Nike Focuses on Supply Chain as Sales Lag

Nike (NKE) announced it will be adopting Feng Tay Enterprise Co. Ltd.’s manufacturing strategy and automation technology, enabling the sneaker giant to cut down on manpower (-30% on the A.J. XIII) while increasing output (+50% on the A.J. XIII). The change in philosophy includes the implementation of 11 new automated technologies; combined, they enable the company to complete and ship customized shoes within 3-4 days, which is less than half the initial projected turnaround time. By 2023, the company would like to offer automated customization on every shoe it produces.

Howie Long-ShortNKE struggled in fiscal Q1 ’18 (domestic revenue declined 3%, gross profit declined 4%), with several of the issues facing the company (i.e. basketball sneakers aren’t in style, heavy promotional market) unlikely to change short-term; so turning their focus to supply chain optimization is logical. Automation and smart distribution systems will make the business more efficient and increase profit margins, but it isn’t helping the company get any closer to Mark Parker’s goal of $50 billion in revenue by 2020. Nike is going to need to grow its women’s division and international business (see: China) if is going to hit that mark.

Fan Marino: Feng Tay and Nike have a storied relationship that dates to 1977; with the Taiwan-based sporting and athletic goods manufacturer first producing the AIR model in ’85. The company also first developed signature shoes for Michael Jordan in ’87 and LeBron James in ’03, produced the 1stgeneration of Shox in 2000 and both developed and produced the Flyknit Racer; one of Time magazine’s “Best Inventions of 2012”. Feng Tay trades on the Taiwan Stock Exchange under the symbol TPE:9910.

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