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OUR BLOG

Nike Supply Agreement

By pierre.shaun@gmail.com | In Uncategorized | on December 13, 2020

ADEC ESG Solutions is a leading provider of ESG solutions, including industry expertise, software solutions and data management. Contact us to learn more about how we can work with you to design tailored solutions for your sustainable supply chain. But this distributed approach has its drawbacks. Acquiring components from so many different establishments is a real challenge for quality control. To ensure that high quality standards are met at every stage of production, Nike is in constant communication with its suppliers and supported by tools and training to launch suppliers in its Quality Management and Total Quality Management (MTQ) framework. The challenges of this approach have also come from outside the supply chain. At the beginning of its pioneering approach to manufacturing outsourcing, Nike decided not to implement centralized control of the supplier`s practices. However, due to growing consumer demand and changes in the market, Nike took a look at its sourcing approach and finally adapted a new strategy. She created a department exclusively responsible for improving the lives of factory workers and played an important role in the creation of the Fair Labor Association (FLA) in 1999. The FLA is a cooperation between companies, universities and universities, as well as civil society organizations, which are working to improve the conditions of factory workers around the world. In the 20 years since the inception of the FLA, Nike has revised its procurement strategy to prioritize suppliers who demonstrate leadership in corporate responsibility and sustainability. Nike also relies on transparency – In 2005, Nike was the first company in the apparel industry to publish a full list of factories in its supply chain.

Nike`s supply chain operates on three organizational principles: outsourcing to reduce costs; Diversification to minimize risk and corporate social responsibility to manage their impact on the world in which they work. Under targeted and experienced management, its supply chain has moved from these principles to one of the most effective and accountable major international supply chains by 2020. Nike, one of the largest suppliers of sports shoes and apparel, is reportedly planning to terminate delivery contracts with independent retailers over the next two years. Nike stated that independent retailers` approach to storing goods no longer fits its distribution strategy. As a result, as reported, the company has warned many independent retailers that it will stop supplying them by 2021. According to the Sunday Times, the sporting goods giant has written to dozens of independent retailers to tell them it will not deliver them by 2021. Nike is reportedly planning to terminate its supply contracts with independent retailers over the next two years as it will focus on its direct consumer sector. As one of the most well-known brands in the world, the American multinational is probably the most influential player in the modern textile industry.

The hundreds of millions of shoes and other products Nike sells each year hide a very complex supply chain. Their success has been attributed by many to the proactive approach to their supply chain management. The main principles of Nike`s supply chain are outsourcing and diversification. Nike allocates 100% of its footwear and apparel production to independent suppliers. It was one of the first multinationals to adopt this approach. Thanks to efficient management, Nike`s supply chain team quickly learned to cope with the additional logistical complexity of this outsourcing, resulting in significant savings over the years.

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