CIO - Nike Rebounds
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Christopher Koch 12 July, 2004 10:54:58
How (and Why) Nike Recovered from Its Supply Chain Diaster
Too many Air Garnetts. Too few Air Jordans. Nike lost money, time and a measure of pride when its demand-planning
software led it astray. How did it recover? Patience, perseverance and, most important, an understanding of what it
was trying to accomplish in the first place
The limitations of demand-planning software
How a robust business plan can insulate tech execs from blame
Single-instance strategies in a global environment
"I thought we weren't going to talk about i2," growls Roland Wolfram, Nike's vice ...view middle of the document...
It drives Wolfram crazy that while the rest of the world knows his company for its swooshbuckling marketing and its
association with the world's most famous athletes, the IT world thinks of Nike as the company that screwed up its
supply chain - specifically, the i2 demand-planning engine that, in 2000, spat out orders for thousands more Air
Garnett sneakers than the market had appetite for and called for thousands fewer Air Jordans than were needed.
"For the people who follow this sort of thing, we became a poster child [for failed implementations]," Wolfram says.
But there was a lesson too for people who do, in fact, follow "this sort of thing", specifically CIOs. The lesson of Nike's
failure and subsequent rebound lies in the fact that it had a business plan that was widely understood and accepted at
every level of the company. Given that, and the resiliency it afforded the company, in the end the i2 failure turned out
to be, indeed, just a "speed bump".
CIO - Nike Rebounds
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The i2 Failure: Tactical or Strategic?
Nike's June 2000 problems with its i2 system reflect the double whammy typical of high-profile enterprise computing
failures. First, there's a software problem closely tied to a core business process - in this case, factory orders. Then
the glitch sends a ripple through product delivery that grows into a wave crashing on the balance sheet. The wave is
big enough that the company must reveal the losses at a quarterly conference call with analysts or risk the wrath of the
US Securities and Exchange Commission, shareholders or both. And that's when it hits the pages of The Wall Street
Journal, inspiring articles and white papers on the general subject of IT's hubris, limitations, value and cost.
The idea that something so mundane as a computer glitch could affect the performance of a huge company is still so
novel that it makes headlines. But what doesn't usually enter the analysis is whether the problem was tactical (and
fixable) or strategic (meaning the company should never have bought the software in the first place and most likely
won't ever get any value from it). The latter is a goof worthy of a poster; the former is a speed bump.
Nike claims that the problems with its i2 demand-planning software were tactical and therefore fixable. It was too slow,
didn't integrate well, had some bugs, and Nike's planners were inadequately trained in how to use the system before it
went live. Nike says all these problems were fixed by northern autumn 2000. And the company asserts that its
business wasn't affected after that quarter. Indeed, at press time, Nike had just announced that its third-quarter 2003
profit margins were its highest ever.
If there was a strategic failure in Nike's supply chain project, it was that Nike had bought in to software designed to
crystal ball demand. Throwing a bunch of historical sales...