Strengthen supply chain management Nike uses RFID blockchain technology to track global inventory level
Reading times:6206 Update time:2021-03-25
Nike, the US sporting goods manufacturer, recently released its third quarter financial report for the fiscal year 2020 / 2021. Thanks to the growth of its consumer facing business and strong digital sales, Nike has achieved an impressive revenue of $10.4 billion. The Greater China region is developing rapidly, and the revenue of the North America region where the headquarters is located is declining due to supply chain problems.
Greater China's revenue exceeded $2 billion for the second consecutive quarter
In the three months to February 28, 2021, Nike's profit reached $1.4 billion, up 71% year on year. The revenue of direct business reached US $4 billion, up 16% year on year.
In terms of brands, Nike's main brand revenue in the third quarter was US $9.773 billion, of which Jordan Brand grew by double digits and jordan women's business by nearly three digits; Converse brand revenue increased 8% year on year to $570 million.
In the third quarter, Greater China grew by 51% year-on-year, with total revenue reaching $2.279 billion, and its profit before interest and tax increased by 75% year-on-year to $973 million, exceeding market expectations.
In the third quarter of Greater China, the sales of shoes, clothing and sports equipment increased by 50%, 54% and 58% respectively; At the same time, this is the second consecutive quarter of Nike Greater China's revenue of more than $2 billion.
In the third quarter, Nike's global digital business sales increased significantly, up 54% excluding the exchange rate factor, and all regions achieved double-digit growth. Among them, sales of digital business in Greater China increased by 44%.
In order to further stabilize the growth trend of digital business, Nike announced the acquisition of datalogue, a data analysis platform, in February this year. The latter's patent technology of automatic data analysis and integration will enhance the ability of Nike to transform data into user insight. Deepen the link between the company and users, and provide personalized services.
It is worth noting that with the effective control of the domestic epidemic, Nike has accelerated the opening of self operated and cooperative retail stores in Greater China.
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Earlier, Nike opened two Nike live neighborhood stores in Shanghai Jing'an and Beijing Sanlitun one after another in a week, focusing on athleisure style, which was welcomed by female consumers. According to Nike's experience, neighborhood stores are six times more likely to turn customers into brand registered members than ordinary stores, and the consumption power of members is about three times that of non members.
At the same time, Nike joined hands with the agent taobo sports to open the largest flagship store in Asia in Wangfujing Commercial Street in Beijing.
The 4000 square meter Nike flagship store, which opened in January this year, has an intelligent basketball court and a running experience area. The court can interact with the players in the field through infrared devices.
The store provides immersive digital shopping experience and a full range of products. The first floor is mainly for women's products, with a special fitting room for women; The second floor sells men's, children's and football products; The third floor is the basketball and Jordan Brand zone. The flagship store has launched a mobile cashier and back store PDA call system to save customers' waiting time.
The person in charge of taobo international in Beijing predicts that the annual sales of the flagship store will reach 250-350 million yuan.
In addition to building basketball courts in stores, Nike also continues to invest in professional basketball and youth basketball in China.
At present, Nike has signed CBA stars such as Yi Jianlian, Guo Allen, Zhou Qi, Wang Zhelin, Ding yanyuhang, Zhao Rui, Fang Shuo, Xu Jie, Hu Mingxuan and Zhang Zhenlin. Guo Allen has been the spokesman of Jordan Brand since 2017.
In the recently released "influence report" for fiscal year 2020, Nike announced 29 targets for fiscal year 2025 for the first time. In the next five years, the company will continue to increase its investment in supporting community development and helping the next generation to "move", and invest 2% of its pre tax income in community influence related projects. Nike hopes to achieve 50% participation of girls in the "made to play" community project, help more people release their potential through the power of sports, and promote the better development of the industry and the world.
Supply chain is still the biggest challenge in the short term
In the third quarter, Nike's North American proprietary digital business revenue exceeded $1 billion for the first time. However, due to the supply chain bottleneck caused by global container shortage and US port congestion, Nike's shipment volume, known as "lean production", has been delayed for more than three weeks, resulting in a decline in wholesale business, inventory of US $6.7 billion, and a year-on-year decline of 11% in revenue in North America.
For many companies, the impact of the epidemic on the supply chain continues to ferment, eventually affecting future growth and inventory levels in various markets. According to the National Retail Federation, there is a backlog of container ships arriving at US ports as orders continue to surge. Port officials expect congestion to continue for months.
Traditionally, many companies have adopted the JIT inventory model. However, COVID-19 needs to reconsider its supply chain strategy to adapt to these factors because of the increase in consumer demand and the reduction of labor force at loading and unloading terminals.
In recent years, Nike uses RFID blockchain technology to track the global inventory level in order to understand the status of the supply chain in real time. After the acquisition of celect in 2019, artificial intelligence and predictive analysis are also used to capture consumer demand. However, this does not completely solve the current problem. Because labor costs in the United States are usually high, many companies have set up production overseas. However, just as the epidemic in early 2020 caused the supply crisis of medical supplies in the United States, offshore outsourcing made the supply chain face large-scale disruption.
According to a survey of retail by Gartner, 87% of respondents plan to increase supply chain flexibility in the next two years. Similarly, in Deloitte's survey of 50 retail executives and 15 experts, 78% of the respondents believe that improving the flexibility of the supply chain is the key to the current work, which needs to connect the supply chain, inventory management and digital user experience.
Since the outbreak of the epidemic, production in the United States has become a hot topic, Forbes reported. Since the beginning of this year, the Federal Procurement Regulations (far) of the United States has made three major amendments, which stipulate that products must be produced through economic activities that are produced in the United States or support employment in the United States. Later, US President Biden also signed the executive order on ensuring that the future will be made by American workers in the United States. Biden also last month ordered a review of the supply chain to reduce dependence on China and other offshore manufacturers.
By 2023, nearly 20% of Nike's production will be transferred to automatic chemical plants. Gartner also advised companies to put local automation on the agenda.
For now, Nike is still optimistic about its performance, with John Donahoe, group president and chief executive, saying that even if shipments are slower than usual, the company still expects inventory to be more stable in the next quarter. The release of consumer demand and the recovery of physical stores will lead to a surge in sales.
According to Nike's plan, the company is concentrating resources to reinvest in potential growth areas through layoffs and other means. The company hopes to establish a more flat and flexible system to lead the future market.
Looking ahead, Nike expects sales in the fourth quarter to grow by 75% year-on-year, and its annual revenue forecast for fiscal 2021 to grow by 10% to 15% year-on-year.
