Nike was founded in 1964 by Bill Bowerman and Phil Knight inBeaverton, Oregon. It began as Blue Ribbon Sports (BRS). In 1972,BRS introduced a new brand of athletic footwear called Nike, namedfor the Greek winged goddess of victory.
The company employs 26,000 staff around the world with revenuesin fiscal year 2005 of $13.7 billion. It has facilities in Oregon,Tennessee, North Carolina, and the Netherlands with more than 200factory stores, a dozen Nike women stores, and more than 100 salesand administrative offices.
Its subsidiaries include Cole Haan Holdings, Inc., Bauer NikeHockey, Hurley International LLC, Nike IHM, Inc., Converse Inc.,and Execter Brands Group LLC. As of May 31, 2004, manufacturingplants included Nike brand, with 137 factories in the Americas(including the United States), 104 in EMEA, 252 in North Asia, and238 in South Asia, providing more than 650,000 jobs to localcommunities.
Objective
Nike grew from a sneaker manufacturer in the early 1970s to aglobal company selling a large number of products throughout theworld. Nike’s sneaker supply chain was historically highlycentralized. The product designs, factory contracts, and deliveryare managed through the headquarters in Beaverton, Oregon. By 1998,there were 27 different and highly customized order managementsystems that did not talk well to the home office in Beaverton,Oregon. At that time Nike decided to purchase and implement asingle-instance ERP system along with supply chain and customerrelationship management systems to control the nine-monthmanufacturing cycle better, with the goal being to cut it down tosix months.
Plan
The company developed a business plan to implement the systemsover a six-year period, with multiple ERP rollouts over that time.The plan called for the implementation of the demand planningsystem first while working through the ERP system and supply chainimplementation.
Implementation
The demand planning system was implemented first for reasonsthat made a lot of sense. The total number of users was small incomparison to the ERP system and was thought to be relatively easyto implement; however, this turned out not to be the case. When thesystem went live, there were a number of problems related to thesoftware, response time, and data. In addition, training was notadequately addressed, causing the relatively small number of endusers to use the system ineffectively. The single-instance ERPsystem and supply chain implementation plan differed from thedemand planning system and called instead for a phased rollout overa number of years.
The ERP system implementation went much more smoothly. Nikestarted in 2000 with the implementation of the Canadian region, arelatively small one, and ended with the Asia-Pacific and LatinAmerica regions in 2006, with the United States and Europe, MiddleEast, and Africa in 2002. This included implementing a singleinstance of the system, with the exception of Asia-Pacific, andtraining more than 6,300 users.
The total cost of the project as of 2006 was at $500million—about $100 million more than the original projectbudget.
Conclusion: What was Learned?
The demand planning system interfacing to legacy data from alarge number of systems that already did not talk well with eachother was a root cause for misinformation and resulted ininadequate supply planning.
The demand planning system was complex, and end users were nottrained well enough to use the system effectively.
System testing was not well planned and “real” enough to findissues with legacy system interfaces.
The overall business plan for all the systems and reasons fortaking on such a highly complex implementation were well understoodthroughout the company. Thus, Nike had exceptional “buy-in” for theproject and was able to make adjustment in its demand planningsystem and continue with the implementation. The goal was to ensurebusiness goals were achieved through the implementation, and not somuch to get the systems up and running.
Nike exhibited patience in the implementation and learned frommistakes made early in the process.
Training was substantially increased for the ERP implementation.Customer service representatives received 140–180 hours of trainingfrom Nike, and users were locked out of the system until theycompleted the full training course.
Business process reengineering was used effectively to clarifyperformance-based goals for the implementation.
Case Questions
1. How could OPM3 have helped to identify the problems withimplementing the demand planning system?
2. What were the three primary reasons Nike was successful withthe ongoing ERP implementation?
3. Why was a phased rollout the correct decision for Nike?
