Nike’s Supply Chain Software Disaster
Thi Lanh Nguyen
MKTG 455-01
Nike’s Supply Chain Software Disaster
One of the worst supply chain disasters was Nike’s supply chain crisis in May 2001. According to the analysis of the Boston Consumer Group in April 26, 2004, trying to reduce inventory tied up in out-of-style products and boost sales of hot-fashion products, Nike installed i2’s demand-planning software into its legacy systems without testing the new system. The new software system supposed to help Nike match supply with demand and narrow the sneaker manufacturing cycle from nine to six months, according to Christopher Koch (author of the article “Nike Rebounds: How (and Why) Nike Recovered from Its Supply Chain Disaster” in the CIO Magazine.) According to Koch, the result did not come out that way. i2’s demand-planning system has placed the orders of low-selling Air Garnett sneakers instead of high-selling Air Jordans sneakers. Nike’s supply chain was collapsed resulting excess inventory in Air Garnett sneakers, shortage in Air Jordans sneakers, and order delays. Nike announced a loss sale of $100 million resulting company’s stock price to drop 20%. Nike had to sharply reduce prices to sell off excess inventory and offset the loss. Based on Koch’s report, software bugs, integration issues, and lack of training etc.” were the major reasons for the failure. These are common problems when a company tries to adapt a big and complicated software system too quickly and too extensively at once without testing and removing bugs from the software system before rolling the entire system out. Both Nike and the software provider are to blame for the failure. This was an implementation failure. According to the report “E-Supply chain: no more big bangs” on the Software Magazine (August/September 2001, p. 80), Nike spent $400 million for i2 Technologies. This investment was too risky and went terribly wrong. It was a management failure. The Boston Consumer Group mentioned
MKTG 455-01
Nike’s Supply Chain Software Disaster
One of the worst supply chain disasters was Nike’s supply chain crisis in May 2001. According to the analysis of the Boston Consumer Group in April 26, 2004, trying to reduce inventory tied up in out-of-style products and boost sales of hot-fashion products, Nike installed i2’s demand-planning software into its legacy systems without testing the new system. The new software system supposed to help Nike match supply with demand and narrow the sneaker manufacturing cycle from nine to six months, according to Christopher Koch (author of the article “Nike Rebounds: How (and Why) Nike Recovered from Its Supply Chain Disaster” in the CIO Magazine.) According to Koch, the result did not come out that way. i2’s demand-planning system has placed the orders of low-selling Air Garnett sneakers instead of high-selling Air Jordans sneakers. Nike’s supply chain was collapsed resulting excess inventory in Air Garnett sneakers, shortage in Air Jordans sneakers, and order delays. Nike announced a loss sale of $100 million resulting company’s stock price to drop 20%. Nike had to sharply reduce prices to sell off excess inventory and offset the loss. Based on Koch’s report, software bugs, integration issues, and lack of training etc.” were the major reasons for the failure. These are common problems when a company tries to adapt a big and complicated software system too quickly and too extensively at once without testing and removing bugs from the software system before rolling the entire system out. Both Nike and the software provider are to blame for the failure. This was an implementation failure. According to the report “E-Supply chain: no more big bangs” on the Software Magazine (August/September 2001, p. 80), Nike spent $400 million for i2 Technologies. This investment was too risky and went terribly wrong. It was a management failure. The Boston Consumer Group mentioned