Risk Mitigations and Sustainably Within Upstream Sourcing at Nike, Inc.

Risk mitigations and Sustainably within Upstream Sourcing at NIKE, Inc.

Abstract

It is a rapidly changing world; and no business is immune to risk, no matter how large or how robust their systems are. The emergence of new digital technologies and business models, the availability of new low cost manufacturing markets, environmental issues including climate change, the demand for sustainable and transparent business practices, political and economic factors all influence global supply chains. In the age of the 24-hour news cycle and the speed of internet communications, customers are highly aware when businesses participate in unethical manufacturing conditions. Additionally, there are risks associated with competition and partnerships; as markets become saturated and competition becomes tougher or suppliers disrupt quality and or delivery agreements, these present real risks to any organization. These risks affect sustainable operations and have the potential to squeeze a company’s bottom line. Given all these impending risks, any organization must understand importance of risk mitigation. Companies must be proactive and strategically set out to reduce risk where possible. This paper, speaks to strategies implement by NIKE to minimize risk.  It details the sourcing strategies NIKE is pursuing in its supply chain with further evaluations on categories of risks, how NIKE utilizes indexes, key performance indicators (KPI), digitization trends, sustainability and CSR to reduce risks.

Background

“NIKE designs, develops and markets high quality footwear, apparel, equipment and accessory products worldwide” (Sustainable Business Report, 2014).  As the president of NIKE stated at the annual meeting “Our goal is to deliver value to our shareholders by building a profitable global portfolio of branded footwear, apparel, equipment and accessories businesses.  Our strategy is to achieve long-term revenue growth by creating innovative, “must have” products; building deep personal consumer connections with our brands; and delivering compelling retail presentation and experiences” (Sustainable Business Report, 2014).

NIKE is one of the most recognized brands in the world amongst its competitors such as Adidas, New Balance, Converse, and Asics. NIKE conducts business in 42 countries with 700 contracted factories (Stanford). From NIKE footwear, apparel and equipment just about anyone that is athletic or active, one-way or another has been exposed to or by NIKE.  Footwear and apparel make up 88% of NIKE’s revenue and NIKE achieves this great achievement without owning a single factory to produce either of these product categories (Soni, 2014).  They are also very profitable, with their stock price ranging from $18 per share to $78 per share in the last ten years (MSN Money).