I consider in the manufacturing of the Athletic shoes the supply chain strategy of outsourcing the manufacturing of shoes from third parties because it has an enormous cost advantage to the company. The strategy is also implemented by Nike, Under Armour Inc. (UAA), VF Corporation (VFC), Lululemon Athletica Inc. (LULU), and Adidas which also include overseas manufacturers. These companies source most of their raw materials in the host countries by independent contractors. Nike Company, for instance, employs lean manufacturing which improves efficiency, enhances the production of the athletic shoes, and largely lowers waste. Lead manufacturing employed by these companies focuses on the quality and production of the shoes. The companies ensure that there is effective consolidation of materials, manufacturing invention, and modernization which supports the manufacturing process, (Singh, 2019; James, 2011).
According to James (2011), physical distribution management is commonly referred to as business logistics. It involves the movement of materials from business operation to the customers. The business logistics management involves materials for production handling and its related movements and storage, and control mechanisms for their management. It also involves warehousing or distribution centers of the materials, finished products or rather inventory, distribution and management. This also includes packaging and transportation of the products, (James, 2011).
In respect to the Athletic shoe industry, it is important therefore to share the experience of Nike, as the most representative company in the footwear industry, (Jiang, 2019). The company has a license agreement that gives authority to unaffiliated manufacturing parties to manufacture and sell Nike’s owned trademarks, apparel, digital devices and applications, and other equipment for sports activities. The company has six primary centers based in the United States. Four of these are situated in Memphis, Tennessee. Two of these four are owned and the other two are leased. And the other two are sited in Indianapolis, Indiana, and Dayton, Tennessee. The company has contracted third-party logistics providers to manage these two distribution centers. The logistics providers manage Nike’s branded apparel and equipment products shipped from a distribution center in Foothill Ranch in California. Nike has a total of 67 distribution centers from outside the United States at the end of the fiscal year 2019, (Singh, 2019).
According to Dan (2017), Adidas has initiated a bold move which involves three dimensional produced shoes in the United States and the European Union, and a complete overhaul of its supply change. The company seeks to be the world’s fast fashion shoe. The shoe production at Adidas takes 18months from inception to the shelf. The company has been taking some initiatives to be better able to claim the fast sports market by aiming to swiftly reshape its supply chain by increasing its speed to the market. The company has mainly focused on increasing the speed to the market through a digitized supply chain since 2015 as one of its three strategic pillars. This move has been activated by three market trends which makes it digitized supply chain a strategic imperative; inability to respond to consumer trends quickly, customization, and cost trends. Adidas has digitized all of its supply chains in a concerted effort with its speed factory which has resulted in reduced time to deliver products to the market by implementing rapid prototyping qualified by 3D printing. In Russia, the company was able to track inventory through in-shoe RFID chips. This kind of inventory system allows customers to purchase online and pick up in-store, or have the shoes delivered directly to the local stores.
Nike’s digitization initiatives in the Athletic shoe industry have seen it make in profit margin in the market. These initiatives focus on fast response to consumer or customer demands in the market. The digital revolution initiative is expected and achieved from the digital demand ‘sensing’ which is linked to inventory to digitally powered product design and development or production. The company has plans to merge its target geographies from six to four to create a lean supply chain to be able to tighten the digital association with its consumers, (Hulme, 2019; James, 2011).
It is important to restate that Nike Company remains today the leading innovator in athletic footwear and other assorted sports products. It has exceptionally strong supply chain relations. It has helped to integrate sustainability into product development and manufacturing. It has been able to manage sourcing through a balanced method taking into consideration the environmental, social, quality, and cost impacts. Nike has increased its global long-term relationship with fewer factories as trusted partners as opposed to having short-term transactional relationships with a larger number of factories. The company has integrated vertically which involves every segment of its value chain from manufacturing down to sales. This vertical integration supply chain is between the suppliers, manufacturers, distributors, and retailers. All the firms are ensured to be in close working relationships. For the company to prevent miscommunications that might threaten relationships that might later badly affect the smooth production at the factories, the research and development staff are sent to ensure the right communication is adhered to. Nike’s supply chain integration is driven by technology that includes electronic data interchange (EDI) which transmits the data between companies using networks such as VAN or internet; Value Added Network(VAN). This has helped in enhancing the supply chain in creating a trail from the customer’s address purchasing shoes on the Nike home page to the supplier expected to bring them together with the components of the customized shoes. The information technology (IT) fast track planning, tracking, and estimation of lead times based on real data which can be accessed in the system. The managers will then analyze, plan activities, and make decisions based on the available and real-time information from the entire supply chain,(Itani,2019; Sneller,2014).
According to Adidas (n.d.), the company has outsourced most of its production from various regions in the world. It works with almost 700 independent factories in these regions which manufacture athletic shoes in more than 50 countries in the world. The company’s supply chain is global and is multi-layered, (Adidas, (n.d.). Adidas has an integrated supply chain which includes the use of information technology (IT) which supports better planning and forecasting. The upgrading of its current software for better technology and integrating operating environment has enabled the company to implement made to order manufacturing, rather than made to stock variant production. Finally, this has integrated consumers and retailers with Canadian distribution and Asian manufacturing operations. And above all, it integrated three merged companies and eight major brands. This has helped customers to access sales, order status, and payment information via the web, (Shivankit, 2010, Lu, 2011).
Adidas has established its business globally through the speed factories. The company’s Global operations functions ensure that costs are minimized, consumer’s brand experience is increased and consistent, and production lead times are considerably reduced. Integration and incorporation of digitization of tools and processes have sped up the creation process and leverage automation opportunities for the company. Digital creation and automation are important areas for Adidas. This involves auto cutting and auto stitching to reduce dependence on manual labor. The company has moved globally by establishing production facilities near the target market that is why it initiated a speed factory for this determination. Adidas’ global operations function involves product development, sourcing, and supply chain management. The company has set and stated clear priorities for its global business operation abroad with the main intention of presenting an agile supply chain and with increased efficiency with the customer at the heart of business operations through ensuring that the business delivers the products to customers at the right time, place, and the right cost,(Pratap,2019:Lu,2011).
Nike’s global business operation strategy was mooted way back when the first founder was still in the university which later became a reality. The company’s global marketing strategy has seen it establish itself globally. The company is now in more than 700 plants located in 42 countries worldwide. All the manufacturing processes for the company are outsourced which are seen to be economical. The company’s core of the international marketing strategies is creative innovation which helped it to have a strong competitive edge for its competitors because of its brand superiority, (Hoopwood, 2019; Lu, 2011).
Nike uses Artificial Intelligence (AI) after procuring a Celect analytics company to improve its new strategy of selling directly to customers. Celect technology has been integrated into Nike’s app and website. This will help Nike to manage properly its inventory to meet its customers’ demands. This will result in a reduction in costs and increased profit margins for the company. It also acquired Invertex computer Vision Company which helped develop Nike Fi which involved a 3D scanner in Nike’s mobile app that enabled its customers to find out their shoe size. AI is indeed driving the fashion industry towards selling directly to customers, hence the elimination of intermediaries, (Lizzeri, 2019). Both Nike and Adidas have started implementing AI and the use of robots in the manufacturing of Athletic shoes. Nike is using these new initiatives in its facilities in China and Mexico where robots use static electricity to assemble the complex upper part of the shoe faster than humans. While Adidas has opened a factory for the same purpose in Little Rock, Arkansas. Robots that will use AI, (Rothstein, 2018).
