NIKE Inc. Project Failure in Year 2001 Problems with supply- chain management system contributed to loss $100 million

Introduction Nike Inc. founded by Mr. Phil Knight in 1964 Nike is an American multinational corporation in worldwide marketing. Nike Selling of Sports footwear, apparel, equipment & accessories. Nike is world no. 1 athletic shoemaker with 500,000 workers in 55 counties

Nike contracted I2 to implement new supply chain system (SCM) in year 1999. SCM clubbed with Customer Relations Management (CRM) to take order from customer and system inventory. SCM expected reduce order-to delivery time about 50% on the current system and the project taking 5 years to complete. Estimate cost $400 million, while price of I2 software is $40 million.

Problems Company's profits of the fiscal year ending May 2001 would fall short of 24 percent. Nike claimed that failure of supply chain produced by I2 not perform well and generate. The problems would cost $80 to $100 million in sales for that quarter. This failure effected Nike's reputation as an innovative user of technology. SAP & CRM pointed out the fault of customization of the software and over demand forecasting.

Results Less popular shoe model and shortage of those models were in high demand orders. Caused by less popular shoes send to the factories twice by old and new management system. This causing Nike not being able to cater to the market demand. Nike lost considerable market share to New Balance & Reebok. Huge number unpopular models manufactured had to be sold out at highly discounting prices. Incurred additional cost as it had to airfreight the shoes compare by shipping.

Reason of the failure Failure in Control Project Change and Communication Management I2 technologies claimed that Nike did not implement software properly and refuse to use the template and methodology. Nike blaming I2 failed to provide quality service on the software. Nike maintained that I2 did not deliver the functionality led to under & over-manufacturing of shoes models. 2 parties are not communication well in the design stage and implementing stage of the project.

Reason of the failure Failure in Information Distribution and Human Resources Management Increasing of turnover of employees. CIO which involve in the initiate the supply chain renovation has left the company before the system complete installed. Planning, definition and WBS is not being well. New person in-charge is not clear the situation of the project before take over.

Reason of the failure Failure in Quality Management and Integration Management Both party did not appoint third party integrator to help implement software/system. Nike staffers and I2 consultant are not well schedule up for the confirming the quality of the software.

Reason of the failure Failure in Time Management and Risk Management Missing out commissioning schedule & did not pre-test the system. Extended the system to dispersed supplier and distributors simultaneously. Implement two major project at the same duration.

Solution, Recommendation and Conclusion Communication and performance reporting should be implement all the time during the project ongoing. Changes in the project should be closely monitor and reporting to both parties. Try to keep the employee turnover rate as low as possible. Assign new replacement to follow up or take over the entire job task. Project details should record in the clear format.

Third party integrators must be exist to be help implement and checking the performance of the new software. All the new software should be pilot test by the specialist. Make sure all the project phase is according to the schedule. Allocate an adequate time schedule for pre-tests and executing the software product.

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