As it looks to break out of a deepening sales slump, Nike is targeting greater supply-chain flexibility by producing goods closer to home and using more manufacturing and distribution partners.
The sportswear and sneaker company wants to make its supply chain “more flexible, more responsive and more efficient,” COO Venky Alagirisamy said during a meeting with employees on October 2.
This includes “shifting away from owning a large part of our fulfillment and distribution network that we have done so for the last 50-plus years,” he said. Nike is instead moving into a model where it can “leverage partnerships.”
The company is also looking at more “nearshore sourcing” for North America and the region that includes Europe, Africa and the Middle East, Alagirisamy said. “There are very aggressive plans to make that happen and our teams are working very hard in this moment to accelerate the journey.”
He said that existing production countries such as China and Vietnam “will continue to play a significant role.”
Alagirisamy spoke alongside CEO Elliott Hill and other executives at Nike’s first meeting with workers after announcing a new round of streamlining. The new plan includes consolidating the company’s geographic regions and reducing headcount.
Nike is under growing pressure to prove it can recapture the growth it was once known for as competition heats up and shoppers become more selective amid rising prices.
“This is not a new strategy,” Mary Remuzzi, Nike’s senior vice president of corporate communications, said, adding that actions across the company’s strategic plan are “designed to improve our responsiveness to consumer demand.”
The plan is helping Nike to develop products more quickly and the company will “expand and strengthen” its relationship with partners, she said, as Nike targets sports such as running and basketball.
In April, Nike said it would make changes to operations including “optimizing our supply chain footprint” and “strengthening our partner and supplier relationships.”
During Nike’s earnings call on October 1, Hill said management would offer greater details on turnaround plans during an investor day in November. The company reported weaker-than-expected sales for the latest quarter and gave guidance that disappointed investors.
Hill, who turned 63 on Friday, acknowledged employees’ concerns about potential layoffs: “You’ve seen the market’s reaction and I know it raises a lot of questions about our performance and the choices. And I’ll say this, those questions are fair.” He reiterated that the new plan “does mean that Nike’s going to have less roles.”
The CEO said that Nike’s renewed focus on sports is paying off, but that part of the business “is not yet big enough to offset the challenges that we’re seeing in Nike sportswear business, the Jordan brand, and of course Greater China.”
The company is looking to expand its success with so-called performance products to other parts of the company, he added.
