Just Do It: How Nike Turned a Supply Chain Crisis into Opportunity

Nike's response to a supply chain crisis repositioned it as a sustainability leader, and raised the bar for an entire industry. 
Bushra Tobah September 25, 2017

One Company's Unprecedented Disclosures Raised the Bar for an Industry

In April 2005, Nike surprised the business community by releasing its global database of nearly 750 factories worldwide. No laws required the company to disclose the identity of its factories or suppliers. Yet, between the early 1990s and 2005, Nike went from denying responsibility for inhumane conditions in its factories to leading other companies in disclosure. This response to a supply chain crisis was a strategic shift. This shift illustrates how a firm can use transparency to mitigate risk and add value to their business.

Making the Shift toward a Sustainable Supply Chain

David Doorey (York University) conducted a case study of this transformation, drawing on interviews with company executives, industry professionals, and representatives of unions and NGOs involved in the push for factory disclosure. In the early 1990s Nike executives began to see reports of abusive labour conditions in their supplier factories as a risk to their brand image. Nike’s traditional line denying responsibility for conditions in these factories no longer satisfied a growing number of customers. On top of that, media images of children sewing Nike soccer balls and running shoes sent social activists, academics and journalists into a costly anti-Nike campaign.

Nike leaders realized they were facing a supply chain crisis. They needed a new strategy to deflect the growing criticism and improve their suppliers’ performance. Starting with the creation of a new labour practices department, Nike introduced a series of changes to enable better monitoring of sources of risk associated with suppliers’ labour practices. These changes included:

From Supply Chain Crisis to Sustainability Leadership

These monitoring and enforcement systems created confidence internally, which was necessary before releasing the list externally in 2005. Nike turned this unprecedented response to its supply chain crisis into a lucrative marketing opportunity that outweighed competitive risks associated with factory disclosure. It advertised its new transparency as evidence of its new commitment to labour practices. In fact, the company turned its full disclosure into a badge of honour among the apparel industry.

Seeing the success that Nike enjoyed from this move, many of Nikes competitors disclosed their factory lists, including Levis, Timberland, Puma, Adidas and Reebok.

Better Strategies for Supply Chain Management

What can other organizations take from Nike’s experience to avert their own supply chain crisis? Companies should replace defensiveness with a proactive strategy that uses code monitoring and enforcement — and eventually full disclosure — to their advantage.
Doorey, David J. (2011) The Transparent Supply Chain: from Resistance to Implementation at Nike and Levi-Strauss. Journal of Business Ethics, 103, 587-603.

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