Future forecasts as the means to improve the supply chain, are not easy to foresee… as Nike learned the hard way
Nov 16th, 2011 by tamara
Back in 2000, Nike purchased software (i2 demand-planning software) that supposedly can foresees the quantity recommended to produce by evaluating past sales.
Sounds good?
The forecast caused Nike a loss of $100 million!
The idea is logical. Nike is such a huge company that it is hard to create orders based on intuition alone; however, trusting a computer program will not do it by itself!
The strategy is to combine both, and to take into consideration whatever the marketing team is forecasting in sales for a certain product.
The supply chain is more sensitive in the clothing and apparel businesses, since, if you over produce, even though the goods will not “get spoiled” their “fashionable value” will depreciate and they will lose their price value.
Therefore, trusting the human instinct is the best way to lead the supply chain.
That is what Nike learned from their mistakes, and increased their profits in later years.
citation: Koch ,Christopher. “Nike Rebounds: How (and Why) Nike Recovered from Its Supply Chain Disaster” Tue, June 15, 2004 http://www.cio.com/article/32334/Nike_Rebounds_How_and_Why_Nike_Recovered_from_Its_Supply_Chain_Disaster?page=1&taxonomyId=3207