, which implemented the above-mentioned strategy. So today, Nike is working only on the design of a lot of products, as well as manages trademarks and patents. All production, distribution, and sale of sportswear are performed by the companies-outsourcers.
Supply chain management
Managing a network of the interconnected businesses involves the supply of packages of products and services from the raw materials to the consumer in accordance with the requirements of the end users.
The planning and management of all activities includes the sourcing, purchasing, production, and logistics management. It also includes coordination and collaboration with partners through the channel (suppliers, dealers, and customers).
Supply chain has two main functions; physical function of the supply chain is visible and evidential: materials are converted into the details, and those are converted in the finished product. All of this in some way moves in space. Mediating function of the supply chain is less obvious; though, very important. Every good has to come to the market to meet consumer’s needs. Both functions are accompanied with certain expenses. During the conducting of physical function costs of production, transportation and storage costs rise. Mediation involves a cost as well. When supply exceeds demand, Nike reduces prices and sells at a loss. It means lost revenue and dissatisfied customers. On the other hand, when demand exceeds supply, Nike can increase prices; thus, gaining high levels of revenue and making healthy profit.
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Inventory management and material requirements planning (MRP), enterprise resource planning (ERP)
In cases of the predictable demand for the functional goods, mediation costs are relatively low. Therefore, Nike can focus on the reduction of physical costs, which is especially important taking into account high elasticity of demand for the functional foods. Nike usually uses information systems that make the planning of production resources (Material Resource Planning, or MRP) effective. The software used to manage orders, production, and supply, leads to a reduction of inventory throughout the supply chain and increases production efficiency. It is important in such cases to consider that any information, first of all, is information about events within the supply chain. Such information enables suppliers, manufacturers, and sellers to coordinate their actions in order to meet foreseeable demand at the lowest possible cost.
This approach, however, is not suitable for the innovative products. In the case of innovative products, cost of intermediation (not the physical cost) is the dominant one, and becomes the focus of managers. Critical information in such cases is out of the supply chain. It is distributed in the market. The most important decisions that have to be made by the management in this case, do not relate to the reduced costs and inventory management. They are related to the issues of the placement of the resources in the supply chain in order to meet the poorly predictable and transient demand in the best way. They are also related to the management of the financial resources, which is performed by the Department of Finance, headed by the Chief Financial Officer. Nike has held recruiting building a system of motivation in order to monitor the safety of its operations.
Managers provide information resources of information dissemination system in the organization. Time resources managers provide planning system to each division and department.
Aggregate planning in the organization consists of the following stages:
- The analysis of external factors causing the change. The opening of this department allows the consumer to buy the products of “Nike” at the lower prices. This will reduce the chance of buying low-quality goods;
- Analysis of internal factors. This move will increase the volume of sales, and will give to the company’s management an opportunity to actively monitor the changes and trends in the purchasing sector;
- Diagnosis needs. Any change from the current state is desired;
- Diagnosis of changes of the organization;
- Analysis of the force field. This represents a change in the situations that are under a certain balance, or equilibrium, between the driving and restraining forces of change. Its goal is a realistic comprehensive evaluation that may lead to a proposal for change;
- Identification of the restraining forces.
Time management and lean production systems
Time management as a system involves a number of elements, which, used together, give a significant reduce of time needed to implement the various production processes. These elements include: analysis of working time, setting goals that are wanted to reach the head during use time management, planning of working time, and the development of different methods of avoiding waste of time resources.
Management of quality and capacity planning
Nike uses the following concepts of quality management:
- Quality driven management system. The system ensures the promotion of goods in production, quality of which made the most positive response of surveyed respondents;
- Quality assurance and statistical quality control. This type of control provides quality control with statistical indicators;
- Good manufacturing practices. The system takes into account the experience of delivering goods to the market;
- Environmental management system. This type of control provides the promotion of the most health-protective products;
- Total quality and productivity management. The system is oriented towards the markets with the optimal balance of performance and quality;
- Continuous improvement implementation system. This management tool is designed for a continuous research of the needs of the customer and implementation of the quality improvements according to their needs.
Human resources policy
F. Herzberg determined factors, which have motivated human behavior and cause its satisfaction or dissatisfaction.
Table 4. Analysis of the factors of motivation and dissatisfaction of Nike’s personnel
|Factors of dissatisfaction||Factors of motivation (satisfaction)|
|– The degree of control over the work and its verification (rigid control system creates stress of many workers);
– Working conditions (well-equipped and comfortable rooms as places for work);
– Salary (high and stable salary for all employees);
-Interpersonal relations with superiors (relation with the superiors not only on the manager-subordinate scheme);
– Overtime (well-paid overtime).
|– Career development (ability to advance in employment for all employees)|
Such factors as interpersonal relationships with superiors, wages, working conditions, and overtime are not the factors of dissatisfaction, because the company offers good working conditions and large wages. Overtime is paid. Interpersonal relationships with superiors are built not only on the manager-subordinate scheme; they are based on personal contact, understanding, and trust.
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So, it is evidential that Nike performs a full-fledged operations management in the different directions. It all provides a situation, when Nike, as a sports goods producer, is ranked being the first in the industry of the sports goods production.