The Project: An online system that links Nike with manufacturing partners to save time and reduce costs.
The Payoff: In four years, Nike has reduced the percentage of shoes it orders on speculation from 30% to 3%.
Shoe giant Nike Inc. (NKE ) was tired of hedging its bets. For years, the company boosted inventories just to make sure it had the right sneakers on hand. Now Nike is spending $400 million to develop a system with smarts enough to deliver sneakers just in time and at lower costs. Need a new pair of sneaks? Now it's almost as if Nike knows you're coming.
Before the new supply-chain system went into effect, about 30% of the total volume of Nike's footwear orders was based on guesswork. That number has dropped to 3% because of better forecasting and planning. On top of that, the company has been able to reduce the lead times for developing new shoes from nine months to six. Those kinds of improvements are making their way to the company's bottom line. In its fiscal second quarter, the supply-chain efficiencies helped boost Nike's gross margin by 2.1%. With the new system just 75% complete, more gains seem sure to come.
By Stanley Holmes