Nike’s secret brand weapon: supply chain transformation

As other brands struggle to navigate product availability issues, Nike is pushing forward as investments in its supply chain resiliency and digital ecosystem start to pay off for the brand. 

Why it matters

The challenge of the pandemic, including the temporary closure of factories in Vietnam, forced Nike to accelerate its digital transformation plans. The brand’s direct-to-consumer model is increasingly central to the company’s strategy as it builds out an omnichannel retail ecosystem. Smart supply chain management is a crucial part of its brand growth.

The operating model as competitive advantage 

Nike’s direct-to-consumer business is worth around US$10 billion a year. D2C is now responsible for 24% of the company’s revenue, more than double the pre-pandemic level. 

Like many brands during the pandemic, Nike found itself trying to accommodate booming demand at a time when global supply chains were creaking at the seams. While Nike wasn’t entirely insulated from these issues, the company’s investments in its own supply chains – especially in inventory management – have allowed the brand to weather the storm and drive growth despite challenging conditions.

“As we accelerate our consumer-led digital transformation, we are developing and refining new capabilities that are transforming our operating model, quickly becoming a competitive advantage for Nike,” said Matt Friend, Nike’s Chief Financial Officer, during its 2022 Q1 earnings call.

“This will give us real-time visibility to inventory across our network, plus dynamic transactional capabilities to optimize consumer demand and inventory productivity,” Friend said in a Q2 earnings call in June.

Nike’s ‘Consumer Direct Acceleration’ plan

• Create e-commerce platforms such as websites, apps, and Nike-owned stores to sell directly to customers.
• Use data from direct-to-consumer platforms to inform supply-chain and logistics decisions, based on real-time analysis and demand tracking.
• Develop more precise inventory management including the use of RFIDs in hundreds of millions of Nike products
• Install 1000 robots to hasten deliveries from distribution centers
• Use machine learning and artificial intelligence tools to predict consumer trends and buying behaviors

Source: CFO Brew, CIPS, Supply Chain, Nike