Operations management (OM) is a crucial discipline that all businesses must apply to succeed. For instance, the OM principles and techniques apply to all enterprises worldwide, from restaurants, hospitals, banks, retail stores, and others that produce goods and services. OM ensures the efficient production of goods and services, meaning that firms that want to improve the efficiency of their operations must effectively apply OM’s techniques, concepts, and tools. This makes operations management the heart of any organization since a business cannot meet its goals and purpose of providing goods/services to its customers without the operations function. Although globalization and technology have helped close the distance gap between manufacturers/producers and consumers, the advancements have created a significant challenge for operations managers since they must always ensure consumers get products/services on time. This paper examines Nike’s operations management strategies and practices. In this case, the paper will provide an overview of Nike Inc., define and discuss Nike’s operations management, forecasting approaches, and operations.
Nike Inc. is a multinational company established in 1964 with headquarters in Beaverton, Oregon, in the United States. The company designs, develops, manufactures, markets, and sells sports apparel, footwear, equipment, and accessories. Nike is the leading supplier and manufacturer of sporting products (Annual Report, 2020). The company uses its retail shops, e-commerce platforms, and independent retailers/distributors to sell its products across countries globally. However, Nike’s products are manufactured by contracted manufacturers, with almost all apparel and footwear being produced outside the U.S. As of 2020, the company employed about 75,400 employees, including part-time employees.
The company’s mission is “to bring inspiration and innovation to every athlete in the world.” In this case, the company aims to move the world by breaking barriers to reach everyone with an athletic mind. For instance, the company believes that everyone with a body is an athlete, representing its strategic goal of reaching the global sports product market (Smithson, 2019). Nike’s mission drives it to go beyond limits to expand human potential and bring the best out of people, as represented through its inspirational slogan, “just do it.” Nike does this by engaging in sports innovation and continuous improvement of its products through new technologies.
Operations Management Definition
Operations management refers to the set of activities that promote the effective conversion of inputs such as raw materials into outputs (products and services) (Heizer et al., 2017). In this case, operations management involves administering business practices and activities to create efficiency in an organization, leading to the creation of value in products and services. In Nike’s context, operation management involves the conversion of raw materials, labor, and other inputs into finished sports products (apparel, footwear, and equipment) that meet customer needs and expectations. In this case, OM involves utilizing company resources such as staff, materials, technologies, and equipment to develop and deliver goods to clients.
Nike Inc.’s Operational Strategy
Nike is one of the leading manufacturers and sellers of sporting goods, and this has been made possible due to its effective and efficient operation management approach. In this case, the company continually monitors and improves its strategies in its various decision areas of OM to streamline operations, productivity and ensure it meets its business goals and objectives. The company uses ten strategic decision areas of OM to manage its operations (Ferguson, 2017). These decision areas cover various issues, including product and service design, human resources, supply chain, quality, and inventory management. The decisions also cover scheduling, location strategy, process & capacity design, and maintenance. These are crucial areas in Nike’s operations management and have proved to be effective in promoting its brand. The company has extensive knowledge of its market, allowing it to effectively market its products. The company also heavily depends on agility and flexibility, which allows it to capitalize on consumer tastes and styles. In this case, Nike designs its products based on the current market tastes and preferences, producing trends that consumers want (Ferguson, 2017). This allows the company to incorporate the innovation aspect of its mission statement by emphasizing continuous improvement in the design of its products through the use of new technologies.
Nike is also highly committed to quality management as it emphasizes quality in its processes and products to ensure customer expectations of quality are met. The company addresses this by adopting quality strategies such as total quality management (TQM) and lean manufacturing in its production and manufacturing processes. TQM is concerned with the overall quality of the organization from its suppliers to customers and is crucial for firms that want to compete globally like Nike as it allows the firm to secure its market share and gives it a competitive advantage by creating value for customers (Yeng et al., 2018). TQM is. On the other hand, lean manufacturing focus on minimizing waste while maximizing productivity during manufacturing.
Productivity is measured by dividing outputs by inputs. In this case, enhancing the ratio of outputs to inputs leads to improved productivity and efficiency. Nike improves productivity by reducing wastage and improving process efficiency to ensure less inputs are used to create outputs or ensure the same amount of inputs are used to create more outputs. The company measures its productivity through single-factor and multifactor productivity approaches. Nike’s OM supports maximum productivity, and various measures are applied to determine productivity levels. The company utilizes measures including revenues per square foot measure in its retail stores, pair of shoes per hour, and items per day to determine inventory personnel productivity (Fugerson, 2017).
Operations management and Project Management
Project management and operations are similar and differ in many ways. For instance, operations management refers to continuous implementation/execution of activities to produce a given result or output, such as products and services in the long-term, leading to business success (Heizer et al., 2017). On the other hand, project management refers to a temporary process of creating products and services. These processes are similar since they are planned, implemented, and executed. They also have resource limitations, and project managers and operations managers must effectively plan and collaborate to efficiently utilize available resources to deliver desired outcomes. On the other hand, these processes are different since operations management is a continuous and repetitive process that helps sustain the business on a daily basis and achieve business goals. For example, operations management at Nike would involve the management of quality, supply chain, and human resources for business success. In contrast, project management is a temporary activity with a beginning and end and leads to the development of unique products/results that has not existed before (Heizer et al., 2017). For instance, project management at Nike would involve installing new production equipment at its manufacturing facilities.
Operations Management Forecasting
Forecasting refers to the process of predicting future events by using historical data. Forecasting can be data-based or subjective (based on intuition), and both methods can be combined using a mathematical model to predict future events (Heizer et al., 2017). Forecasting plays a crucial role since it can help establish how sales and purchase expectations will affect demand, resulting in anticipation of expenses for a given period and informing budgeting decisions. Forecasting also helps in planning, such as ordering raw materials, allocating labor, and pricing.
Nike Inc. Forecasting methods and Practices
Nike utilizes both qualitative and quantitative forecasting approaches. For instance, the quantitative approach the company utilizes is the time-series models that assume the future is a function of the past. In this case, it involves evaluating and analyzing historical data to predict the future. For instance, Nike utilizes the predictive analysis method that involves utilizing the information they have (data) to generate the information they don’t have. The company utilizes Artificial intelligence and machine learning to predict information about the future (Boyd, 2019). This involves utilizing information such as social media data to analyze customer behavior, analyze purchasing data to predict demand and sales, and inform decisions on where to build stores.
Nike Inc. also utilizes associative forecasting models that utilize several variables to forecast items of interest. For instance, the company relies on linear regression analysis to establish relationships between various variables that might influence the number of units to be produced. Nike also utilizes qualitative forecasting methods such as the use of a jury of executive opinion that includes high-level managers, especially regional managers knowledgeable in their respective markets, to inform forecast decisions. The regional managers are crucial since they provide crucial information about the markets, including potential opportunities that inform the firm’s financial and business plans. The company also utilizes market surveys to solicit customer inputs to predict customer needs/expectations and inform product design. Nike utilizes its apps such as the Nike app, Nike training club, and others to collect customer data that is transformed into valuable insights to predict demand/sales and inform designs to produce and items to stock at Nike stores (Boyd, 2019).
Seven Steps in the Forecasting System
The first step is to determine the use of the forecast. Nike uses demand and sales forecasts to drive its production, staffing decisions and determine materials needed and inventory levels. The other step is the selection of items to be forecasted. For Nike inc., items to be forecasted include demand, sales forecast, and consumer purchasing behavior as they determine labor and overall profit. The other step involves determining the forecast’s time horizon, which is weekly, monthly, annual, and bi-annual forecasts in Nike’s case. In addition, the forecasting models used by Nike include time-series models, associative forecasting models such as linear regression, and qualitative forecasting approaches such as market surveys and jury of executive opinions. The fifth step involves gathering data needed for forecasting. Nike gathers data from social media, Nike apps, and other digital channels such as e-commerce sites to help with predictive analysis. The other steps involve making the forecast and validating and implementing the results. After making the forecast, Nike reviews the results to ensure that the methods, models, data, and assumptions are valid.
Forecasting is associated with various ethical issues. For instance, a forecast of increased demand could pressure the organization to violate employee rights. For instance, the demand for labor could lead to child labor, sourcing for cheap labor below the minimum wages, and other problems. Nike has faced various lawsuits associated with child labor, underpayment of employees, and poor working conditions that created ethical concerns for the company. For instance, quality may suffer when the company predicts high demand with limited capacity to meet the demand. In this case, the company understands that product design is its strength. In this case, it outsources and offshores its manufacturing operations. In this case, it utilizes its forecasts to order raw materials and required labor.
In order to address ethical issues, the company developed a grievance process for its employees to ensure they freely raise concerns and receive a response regarding their problems. Also, Nike addressed the working condition concerns by requiring its contractors and suppliers to provide safe, healthy, and hygiene working conditions. The company monitors its suppliers through organizations including International Labor Organization and Fair Labor Association to ensure Nike’s labor standards are maintained.
Forecasting Simulation Lessons Recap
The OM forecasting simulation provided me with various lessons that Nike has mastered well. For instance, one lesson was that utilizing a combination of forecasting approaches such as qualitative and quantitative methods leads to more accurate predictions. Nike applies different forecasting methods from time-series models, associative models, market surveys, a jury of executive opinions, and others to forecast. In addition, I learnt that demand forecasting may not always produce the expected results as demand and customer expectations could change at any moment. In this case, Nike must stay updated with current trends and designs to keep their customers happy.
Operations refer to the activities followed to produce the desired outcome/result, such as products and services. They include normal business functions that are necessary to sustain business and the system as they help achieve organizational goals.
Designs of Goods and Services
Design refers to the combination of company capabilities, knowledge, skills, and materials to convert ideas into products or services. This strategic area is concerned with the design of Nike products such as apparel, footwear, and sports equipment. Nike ensures its OM objectives of designing products that align with the organizational business goals and capabilities is achieved. In this case, it designs products produced through recycling and reusing to avoid wastage and promote sustainability. Nike utilizes advanced technology and innovative capabilities to design products that meet current market preferences.
This is a strategic decision area for Nike’s operations management. Nike’s location strategy aims to optimize costs and efficiency. Considering that the company has manufacturing facilities across the continent, it ensures that its manufacturing plants are located close to raw materials, labor sources, suppliers, and the target market. For instance, Southeast Asia’s sport shows suppliers were selected due to the cost advantage associated with cheap labor in the Southeast Asia region (Ferguson, 2017). Also, suppliers in Europe are due to high market demand in the region.
Human Resource Strategy
The HR strategy is key to realizing Nike’s vision, making it important for the company. Nike maintains HR resource adequacy through labor planning to ensure employment stability and ensure an on-demand supply of labor. In this case, the company conducts regular job evaluations to ensure employee-job fit and fair payment for individuals holding similar positions (Ferguson, 2017).). Nike also provides various employee benefits such as paid leaves and adaptable work time to retain employees and ensure they rest and become innovative. Workers are also trained to improve their efficiency and innovation. Lastly, Nike promotes internal leadership development through mentorship and coaching, giving the firm a competitive advantage.
Annual Report. (2020). Nike Annual Report 2020. Retrieved from https://www.sec.gov/ix?doc=/Archives/edgar/data/320187/000032018720000047/nke-531202010k.htm
Boyd, C. (2019). How Nike Uses Predictive Analytics. Medium. Retrieved from https://medium.com/swlh/how-nike-uses-predictive-analytics-821907a90187
Ferguson, E. (2017). Nike Inc. Operations Management: 10 Decisions, Productivity. Panmore institute. Retrieved from http://panmore.com/nike-inc-operations-management-10-decisions-areas-productivity
Heizer, J., Render, B., & Munson, C. (2017). Operations management: Sustainability and supply chain management (12th ed.). Pearson Education, Inc.
Smithson, N. (2019). Nike Inc.’s Mission Statement & Vision Statement (An Analysis). Panmore institute. Retrieved from http://panmore.com/nike-inc-vision-statement-mission-statement
Yeng, S. K., Jusoh, M. S., & Ishak, N. A. (2018). The Impact Of Total Quality Management (Tqm) On Competitive Advantage: A Conceptual Mixed-Method Study in The Malaysia Luxury Hotel Industries. Academy of Strategic Management Journal, 17(2).