Nike just announced it will launch its new ERP system across its global network this year in a bid to increase inventory visibility and productivity, reports Supply Chain Dive (July 11, 2022). The system is the company’s biggest investment in its digital transformation, and is set to go live in China this month, and in North America in 2024. The ERP system will be “foundational for increasing speed and agility across our supply chain as Nike leans increasingly into direct-to-consumer sales,” says the firm’s CFO. The investment involves shifting its ERP onto the SAP S/4 HANA platform.
The ERP launch comes as the retailer continues to face elevated in-transit inventories and extended lead times to get products to market, issues that the new technology system could be instrumental in tackling. Transit times remain at roughly two weeks longer than pre-pandemic levels and aren’t expected to improve significantly through the end of 2023. In China, the extended transit times and factory closures have left Nike with bloated inventory reserves, with seasonal products arriving behind schedule. The firm says it is “recalibrating” its supply and demand in the region in response to shifting market conditions.
Nike has been planning an ERP overhaul since 2020, part of a strategy to more effectively service online customers and unify financial and inventory views across the company’s ecosystem. As part of the retailer’s acceleration of its direct-to-consumer strategy, the CFO noted that the revamped digital system should help fuel profits in China. “And our ERP is frankly the backbone that’s going to enable us to take advantage of those opportunities at a more significant way,” he said.
As we discuss in Chapter 14, ERP tools can make or break a business — they track and manage inventory, procurement, supply chain and other core business operations. Systems need to efficiently enable massive transaction volumes at global scale. But the enterprise technology landscape is riddled with ERP failures. Waste Management, for example, spent $100 million on its ERP failure. Nike itself is also still somewhat scarred by its 20 year-old reputation as the poster child for bad ERP implementations, having spent $400 million on that earlier failed system.
Classroom discussion questions:
- What are the advantages and disadvantages of an ERP system?
- Why do many systems fail and why are they so expensive?