Nike operating dilemmas as they try to outsource their factories. As you already know or nor Nike has outsourced their manufacturing plants in China and Taiwan for the past decade. The cheap labor and great cost cutting ability was a no brainer for Nike to outsource their operations oversea. It has been a great run that had to come to an end. With China and Taiwan booming with business as a result of importing ten times lesser than exporting their economy has flourished.
Nike had to make the decision to move to another third world country to produce their goods and products. The next stop Vietnam, where they would have their products made.
However in the past five years their operations in foreign countries in China, Taiwan and Vietnam and surfaced their poor labor management of their factories. Dubbing Nike with the sweatshop operations of the 21st century. Nike has gain a horrible reputation and their sales have sloped for the past few years.
Documentary has surfaced of workers being miss treated and asking CEO of Nike to help. Nike operations have been hit hard and CIO of the company has been frantically trying to fix the mess they have caused. The labor rules in Vietnam are not as strict as it is in America. Nike has tried to employ independent factory, which was their first mistake. Many of the independent factory owners bought used and harmful equipment from third parties where they modified the safety shutoff.
Why? To be able to mass-produce product without stopping. This caused many injuries that were not reported to Nike because they were independently owned. The average wage in Vietnam for workers is about $2 a day or 40,000 dong. Nike workers in Vietnam made $2 more than the daily wage making about $100 in a month.
Nike operation was not just devastating to the company because of the sweatshops. Nike had a huge jump in defective goods reaching American buyers. Especially there most notable brand the Jordan brand that brings in $500 millions in revenue a year for Nike nearly half their revenue. Nike has failed in the new operations management in a new country. Their number one selling product line is even has defect reaching America. The Jordan brand had retro shoes released in limited quantities hyping up the buyers and sneaker heads everywhere.
Nike with all their experience in China and Taiwan should have seen this entire coming and had it in their management strategy and mission of their company to promote their product. Their operations management team has failed in every way. The CIO of the company has been frantically trying to make a change however there number one product line has hit an all time peak in sales with many of their products being defective.
Do you think if Nike had better strategies their operations plan in Vietnam their sales would have doubled or triple for the past few years?
The sales in there Jordan Brand has not fell even with all the defects. If Nike could have improved their Operations management team in Asia and Vietnam I feel they could have increase their reputation and sales of their company as a whole.
http://news.bbc.co.uk/2/hi/business/7324242.stm
http://www.cio.com/article/32334/Nike_Rebounds_How_and_Why_Nike_Recovered_from_Its_Supply_Chain_Disaster
http://talk.onevietnam.org/nike-factory-in-vietnam-source-of-jobs-or-evil-sweat-shop/
http://www.nytimes.com/1997/11/08/business/nike-shoe-plant-in-vietnam-is-called-unsafe-for-workers.html?pagewanted=all&src=pm