Implementation Strategies
There are four main strategic scenarios from which Nike can choose when considering how to improve its sustainable manufacturing. The first option is the “Big Bang” approach – in this case, the change is implemented simultaneously in the whole company, and all processes are revised at the same time (Jeston, 2018). The main benefit of this strategy is the speed of change, as all parts of the company will adopt the new process plan at one time. However, this action also has a major drawback, as the sudden and significant change poses a high risk of business disruption.
In the case of Nike, the cons of this scenario greatly outweigh the potential advantages. The company has many manufacturing plants that operate internationally. Moreover, they have to supply a consistent stream of products for Nike to sell from its own online and offline locations and distribute to resellers. Thus, any type of disruption in the process and any mistake in one plant can put pressure on other manufacturers or completely halt the production, leading to massive losses.
The second scenario is “Parallel,” a strategy where the company introduces the change step-by-step, although each location starts its own process before the previous ones are finished elsewhere (Jeston, 2018). In this case, Nike can use the information received from some plants to make adjustments to the next stages of the implementation. Nevertheless, the overseeing task will be incredibly complex, with managers having to exchange information and review the strategy in real-time constantly. This issue may affect the process of change, especially in the beginning, when Nike’s first manufacturing plants start optimizing their process for sustainable manufacturing.
In contrast to parallel implementation, the “Relay” scenario suggests completing changes in sequence, waiting for each small project and step to finish before starting the next one (Jeston, 2018). Using this strategy, Nike can use the information learned from previous actions and take its time to improve each subsequent implementation. For example, a roll-out at the plants in one country may experience problems with time or the number of workers needed to complete and oversee the project properly. Nike may capitalize on this knowledge before moving onto the next step. However, such an approach will take significant time, and Nike may lose momentum among consumers and other stakeholders interested in supporting the change.
Finally, the last possible strategy is “Combination” – Nike can use parts of each method and adapt it to its needs in regards to the speed and size of the implementation (Jeston, 2018). Here, the main advantage is flexibility, as Nike can choose how it will approach the process at every stage. Nike is an international company with a great number of manufacturing plants. Thus, it requires a tailored approach that balances the speed of the implementation and allows Nike to try out the new strategy before committing to it fully.
Based on the descriptions of all strategies, a combination scenario seems the most useful for this particular case. For example, Nike can take advantage of an approach that many companies moving into sustainable manufacturing choose. At first, it may start with a relay or a parallel process and implement the new method in a small number of selected plants. Then, the business will collect all information about the implementation process and results and appraise its success. After a series of implementations that do not pose a disruption risk, Nike can move into the big bang phase and complete the changes in other parts of the company.
To succeed, the corporation requires significant planning and management communication. First, it is vital to choose the manufacturing plant for the first step of the process. This place should possess the qualities of the majority of Nike’s locations. Moreover, it should have a robust executive team that would collect data and interpret it for future steps.
During the initial phase, information collection will play a major role in the outcome of the last big bang transformation. After the first step is completed, the preparation for the big change will require more staff and managers to focus their time and energy on the change. Thus, new channels of communication may need to be established to ensure that all manufacturers are on the same level of understanding, and their results are collected by Nike at the same time.
Establishing Baselines
As noted in the previous part, the two major areas of change for sustainable manufacturing are the materials used for goods production and the optimization of the manufacturing process. The measurements have to represent what Nike has used to make its products and how they managers resources, with a specific focus on environmental preservation. Therefore, the first suggested metric is the volume of recyclable waste that is used in the creation of footwear and apparel in the designated period.
This metric serves two purposes – first, it demonstrates to the company’s analytics how much waste they can anticipate requiring for each plant. This would determine the volume of recyclable material that the company needs to source from within its plants or other sources, such as bottles harvested from landfills and waterways (Nike Purpose, 2020). Second, this number is a potential marketing feature that would help Nike present its achievements in the annual report. The data for this metric should come from the results of the manufacturing process; it can be presented in kilograms to show how much resources were utilized transparently. The more recycled materials Nike uses, the more environmentally conscious its manufacturing process is.
The next metric deals with water use – an essential part of any manufacturing process and a precious resource that is at the center of many discussions concerned with the environment. Nike currently presents this measurement as a difference between past and current year’s volume of used freshwater. By considering this number, Nike can demonstrate how it has optimized the production of goods by reducing the use of valuable and finite resources such as freshwater. Billions of liters of water are used every day, and the consumption of water is considered wasteful as it does not return to the ecosystem without losing its quality (Kishawy et al., 2018). Thus, this metric is vital for demonstrating Nike’s commitment to minimize interference with the environment.
Finally, to showcase Nike’s goals of sustainability in energy consumption, Nike can measure the emissions from each plant and present the overall change in carbon emissions and energy consumption, calculating the overall carbon footprint. Carbon footprint is calculated as the total weight of CO2 produced as a result of the manufacturing process (measured in kgs).
Nike should aim to reduce its carbon footprint as it is directly related to sustainability and environmental conservation. Apart from the overall carbon footprint, the company can also find the average footprint of every plant and every type of goods produced. In this case, Nike can use this number to determine which of the manufacturing locations are more successful in lowering the number and analyze the underlying reasons for their results.
Case Analysis
In the case of ABC Tire Company, the firm wanted to decrease the labor cost per tire and increase the profit from each tire by 5%. The progress of the change project was tracked using several measures, including the total number of sold tires, material and labor costs, and profit and retail per tire. The difference between numbers before and after their project can be seen in Table 1 below, and the calculations are explained in the next paragraph.
Table 1. The Results of ABC Tire Company’s Project.
To calculate the material cost per tire, one has to divide the total materials’ cost by the total number of sold tires – $533,450 / 27,669 = $19.28. Then, the labor cost per tire is determined by dividing the total labor cost by the total number of tires sold, $397,555 / 27,669 = $14.37. The profit for each tire is the difference between the retail price and the costs for materials and labor, which are calculated as such: $122.13 – $19.28 – $14.37 = $88.48. The increase or decrease are found by subtracting the original number from the new number. Then, this difference is divided by the original number and multiplied by 100 to show the percentage. Below are the calculations for:
- Materials cost per tire: ($19.28 – $21.23) / $21.23 * 100 = -9.19%
- Labor cost per tire: ($14.37- $12.67) / $12.67* 100 = 11.05%
- Average profit per tire: ($88.48- $85.10) / $85.10* 100 = 3.98%
As can be seen from the numbers, ABC Tire Company successfully decreased the cost of materials per tire by more than 9%. However, the cost of labor also increased by 11%, which is a larger increase than the money the company saved on materials. Thus, ABC Tire Company could not complete its first goal of reducing labor costs – in fact, the company has lost a significant amount of money in this category. Lastly, although the final average profit per tire has improved by almost 4%, it is insufficient to reach the firm’s goal of increasing profit by 5%.
It is likely that the project was unsuccessful due to the change in labor cost. If ABC Tire Company retained its previous labor cost, it could have reached its second goal and increased the overall profit. However, cheaper materials could have complicated the process of tire production, requiring more workers or more time. An increase in wages and other changes in the local economy could also play a role in this result. It is vital for this and other projects to ensure that the baseline data is accurate. Otherwise, the company may see a drastic positive or negative change in its results, which may skew future plans for improvement.
References
Jeston, J. (2018). Business process management: Practical guidelines to successful implementations (4th ed.). Pearson.
Kishawy, H. A., Hegab, H., & Saad, E. (2018). Design for sustainable manufacturing: Approach, implementation, and assessment. Sustainability, 10(10), 3604. Web.
Nike Purpose. (2020). Manufacturing sustainably. Web.