Logistics Assignment Analyzing Effectiveness Of Nike’s Transportation Capability

Question

Task: Select a company and write a report on logistics assignment critically analyzing the effectiveness of transportation capability of the company.

Answer

Introduction
Purpose
The key purpose of this logistics assignmentis to identify the key transportation goals, needs, transportation capability effectiveness in context to Nike. Based upon the three aspects including Incoterms selection consideration, Carrier selection criteria, and Carrier relationship management some recommendations are provided for building better relationships and enhancing the transportation issues by selecting appropriate income and criteria for selecting a carrier.

Key information about Nike
The main products of Nike are activewear, footwear, and lifestyle products for men and women both. The total revenue of Nike is about 95% through six key categories including NIKE Basketball, Running, Football (Soccer), the Jordan Brand, Sportswear, and Training.The main target market of Nike is the athletes from all over the world. Nike also manufacturesits products for general people and sports enthusiasts. The competitors of Nike are Adidas AG and Under Armour. The organizational goal of Nike is to bring innovation and inspiration to all athletes in the world. The business strategy of Nike is defined as clear, invest brand-building through sports celebrity endorsements, emotional marketing and, developing products with market-leading technology and high-quality and buying out competing sports brands.

Incoterms selection consideration
Analyzing the effectiveness of Nike’s transportation capability
The main attraction of Nike's supply chain and distribution process is a direct-to-customer policy. Nike has different distribution centers all over the world and from those locations, the company sends its products to the doorstep of the customers. This strategy is known as Nike Direct in which both their physical stores and online platforms are included. Nike’s Consumer Direct Offence Strategy is mainly focused on digital business(Bowman, 2019). The company is planning to emphasize both of their supply chain strategies to boost its profit margin in upcoming days. The main catch of Direct-To-Customer (DTC) sales are that it creates a direct connection with the customers which offers improved customer service (Supply Chain, 2018). DTC sales bring a company closer to their customers which benefits both of the bodies as it helps the company to understand what their customers want from then and from the customer's perspective, they get what they want.

Nike is trying to reduce the lead time from 60 days to 10 days by bringing change to their logistics network (McKevitt, 2017). Through the implementation of automation manufacturing machines, Nike is trying to reduce the total time needed from manufacturing to delivery of their products. Upon manufacturing the products, Nike delivers its products to 67 distribution centers outside the US throughout the world as per the 2018 data (Singh, 2019). The company is trying continuously to expand its sales channel to direct-to-customer (DTC) sales. Currently, in DTC sales, Nike is lagging behind other competitors like Under Armour and Adidas. Nike needs to work a considerable amount in its DTC sales to improve in upcoming days. Currently, the majority of the revenue comes from wholesale business. Currently, as compared to other companies like Adidas, Reebok, Under Armour, the profit margin of Nike is still low. Products that are not sold from DTC sales go to the secondary outlets from Nike’s wholesalers (Jacobs, 2015). These secondary outlets include second-hand stores, salvage dealers, thrift stores, and value retailers. The products (mainly shoes) which are returned by the customers to Nike through reverse logistics do not match Nike’s retail standards and also end-up reaching these second-hand outlets.

Recommendation
The main area in which Nike needs to work is in its DTC sales.In the case of Nike’s business, product FCA (incoterm) is used for all transportation activities as for any loss due to delay or failure in the transportation of goods, Nike is not responsible for that. The first step will be increasing the number of distribution centers and wholesaler outlets of Nike in all over the world. This will help the company to deliver products much quicker to its customers. A DTC sale always brings the customers towards the company and Nike needs to use that in the first place. Direct customer-focused sales can help the company to improve its overall sales. Secondly, the company needs to work on its digital platforms to boost their online sales. Through its wholesale distribution centers, Nike can deliver their products to their customers’ doorsteps using logistics. This can hugely boost its sales to a great extent. To fulfill both of these situations, Nike needs to open new distribution centers all over the world especially to those markets where they are less popular and do not have multiple distributing centers.

Carrier selection criteria
Analyzing the transportation goals and needs of Nike
Choosing the right carrier for the transportation of a company’s products is crucial as it determines the cost of the products, delivery time, quality of service, and many other factors. Shipping partners have a great influence on the day-to-day operation of a company. Nike is constantly trying to reduce the time of delivery of their products to their customers and the right transportation method can help Nike to achieve their goals.

Time
Time is one of the most important factors when choosing the right transportation medium for a company. Transporting products through the air makes the transportation process quickest among other alternatives like waterways or by car (Bison, 2018). However, transporting products through the air from one continent to another is the best option, but when it comes to local transportation, companies only available transportation method is through the car. Transportation through waterways takes a significant amount of time to transport products from one continent to another.

Cost
The cost of transportation is another important factor as transportation through the air is the costliest option where waterways are a more convenient option for Nike to transport their products from one continent to another. Transportation through cars is the least costly option among all other alternatives and companies choose trucks to transport products from one location to another whenever possible to save money (Lyu, Chen & Wang, 2019).

Limitations
These transportation mediums have their limitations like transportation through ships is also possible when there is a waterway available and it is cost-efficient (Pillai et al. 2018). One the other hand, transportation by cars is only possible within a continent where roads are available. There are other factors like safety, carrier capacity, stability when choosing the right transportation medium for Nike. It would be best for Nike to choose transportation by car if available and otherwise they should go for the waterways while transportation of their products from one continent to another to reduce the cost of transportation as much as possible.

Figure: Nike Just Trade
(Source: wwwkunlastree, 2019)

Figure 2: Nike distribution model
(Source: wwwkunlastree, 2019)

Recommendation
As per the recommendation the safety procedure needs to be enhanced for reducing any case of accidents. The carrier needs to be selected by considering the safety factor, which can further build a better supply chain image in the market and increase the overall sales. Identifying the LOS rates or level of services needs to be identified. Choosing the carrier by considering its stability is another factor, which is crucial. Stability in the market can maintain continued service followed by the needs of business transportation. Using electronic logging devices (ELDs) can be useful for maintaining safety in the chosen carrier. Choosing the carrier by considering the delivery time, quality, and pricing is extremely important. Choosing the least expensive carrier can ruin the delivery time and sacrifice the quality. So, analyzing the needs of the supply chain and the existing business type of Nike is necessary for narrowing down the options and choosing the best fit carrier for Nike to get multiple services.

Carrier relationship management
Analyzing the transportation goals and needs of Nike
Long-term relationships are built in the organizational structure of Nike to meet with the standards, the quality, and maintain sustainability. The mutual respect and having trust in the carrier companies including third parties are supporting for creating the product with more responsibility, better serving athletes, and accelerating innovation (Blos, da Silva & Wee, 2018). On-time delivery and quality maintenance is the priority for Nike as per the carrier management. The approach of building strong relationships with the carrier companies are further useful for supporting better outcomes for strengthening the supply chain management standards. Addressing an issue in the existing carrier policies are sorted out through some social compliance program to meet with a sustainable strategy. The present Fair Labor Association Reaccreditation Report analyzed different terms of standards to meet through the carrier service to its end-user of Nike.

Continuous improvement is the key to delivering the product on its expected delivery is the key priority by the shipping company. Having a strong relationship with the carriers and Nike can be cost-effective and facilitate the continuous operating service. As a result, the carrier can meet with Nike’s customer service and logistics efficiency as per their standard. Keeping promises and being loyal to showing respect are the key affirmations for building trust. The existing carriers of Nike are getting paid on time and correctly with efficiently utilizing the time of drivers and quickly resolving claims by which the consistent load promises get fulfilled. Invoicing the carriers on time and with accuracy are the key aspects of Nike to provide a consistent exceptional level of service. Load denials and acceptance are identified through proper monitoring to resolve any claims on time for continuous delivery by focusing on the accuracy (Logistics Viewpoints, 2017). Monitoring the damages and claims handling is making the carrier of Nike more viable for meeting with supply chain management. The delivery performance on-time, quick resolving of discrepancies, and accuracy of billing are taken into account. Performance monitoring with shippers and carriers and strong relationships get built.

Recommendation
Technological advancement is the key to making the carrier relationship get more strengthened. Technological advancement can manage the carrier relationship with Nike through transactional information capturing. The collected data can be useful for identifying accountability levels through Transportation Management Systems (TMS). TMS is highly useful for gathering the transactional information and capturing the transport process data for providing high visibility levels in the supply chain (Clark, 2018). Identifying the shipping transaction history is necessary for understanding its paying per lane. Proper benchmarking of each carrier against one another is recommended for establishing an acceptance service at its minimum level. Nike needs to introduce the analytics at the fingertips. Management empowerment can be done through Carrier scorecards for making better decisions and information to improve the behavior as per the results. Carrier scorecard can identify the accessorial total freight percentage, spending per lane, per carrier, and per mode, better claims handling, and damage monitoring.

Conclusion
From the above study, it has been concluded that the transportation and shipping carrier of Nike plays a huge role in Nike. The footwear, activewear of Nike is high-quality and involved in all levels of activity with a global existence. The proper way of transportation plays a huge role in a company’s supply chain management operations. A prompt service makes the business operation easy but also takes a good amount of cost. Today in this global market, companies use different means of transportation such as transportation by car, ship, or air as per the demand. To focus more on the DTC sale, Nike has to choose different transportation mediums based on the situations to reduce cost and time of transportation without damaging the product during the transportation process. On-time payment, identifying the load denials, relatability is the key to maintain the strong relationship between Nike and carriers. Transportation Management Systems (TMS), benchmarking each carrier and Carrier scorecards are the key recommendations for improving the transportation capability to enhance the supply chain management.

Reference list
Bison.(2018). 8 TIPS FOR CHOOSING THE RIGHT SHIPPING CARRIER. Retrieved on: 7 August 2020 from:
https://blog.bisontransport.com/8-tips-for-choosing-the-right-carrier Blos, M. F., da Silva, R. M., & Wee, H. M. (2018). A framework for designing supply chain disruptions management considering productive systems and carrier viewpoints.International Journal of Production Research, 56(15), 5045-5061. Retrieved on: 7 August 2020 from: https://www.researchgate.net/profile/Hui_Wee/publication/323522765_A_Framework_for_Designing_ Supply_Chain_Disruptions_Management_considering_Productive_Systems_and_Carrier_ Viewpoints/links/5b67fd7d45851584787f20d1/A-Framework-for-Designing-Supply-Chain- Disruptions-Management-considering-Productive-Systems-and-Carrier-Viewpoints.pdf Bowman, J. (2019).Nike's Consumer Direct Offense Is Paying Off.Retrieved on: 7 August 2020 from: https://www.fool.com/investing/2019/12/22/nikes-consumer-direct-offense-is-paying-off.aspx

Clark. D. (2018).The Importance of Carrier Relationship Management.Retrieved on: 7 August 2020 from: https://www.foodlogistics.com/transportation/blog/20999484/the-importance-of-carrier-relationship-management Jacobs, D. G. (2015).Practical example of base source optimization: footwear profiling at Nike, Inc. Retrieved on: 7 August 2020 from: https://dspace.mit.edu/bitstream/handle/1721.1/99003/921182824-MIT.pdfsequence=1

Logistics Viewpoints.(2017). The Importance of Data in Managing Carrier Relationships.Retrieved on: 7 August 2020 from: https://logisticsviewpoints.com/2017/12/14/importance-data-managing-carrier-relationships/

Lyu, X., Chen, H., & Wang, N. (2019, February).An Iterative Request Exchange Mechanism for Carrier Collaboration in Less than Truckload Transportation.Logistics assignment In ICORES (pp. 299-306).Retrieved on: 7 August 2020 from: https://www.scitepress.org/Papers/2019/73686/73686.pdf

McKevitt, J. (2017). Inside Nike's plan to cut lead times from 60 days to 10.Retrieved on: 7 August 2020 from: https://www.supplychaindive.com/news/nike-lead-times-innovation-automation-consumer/508606/

Pillai, A. S., Menna, R., Jacob, S., Bandyopadhyay, S., Subbiah, S., Varughese, V., &Benedek, Z. (2018).U.S. Patent Application No. 15/697,119.Retrieved on: 7 August 2020 from: https://patentimages.storage.googleapis.com/82/f7/a7/65f23be8c79991/US20180068269A1.pdf

Singh, A. (2019). Nike Manufacturing and Supply Chain Strategies. Retrieved on: 7 August 2020 from: https://marketrealist.com/2019/10/nike-manufacturing-and-supply-chain-strategies/

Supply Chain. (2018). From Factory to Footwear. Retrieved on: 7 August 2020 from: https://supplychainx.highjump.com/nike-supply-chain.html

wwwkunlastree. (2019). Nike Supply Chain Map. Retrieved on: 7 August 2020 from: https://wwwkunlastree.blogspot.com/2019/02/nike-supply-chain-map.html