Research
When Software Broke Nike’s Supply Chain: A $100 Million Cautionary Tale for Digital Transformation
Nike’s ambitious roll-out of the new demand-planning software from i2 Technologies in 2000-2001 was the largest supply chain fiasco. The “big bang” approach to its new system, meant to travel beyond its legacy system to re-invent its forecasting and inventory planning for footwear products, went horribly awry, costing Nike some US$100 million, dooming it.
Some of the features of the new system, which was intended to work in parallel with the SAP Enterprise Resource Planning (ERP) system, were overwhelmed by masses of data and poor accuracy, writes Logistics Insider. It created inaccurate orders which most importantly, resulted in over-stocking poorly-selling footwear and out-of-stock of the best sellers such as Air Jordans. It transmitted conflicting information about demand to the suppliers leading to wrong manufacturing, overstock of some products and under stock of others.
The share prices of Nike fell 20% and earnings were not suitable but Nike CEO Phil Knight made fun of it.
The lesson was that without sufficient testing and planning, unrealistically short delivery time, no integration with existing systems, inaccurate expectations for the solution, without the necessary customisation and change management – problems can occur.
Logistics News Website recently published that this case shows that new tools do not make the business agile, but can even make the business more fragile if not managed correctly. CIO.com concluded the event highlighted tactical vs. strategic IT. Panorama Consulting pointed out that the case is an example of SCM failure, and it illustrates the need to roll out software in batches, testing and software-process fit.
Case studies (see comparisons by Henrico Dolfing) show both Nike and i2 Technologies suffered from the event; both blaming each other. Nike eventually recovered from the event, with lessons in supply chain visibility and risks, and system upgrades. This case is an excellent lesson for many businesses – digital transformation is not just about using modern technology – it’s also about preparation and planning, expectation management and preparation. They are still valuable in the ever changing global supply chains.
The editorial team of - Logistic Heroes news Website - managed by a group of seasoned professionals with diverse expertise in supply chain management and latest technologies using in cargo Industry. With several years of on-site experience, the team provides in-dept analysis, conducting interviews and podcasts, helping readers stay informed about the latest trends, changes and innovations in logistics Industry.
