Welcome to our countdown of the top 25 supply chain performers as assessed by our analysts. Gartner supports businesses in optimizing their supply chain management, and our list aims to share teachable achievements to support our community.
In the last article, we explored the effective supply chain management of HP Inc. and Dell Technologies, two leading technology companies. In this article, we discover how numbers 13 and 12 on our list, Inditex and Nike, run their supply chain to develop their incredible business success.
Inditex has earned the title of being the one to beat in supply chain digitization, delivering a benchmark of efficiency and transparency through fashion retail supply. Inditex is the company behind Zara and Massimo Dutti, some of the most successful fashion retailers worldwide, partially due to their ability to forecast demand and match its supply.
Our advanced modern world adapts its needs fast, and it’s no different for fashion trends, where retailers must predict the future expectations of customers and get these new garments to stores as soon and as cheaply as possible. A natural indicator of the Inditex supply chain success has been their financial performance which has grown by over ten percent annually between 2007 and 2016. Digitization was critical to Inditex meeting future consumer demand and establishing relevance in their brands – so let’s look at what led them to success.
Radio Frequency Identification
Inditex utilized radio frequency identification (RFID) in their quest to digitize its supply chain in 2014, which allowed them to identify individual garments through radio waves. Through a more practical lens, they installed RFID equipment in the safety alarm of clothes, enabling them to track when garments leave Inditex stores. So, instead of relying on delayed sales processes and inaccurate metrics, they could see which items needed to be restocked in real-time and order more in one swift action to their stockroom.
Arguably more important, RFID provided Inditex with valuable and immediate data on the popularity of garments, which they fed to their production and fulfillment systems. Inditex could produce more items in high demand and less of the lower demand items, maximizing revenue and minimizing waste.
The Impacts of Digitization
The benefits of this innovative system are immense and filter into other aspects that meet the overall business strategy and performance. Inditex can now control its inventory more efficiently for its warehouses and stores, as well as the delivery and unloading processes to reduce manual labor time.
The customer experience is also improved as the system instantly identifies a piece of garment requested by customers, which is immediately sent to the store or directly to the customer. Finally, perhaps the most substantial benefit to the brand’s reputation is the RFID’s ability to predict future trends from what is currently popular– they can then create and deliver these clothes to stores in a matter of hours.
Needing no introduction, Nike is one of the most popular brands in the world and is an influential business to both their customers and peer organizations. Deep below the millions of shoes that customers purchase each year lies a thoroughly managed and optimized supply chain – which played an enormous role in the success of Nike.
Independent and Diversified Suppliers
Outsourcing and diversification are critical to the success of the Nike supply chain, and they don’t hold back with it either. Independent suppliers complete Nike’s entire manufacturing of shoes and clothing. Of course, this system opens the door to disconnection, which Nike combatted through effective management – their supply chain team places continuous effort in managing the logistical complications expected with outsourcing.
From the beginning, Nike has mitigated the risk by spreading their supply evenly across over one hundred factories, with no supplier accounting for more than nine percent of the production. By sharing the responsibility, they’re not reliant on any single factory, which means that if issues arise, they have many other suppliers to support the demand for their products.
This broad supplier list presented an issue of quality control and visibility, so Nike has again combated the problem with impressive communication systems. They provide support through tools and initiatives and train their suppliers in their lean management framework to ensure suppliers operate at a uniform standard.
Nike’s movement to progress their corporate social responsibility was visionary in a sense and impacted the engine of their operations. Nike has structured its supply chain strategy to prioritize suppliers that demonstrate innovation in creating fair factory work conditions and sustainability. Nike has backed up their social responsibility by being the first apparel organization to publish a list of its factories to communicate the conditions in its supply chain.
The effects of social responsibility in a supply chain are vast. Firstly, it’s ethical, and something companies should strive for to create a fairer society for all. It also improves their reputation among consumers and partners, and while that impact is hard to measure, it indirectly increases their revenue and profitability over time. Another effect of social responsibility is adapting processes before regulation breaches impact their production. By being a leader in sustainable operations, Nike can ensure its operations meet current and future corporate requirements.
Nike’s three-part supply chain organization has facilitated the growth that has made them the giant they are today. Outsourcing minimizes costs, diversification mitigates risks and maintains agility, and social responsibility reduces manufacturing impacts in the environments that keep them functioning. The successful implementation of these strategies has made the Nike supply chain one to watch for years and is partially why they’ve earned the 12th position on our list of top performers.