Nike and Lean System Case Study

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Austin Robinson

OSCM390-FW11

Jim Smallwood

October 15, 2017

Nike and Lean System

The company that uses the lean system that I have chosen is Nike. Nike is an athletic clothing and equipment brand that started in Oregon in the year 1964. Originally named Blue Ribbon Sports, was founded by Phil Knight, who was a track athlete for the University of Oregon, and his coach Bill Bowerman. Nike is a multinational company that sells its products all around the world. You cannot walk down the street without seeing someone wearing either some of the clothing that Nike produces or the bestselling product that Nike has, their shoes.

The reason that I have chosen this company is because of their global impact in the economy and because they are such a known name that learning more will really allow me to appreciate their products in the future. Nike has been one of my favorite athletic brands. Their shoes are something that I have always worn and always will. I also wear a lot of the clothing that they produce. Nike has some of the best sweatpants that I have ever owned.

The main function of this company is to produce the highest quality of athletic gear that is available on the market. The mission statement of Nike is “Bring inspiration and innovation to every athlete* in the world. *If you have a body, you are an athlete” (Nike.com).

No matter where you are in the world, Nike wants to be able to reach you and to inspire you every day. The amount of sports that Nike has equipment for is astonishing. Any sport that you can think of, Nike has a product for it. From cricket to basketball, hockey to swimming and everything in between Nike will have you covered with the best equipment that you can find. I have always worn Nike brand basketball shoes, the quality of the shoes is better than any other company.

Nike uses lean manufacturing in its supply chain in many ways. The main use for the lean manufacturing is to shorten the lead times and improve the supply chain from making mistakes. When adopting the lean manufacturing, the process was explained as being ‘better manufacturing’ that reduced wasted materials and time - the company’s supply chain has operated more efficiently. The report explained the company had worked to eliminate waste, lost time and lost material from its processes as part of its sustainability agenda.

It was reported that companies that use the lean system reported that its defective rate was 50% less than those who did not use the lean system. Also, lead times for factories were 40% lower in companies that use the lean system than companies that did not. The final stat that came from this report was that companies who had implemented the lean system saw in increase in productivity 10-20% higher than those who did not.

Mark Parker, CEO and President at Nike, said in a statement: “Sustainability at Nike means being laser-focused on evolving our business model to deliver profitable growth while leveraging the efficiencies of lean manufacturing, minimizing our environmental impact and using the tools available to us to bring about positive change across out entire supply chain.” (cips.org).

Lean manufacturing also played a big role in the Nike manufacturing cycle by helping with the fear of sweatshops. Nike was accused of using child labor in conditions that were unfit to work in called sweatshops. These sweatshops were located in foreign countries that did not require high pay for the workers in the factory.  Nike knew that these factories were unfit work environments and Phil Knight even came out to say that they were working to change how these factories produced the product and was focusing on creating a better work environment.

The change that Nike went to was the lean system of manufacturing. The changeover from contract factories to lean factories was a major process for Nike. They had to hire and appoint managers to go to these sweatshops to transform them into a high functioning lean factory. But, just two years after certifying their first Lean manufacturing line, the factories improved their score by more than a half grade on their audits compared to those who had yet to adopt a Lean line. This amounted to a 15 percent reduction in labor noncompliance.

In the year 2005, Nike was one of the first companies to produce a new report called the CSR report. This report showed the pay scales and working conditions in many of its overseas factories. This really jump started other companies to also start looking toward using the lean system. All Nike factories are now subjected to the “Nike Code of Conduct” in its factories. The factories are supplied with 150 trained experts who are required to monitor the factory to make sure that the factory is adhering to the code of conduct and fixes any issues that may occur.

Nike has really focused on the green initiative of their factories. Nike has been focusing on zero waste and improvements in the manufacturing products to reduce waste. One of the biggest things that Nike has done in recent memory is the creation of the Flyknit material. Flyknit is a newer product that turns away from the old school process of sewing the many different parts of the shoe together and now having the entire shoe being sewed together into one part. The process goes as followed, the upper part of the shoe is sewn together at one time and all together. Once the upper is sewn together, you then attach the upper part of the shoe to the sole of the shoe.

This process reduces the waste caused by the old cut and sew process by almost 60%. Since 2012, the technology has reduced nearly 3.5 million pounds of waste.

Nike has also been finding way to take waste and create new products from the waste. Nike is now using plastic bottles to create some of their products. Nike uses these recycled bottles to not only create shoes but they can also make clothing from the bottles. Meanwhile, the company’s ColorDry technology, which dyes fabric using zero water, has saved more than 20 million liters of water.