Nikes Supply Woes Could Signal Broader Trend

Nikes problems with a massive supply chain system installation are a wake-up call to corporations pursuing similar Internet-based rollouts, an industry expert warned.

While the potential benefits of such systems are huge, the challenges involved in linking manufacturers directly into the planning and forecasting systems of major suppliers and customers are just as daunting.

“There are a number of similar stories out there — and were going to be hearing about more,” said Chuck Poirier, a partner in the supply chain practice at Computer Sciences Corp. and author of a book on the Internet supply chain revolution.

“These systems look like the be-all and end-all. The problem is corporations are jumping into it before they clear up their internal and external processes,” Poirier said.

The issue came to light last week after Nike blamed a supply chain installation from i2 Technologies for a significant shortfall in third-quarter earnings. Executives said the installation was fraught with problems resulting in some shoe styles being overstocked while other, more popular styles ran short.

Nike said it believes the difficulties are a one-time problem and it is confident it can work with i2 to correct the system, but the company said errors have resulted in a revenue loss of $80 million to $100 million. Nike also expects it could take another six to nine months to fix the system.

“My immediate reaction is, This is what we get for our $400 million?” said Nike Chairman Phil Knight, referring to the size of the Nike supply chain project.

Officials at i2 were not shying away from the problems at Nike, although they said those have more to do with problems in tying into the internal systems of suppliers and customers than with the software itself.

“I think the news has been blown all out of proportion,” said Jennifer Tejada, vice president of marketing at i2 in Dallas. “Were powering more than 200 marketplaces today . . . weve got more than 1,000 satisfied customers. If anything, I think the nature of the news really speaks to the importance of the supply chain.”