Broker Check

How Nike is Solving the Supply Chain Issue

July 29, 2022

In the past couple years we have all undoubtedly been impacted by the disrupted supply chain. Whether that was waiting for a car, a couch, appliances, or even trying to get simple products at the store, we’ve had to wait. I think I could speak for a lot of us when I say when 2020 rolled around, I thought by halfway through 2022 the supply chain would be fixed and working like it did before 2020, well I was very wrong. And not only was I wrong until this point, but we might be looking at years more of lingering issues throughout the supply chain. It will get better over this time, so it isn’t all bad. But, it will still be a work in progress throughout the remainder of 2022 and in 2023. 

We know as consumers it has been annoying. But there isn’t much we can do other than be patient. However, companies can take initiative and try to ease these issues. So what are they doing? 

For the most part, every company is dealing with the same issues and in general are trying to go about solving them the same ways. Instead of the model of having the fastest and cheapest supply chain they could have, they are starting to shift to how do they have the most flexible and resilient supply chain. Even if that costs a little bit more. They are doing so by investing in the technology needed to have the most in-depth data they could possibly have. This technology includes investments into AI, Robotics, 5G, cloud technology, amongst others. And on the physical side of things, they are working to diversify where their supply chain is located. A lot of companies are trying to find ways to move some of their supply chain away from China and other cheap labor countries that are seemingly more susceptible to disruptions in their production due to forces outside of the company's control (Covid, Government Policy, etc). 

With the increase in tech adoption and investment, and the movement of physical supply chain locations, companies are hoping to be able to mitigate the issues they have had over the past couple years. 

There is seemingly one company that is a step ahead of everyone else. 

That would be, Nike. 

The shoe and clothing brand that we all know and undoubtedly own something from has been a pioneer of the exact investments and adoption that I touched on above. Whether it was having the foresight to identify the issues at hand before they happened, or just being faster to adapt to them, they are setting the example of how companies should implement their supply chain. 

How are they doing so? 

The biggest shift Nike has made has been implementing a digital first, direct to consumer strategy for their company. To do so, Nike invested heavily into technology to see every single part of their supply chain and operations in more detail than they’ve ever had before. What this allows them to do is be able to make decisions significantly faster with more effectiveness on where their focus should be and what parts of their supply chain they need to provide extra attention to as well as what is working well for them. They’re able to shift their supply to areas that need it most. Using AI and machine learning (collecting data),  they’re able to predict consumer trends before they even happen, putting them in the right place at the right time. 

An additional factor, and why their model has been really working, is the shift to direct to consumer. Instead of using a middle man of warehousing products and third party retailers, Nike has been able to build out their websites, apps, and Nike owned stores to be more efficient in reaching consumers. This is something that is very difficult for brands to do and takes a lot of investment in doing so. Because now instead of relying on buying your Nike shoes at a different store, you now go directly to them. Which is different from the model that has worked for a very long time. But, things change and Nike is finding themselves on the front line of that change. 

Their technology advancements and direct to consumer model will push growth in the coming years. 

What does this mean for us as consumers? 

Regardless of what companies can do in the short term, we will still feel the effects of a disrupted supply chain for some time. However, I think it is fair to say that we can expect more companies trying to take a similar approach to Nike’s. If they are able to, the way we shop will continue to evolve. We will shop directly from companies instead of going to third party retailers like we are used to. Ultimately, it may even bring down some costs for us as consumers. As well as provide companies with a better supply chain so we should see less disruption like we have the past two years in the future. It will definitely take companies some time for this type of transition, but the more efficient they are able to be the better off we are as consumers.