Nike's operations team has found a way to reduce lead times by 83.3% by combining various process and technology innovations.
The brand is responding to consumers' demand for the availability of more choice while shopping which requires a full supply chain transformation.
The reason is switching to a direct-to-consumer model means upturning how the design-to-market cycle operates in the first place.
In the past, Nike's product cycle began with a "futures order" months in advance. This would then prompt more than 1 million workers at 566 factories to produce an estimated 1.3 billion units and ship them through 75 distribution centers to more than 30,000 retailers in 190 countries.
But now, the company seeks a business model where "consumer demand is our signal to anticipate and demand," COO Erik Sprunk told investors at Nike's 2017 Investor Day. "To make this shift, we're digitizing our end-to-end supply chain and creating a model with shorter lead times to deliver what consumers want, when they want it, where they want it."
Sprunk says this transformation relies heavily on two goals: developing new methods of manufacturing and "relentlessly driving automation in our traditional methods of make."
To achieve these, Nike two years ago announced it would open a 125,000 square foot innovation center, which — now open — appears to be paying off. Sprunk provided one example where the Advanced Product Creation Center (APCC) found a way to produce footwear uppers with 30% fewer steps and up to 50% less labor.
However, since Nike does not independently manufacture many of its products, such a business model shift requires even closer relationships with its contract manufacturers.
Transforming a supply chain to adapt to consumers requires both technology and process innovation, upending perceptions of the traditional supply chain, and also close relationships with suppliers.