Nike is the world’s leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment, with revenue in excess of US$24. 1 billion in its fiscal year 2012 (ending May 31, 2012) (Nike Inc). The brand alone is valued at $10. 7 billion making it the most valuable brand among sports businesses (Nike Inc). Starting in 1999, Nike decided to implement the first part of its supply chain strategy; the demand and supply chain planning application software from i2 technologies.
Nikes total ERP implementation was estimated to cost $400 million,to upgrade their supply chain and ERP systems, however, the i2 implementation ended up costing Nike an estimated $100 million in lost sales, depressed its stock price by 20%, and triggered a flurry of class action lawsuits (Christopher Koch). The supply chain software implementation of i2, estimated to cost $40M, was the first part of a (NSC) Nike Supply Chain project. The (NSC) Nike Supply Chain project was a project to rollout an integrated ERP system from SAP, and customer relationship management (CRM) software from Siebel Systems. 2 Technologies was a supply chain management software and services company with software designed to improve the management of inventory, production, shipping, and sales forecasting (I2 Technologies). Nike was specifically looking to use the i2 software to help reduce the amount of manufactured materials needed in their shoe production by better forecasting customer demand and material requirements. Nike’s implementation of i2 software was also targeted to fulfill customers demand quicker.
In 2000, Nike launched the i2 software using its old systems rather than launching it during the larger SAP ERP implementation. At the time of the i2 implementation Nike didn’t feel the current software offering had all the required functionality that they needed, and requested i2 customize the software specifically for Nike. In addition, when implementing i2, Nike chose to use a single instance strategy for implementation. The CIO at the time, Gordon Steele, said it was a decision not a discussion (SCM and ERP Software Implementation at Nike: From Failure to Success).
The major glitch in the i2 demand application and supply chain planner resulted from the application using different business rules and storing data in incorrect formats, making it very hard for i2 to integrate the two applications, additionally, it was noted that the system would frequently crash. In the end, these problems would have remained only minor inconveniences had they not impacted the factory orders which resulted in the i2 system dropping or duplicating orders.
Specifically, the i2 demand planning system, released orders for significantly more Air Garnett sneakers than the market was demanding and called for a lot fewer of Air Jordan’s which, at the time, were in high demand. As a result of the software failure, Nike claimed that the i2 software had been ineffective in delivering the promised functionality as it delivered inaccurate forecasts and would crash decreasing the systems productivity. However, i2 reportedly denied Nike’s allegations and placed responsibility on Nike for a rushed implementation, forecasting too far ahead, and required too much customization.
In addition, i2 stated that Nike ignored their recommendations of minimizing customization to the system’s software and using a slower more diligent phased deployment plan. Regardless of the recommendation Nike went live to thousands of suppliers and distributors simultaneously. Likewise, it was stated that Nike did not hire a third-party integrator which was also problematic. Nike as a company did not have the core competencies to deal with software; therefore, they should have investigated hiring a third party integrator for an efficient and more seamless implementation.
A later evaluation of the project showed that Nike had planned the project poorly, that key stakeholders had been remitted from planning, and that the staff was inadequately trained on both the system and its business value (“A New Supply Chain Project Has Nike Running for Its Life”). Nike could have decreased the likelihood of the expensive implementation had it piloted the i2 program and then used a phased in approach. Furthermore, Nike could have waited to implement the i2 software during the SAP ERP rollout which appeared to be diligently thought out.
Nike’s failure, during the implementation of the software i2, affected Nike’s reputation as an innovative user of technology. It appears businesses are often unaware of the differences that exist within organizations and how much time should be spent on large software implementation projects. In extreme cases, ERP software system implementations have led to project and/or organizational failure. In 2001, Nike stopped using i2’s demand planner system and moved to SAP’s ERP system which used a tool based on invoices rather than forecasts.
During the SAP ERP implementation Nike used the lessons learned from the i2 implementation and diligently trained individuals who were going to be using the system. In fact, Nike wouldn’t allow anyone access to the system until they underwent extensive training. In addition, Nike took the SAP ERP implementation more cautiously implementing systems slower and using pilot tests. By 2004, Nike sited it was able to successfully implement the (NSC) Nike Supply Chain project. In the end, it was reported that Nike spent six years and $500 million on the NSC project (SCM and ERP Software Implementation at Nike: From Failure to Success).
The full implementation of the supply chain project helped Nike achieve many benefits such as reduced inventory levels, integration between departments, better visibility to customer orders, decreased manufacturing time, and increased gross margins. Poor integration, inadequate training, unstable software and spotty testing derailed Nike’s i2 project. Fortunately, Nike is a large company that was able to rebound from the i2 software implementation debacle and walk away learning that they needed to take software implementations seriously. In the end, Nike was able to reap the benefits from SAP’s ERP software once it was implemented correctly.
Furthermore, i2 walked away learning they should have been more forceful in their recommendations to Nike on implementation strategies and less customization. References Farmer, M. A. (n. d. ). I2-Nike fallout a cautionary tale – CNET News. CNET News. Retrieved March 31, 2013, from http://news. cnet. com/2100-1017-253829. html 049 SCM and ERP Software Implementation at Nike pdf free ebook download from www. andhrauniversity. info. (2012, November 3). EbookBrowse. com. Retrieved March 31, 2013, from http://ebookbrowse. com/049-scm-and-erp-software-implementation-at-nike-pdf-d412507791 I2 Technologies. 2013, March 27). Wikipedia. Retrieved March 31, 2013, from http://en. wikipedia. org/wiki/I2_Technologies Koch, Christopher. “Nike Rebounds: How (and Why) Nike Recovered from Its Supply Chain Disaster. ” Nike Rebounds: How (and Why) Nike Recovered from Its Supply Chain Disaster. CXO Media Inc. , 15 June 2004. Web. 02 Apr. 2013. “Nike Final’s ERP Implementation. ” Nike Final’s ERP Implementation. Slideshare, n. d. Web. 02 Apr. 2013. Nike, Inc. (2013, March 31). Wikipedia. Retrieved March 31, 2013, from http://en. wikipedia. org/wiki/Nike,_Inc Nike
