Nike Plans to "Just Do It" with Lean?

Perspectives in Responsible Sourcing: June 3, 2007 – June 9, 2007

Nike is out with its most recent “Corporate Responsibility Report.” As Rachelle Jackson wrote about in the blog I’ve linked to:

“Aside from the [reducing] overtime commitment, they are working to implement human resource management systems in their factories, which includes delivering freedom of association training to contract factories. Nike plans to partner with other brands to jointly monitor up to 30% of their supply chain by 2011. They also plan to roll out lean manufacturing to all contract factories in an effort to raise wages.

That’s an interesting approach — I assume what is meant there is that Nike will, through productivity improvements, reduce the NUMBER of workers needed, thereby being able to pay those who are left MORE per hour. Sounds good, but do you believe it? Is it OK to layoff employees if you’re doing it to raise the standard of living for those who are left? That’s not really a net improvement for the community, unless Nike can increase sales and production to make up for the efficiency improvements. Interesting to think about.

Nike also talks about doing manufacturing in a way that is good for the environment and for workers, “There are no tradeoffs,” they say.

In the report’s letter from President and CEO Mark Parker, he states:

To deliver these kinds of products and consumer experiences profitably, we rely on operational excellence – managing costs and driving efficiency. We will continue to be very aggressive in pursuing lean manufacturing practices, materials consolidation, focusing on style and SKU productivity, and gaining Supply Chain efficiencies. We look for every opportunity to squeeze more value out of the money we spend, and that means more value for consumers and for investors.

I don’t know if I like the phrase “squeeze more value out.” I like the language and terminology of creating value. Squeezing is something you do to costs, not value, but I’m, once again, nitpicking.

I’ll be optimistic and hope that Nike will implement Lean in the right spirit and with the right kind of positive results that ARE possible. Lean, done in true Toyota Production System style, could be the BEST thing that’s ever happened to the “sweatshop” employees. Truly respecting workers and treating them well could help put away that sweatshop term forever.

As an aside, there are practical economic arguments FOR sweatshops. I wish economists spent as much time analyzing arguem

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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5 Comments on "Nike Plans to "Just Do It" with Lean?"

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  1. Anonymous says:

    I don’t know how Nike plans on raising wages due to lean, but they could do it without eliminating jobs. Nike could increase profits through increased uptime, decreased inventory, etc….and not lay anyone off. They use some of the profits gained to increase wages. At least, that is what I would hope happens.

  2. Andy Wagner says:

    In a previous job, I worked for the North American branch of a Japanese company with manufacturing in Mexico. (Our customer was a German-owned American car company) ;). The plants were absolutely filled with people. I was told that the local government actually had price caps on labor–maximum wage–in order to increase the number of people employed. The bordertown manufacturers were compete with benefit packages such as free uniforms for sports teams, shuttle buses to work, free meals in the plant, etc. Turnover was very high because pay rates were the same, but a new t-shirt was enough to inspire a job change.

  3. LeanPrinter says:

    When I first saw the tagline and then read “Nike” and “Corporate Responsibility” in the same sentence – not to mention the same article – my BS antennae went up.

    Then I read Ms. Jackson’s blog entry. Come on, a “must read!” ? “déjà vu for me!”? and this: “Nike has officially raised the bar on what brands and retailers can and should do to ensure their goods are made in a way that positively impacts the lives of workers, communities, and the environment.”

    Wow. A positively glowing review from CSCC. Who is CSCC anyway, and why are they so effusive in their praise for Nike? I googled CSCC and found that they are apparently a for profit organization hired by corporations to be a 3rd party “independent” auditor of workplace safety, one that tries to “strive for objectivity, thoroughness, accountability, and quality in all that we do”. Kinda hard to be independent when you’re being paid by the people you’re supposed to be watching. Remember that Kathie Lee Gifford / Walmart sweatshop scandal a few years back? Guess who gave these sweatshops a pass on multiple occasions? So much for thoroughness and accountability.

    Then there’s this, from the CR report, Part 3, Page 22 – “Factory Management”:

    “Over the past 40 years, the apparel, footwear and equipment industries have remained fairly low tech, leveraging low-skilled labor in emerging markets. Increasingly, this model is being challenged to its core, given the evolving global marketplace and trading systems. One legacy of this model is that a majority of suppliers have immature local management systems, with poor human resources policies. (blame the suppliers) In addition, due to traditional tariff and quota systems (now blame the government) , many in the industry had a short term view of relationships with buyers and, consequently, a short-term view of their relationships with workers. (You mean YOU, Nike, had a short term (ie. profit) view and blame everyone else in world but yourselves)

    We believe the predominant industry model of the past viewed workers as a commodity that were readily replaceable given the labor markets in emerging economies. (Ok, now we’re getting warmer – start admitting you’ve treated these people pretty badly)

    Today, that view is going through a fundamental shift in Nike’s supply chain and business model.(Good. Stand up and take responsibility and, more importantly, action)

    External factors (including changing labor patterns, new risks, new costs, new market pressures, new competitive landscapes and new trade agreements) and internal drivers (including innovations, research and development, new business modeling and concepts of responsible competitiveness) are now helping Nike and our partners to radically rethink the traditional model. (Whoops! I guess it was too much to ask to actually have something like “respecting people” be a fundamental reason to “radically rethink the traditional model”. Maybe it’s too radical a concept, or is respect for people buried somewhere in the “concept of responsible competitiveness”?)

    Our core focus within apparel and footwear is to move toward fewer strong, long-term, strategic partnerships and a manufacturing model that drives efficiency and productivity and creates opportunities for workers. Called lean manufacturing, this model is discussed later in this chapter. We think that done well, with the right systems in place, the new models can alter – for the good – the way workers are treated and compensated.” (Good. Nice statement, but probably lifted off the jacket cover of a Lean book.)

    I know, too cynical, and who the hell am I, right? I’ll give Nike some credit, then. They’re at least trying. They’ve claimed to have started Lean training in “18 of our contract factories – comprising nearly half the volume of our worldwide apparel production – have begun lean training and another six are set to follow in FY08.”

    That’s great, but how about Nike’s leadership? It all sounds good, but what Lean training have THEY received? Are they leading this change, if it is real change, or are they just blowing politically correct smoke?

  4. Mark Graban says:

    leanprinter — thanks for digging into the whole report (something I admittedly didn’t take time to do).

    I understand the cynicism when hearing about Nike and corporate responsibility, yet alone Lean, but I was trying to hope for the best (and I still will).

    You’re right, lots of blaming going on.

  5. LeanPrinter says:

    Mark,

    I haven’t read the entire report, either. I zoomed right in to that section and those few paragraphs just jumped right out at me.

    I sincerely hope this is real change, too, and if it is it can have a positive impact on the sweatshop industries.

    Maybe it’s in my name – Thomas. Like Thomas the Apostle, I always seem have my doubts until I can see for myself. For now, I guess we’ll have to “Доверя́й, но проверя́й” – “Trust, but verify”.

    Tom

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