Supply Chain Management Disasters: Nike

How many Nike products do you own? How much do you know about where they come from? Nike is a multinational company and one of the most widely-known brands of athletic wear. It’s no wonder that achieving Corporate Social Responsibility (CSR) in all aspects of their business is crucial to their success.

Consumers have begun to care more and more over the past few years about where their products are coming from. Whether it is the chicken nuggets they’re having for lunch, the latest tech gadget they use to check the scores , or the shoes they wear for their morning run.

This trend is only going to grow. This is because millennials takes CSR into heavy consideration when making purchase decisions. A 2013 study shows they’re 89% more likely to buy a product or service if it came from a CSR company. This was proven in the 1990’s when Nike was under accusations for tolerating sweatshops and child labor.

With all this in mind, it is fitting that we explore one of the biggest media blow ups relating to this issue in recent years. Not because it was a huge disaster that nearly destroyed a company, but because a lot can be learned from Nike’s response. Since then, Nike has been continually improving and promoting CSR in their supply chain and otherwise.

Nike believes that “In sustainability – as in sports – what counts is how you perform on the field.” A sound game plan or strategy is essential to success.” Since 2005 they have been consistently updating consumers and the general public on their commitments, standards, and audit data as it relates to CSR in their operations.

What Happened?

Problems began for Nike in 1991 with reports about poor working conditions at the Nike factories in Indonesia. At this time, Nike’s response was to deny responsibility for monitoring malpractice for suppliers. Nike became a target of campaigners, and because of this a global boycott began. This campaign quickly caught wind and had a significant impact on the Nike’s demand.

It wasn’t until 1996 that Nike finally started addressing the issue in a productive manner. They began by putting a department in place tasked solely with improving the lives of factory workers. Nike started progressing as a company in their efforts towards CSR.

However, unrelenting criticism was still taking a toll on their brand image. In 1998, Nike finally began to see positive feedback. Their CEO at the time gave a speech announcing big changes in working standards. Shortly after this, Nike began the creation of the Fair Labor Association to help improve their operations. Then, they started regular factory audits and publishing detailed factory info.

Nike took responsibility for the monitoring of the operations within every link of their supply chain. Moreover, they were able to provide visibility to consumers. As a result, Nike made a comeback from a potentially disastrous situation to restore their public image.

What We Can Learn From This? Visibility is Key.

First and foremost, you need to understand what is going on within every step of your supply chain. Companies need to have full visibility into not only their own supply chain networks, but also their supplier networks beyond the first tier. Having access to this not only allows you to better manage potential risks, it also empowers you to better select suppliers.

Now you may be wondering: how can we gain access to this info? Well, that is the first lesson we can take from Nike. By performing audits, Nike was able to pin-point areas where factories were failing. As a result, they knew what changes needed to be made. Also, they were using metrics to reflect these changes and the overall company vision. Thus, they were able to measure each factory’s performance. Continuing audits on an ongoing basis ensures they are following policies and meeting expectations.

What’s the next step?

So, what do you do when you achieve this visibility? Well, you need to communicate this to consumers. The only way they’ll know about your CSR efforts is if you are actively informing them. Sharing milestones with your consumers is a good place to start. They can see your efforts and start to build trust in your brand image. Next, you can publicly publish data on your operations. Giving access to this data shows that you have nothing to hide. As a result, you can further build brand trust.

How did Nike do this? By publishing a complete list of their factories, along with details on each location. They continue these transparent updates and being “committed to building deeper community connections and spurring positive change around the world.

Putting a plan in place for the future is the final step in bringing CSR into your supply chain. A critical part of this is selecting which suppliers to do business with. It is important that you can have trust and their company’s vision and values are aligned with yours. Once you set your supply chain up for success, you need to keep it going. Regular audits and re-evaluating performance criteria can help you to achieve this.

Nike now strives to have strong relationships with their suppliers and take an active role in monitoring their factories. They are constantly looking to improve their operations in a way that has a positive impact. Nike is “on track to meet [their] manufacturing commitments and have begun to look ahead, redefining what manufacturing will look like for NIKE in the future.”

This article is the third in a series about supply chain disasters. Check out the first in the series on Target Canada and the second on Atari.