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Promoting productivity and working conditions in SMEs
Nike Lean Supplier Capability Program
1. What is the issue to be addressed?
Garment manufacturing linked to global supply chains is a large source of employment in many developing and emerging economies. It is also often regarded as a āstarterā industry for export- oriented diversification.^1
While for supplier firms integration in global supply chain involves expanded market access and can offer opportunities for upgrading, it also presents challenging requirements and pressures. In particular, in the garment industry, there are increasing trends towards demands for shorter lead times, orders in smaller batches, greater diversity of products and styles, and lower unit prices.
In addition, there are concerns that such trends in sourcing practices may result in negative impacts on working conditions, particularly in terms of long working hours, precarious employment and lower wages. Poor working conditions are in turn an increasing preoccupation for some international buyers, which are expecting their suppliers to comply with certain labour and environmental standards, in addition to delivering on price, time and other primary business considerations.
Nike has several programs in place to assess and train its suppliers with the aim of addressing challenges in supply chain management and working conditions. The focus of this case study is a particular capability building program for promoting lean manufacturing management practices among apparel suppliers.
2. What type of intervention are we talking about?
Nike introduced a supplier capability program on lean manufacturing: it included training on lean manufacturing techniques, promotion of the adoption of lean manufacturing practices, and assessment to certify the application of lean practices among participating suppliers. The objective of the program was to support suppliers in dealing more effectively shorter lead times and smaller order sizes, and in improving their overall efficiency, but it also resulted in improvements in working conditions.
The Nike lean system was an adaptation of the well-known Toyota production system to footwear, and later garment, manufacturing settings.
The Lean system of Nike has several key elements, it involves: identifying core value stream and orienting production around this concept, balancing production processes using takt-time^2 , eliminating waste through reduction of inventory buffers and work-in-progress; increasing operator participation in quality control and problem-solving for continuous improvement; improving operational stability with standardised work and visual management techniquesā (Distelhorst et. al. 2015: 8).
(^1) Note: the case study is largely base on Distelhorst et. al. 2015 āDoes Lean Improve Labor Standards? Management and Social Performance in the Nike Supply Chainā. 2 Tak-time is calculated as available time for production divided by consumer demand
Promoting productivity and working conditions in SMEs
Nike Lean Supplier Capability Program
Following the development and implementation of the program among footwear suppliers, Nike delivered it to its apparel suppliers. In terms of targeting, the program focused on suppliers with a longer business relationship with Nike, many of which came from emerging and developing countries, including Thailand, India, China, Sri Lanka, Vietnam, Malaysia, among others.
Key steps in the implementation of the program among apparel producers are represented below.
Nike reported a range of benefits resulting from the program in terms of business performance. For example for the financial year 2010-2011, it indicated it achieved:
ļ· 50% reduction in defect rates ļ· 40% faster lead times ļ· 20% improvement in productivity ļ· 30% reduction in time taken to introduce a new model
While the program itself focused on lean management systems and practices, it also led to improvements in working conditions.
Independent researchers analysed data from labour compliance assessment in 304 Nike suppliers in emerging countries (68 of which adopted lean manufacturing practices), to detect whether or not there was a link between the adoption of lean manufacturing and improvements in working conditions as found in the results of compliance monitoring reports for these firms. They looked at
- Nike selected and invited suppliers to participate to training
Suppliers commit to implementation of lean manufacturing practices in their plants and confirm participation to the training
- Eight-weeks training was delivered to managers in training centre in Sri Lanka
With support from NIKE, suppliers develop plans for implementing lean manufacturing in their plants
- Suppliers implement lean manufacturing practices
NIKE verifies implementation key elements of the lean system and management understanding of lean techniques
Promoting productivity and working conditions in SMEs
Nike Lean Supplier Capability Program
Supply chain relations and the role of lead buyers
In sectors such as apparel and footwear, some large lead buyers often enjoy significant influence, especially on first-tier suppliers. The fact that the program is offered by a buyer is an important factor affecting suppliersā participation. In addition, the fact that implementation of lean practices is verified by the buyer and feeds into a form of assessment is likely to be an incentive in the adoption of lean practices following the training.
In its targeting for the lean program, Nike focused on suppliers with which it had a long term relation. Longer term relations and continued sourcing are important factors influencing commitment of suppliers to programs and improvements.
Commitment, capacity and sustainability
The program was a large undertaking. Nike had its own staff trained, it established a training facility, and its staff had intense engagement over multiple years with its suppliers both at the leadership as well as the operational level. The intervention therefore benefited from significant investment by Nike as well as from its relations and influence in its supply chain.
The lean capability program also required substantive commitment and investment from suppliers. It required participation by senior managers in a 8 week residential training program, it expected them to cover the costs of the training, and demanded a willingness to implement substantial changes in work organisation in their plants.
