Page 374 -

Chapter 9 Achieving Operational Excellence and Customer Intimacy: Enterprise Applications 373

finished products, and distributing the finished products to customers. It links
suppliers, manufacturing plants, distribution centers, retail outlets, and custom-
ers to supply goods and services from source through consumption. Materials,
information, and payments flow through the supply chain in both directions.
Goods start out as raw materials and, as they move through the supply chain,
are transformed into intermediate products (also referred to as components or
parts), and finally, into finished products. The finished products are shipped to
distribution centers and from there to retailers and customers. Returned items
flow in the reverse direction from the buyer back to the seller.
Let’s look at the supply chain for Nike sneakers as an example. Nike designs,
markets, and sells sneakers, socks, athletic clothing, and accessories through-
out the world. Its primary suppliers are contract manufacturers with factories
in China, Thailand, Indonesia, Brazil, and other countries. These companies
fashion Nike’s finished products.
Nike’s contract suppliers do not manufacture sneakers from scratch. They
obtain components for the sneakers—the laces, eyelets, uppers, and soles—from
other suppliers and then assemble them into finished sneakers. These suppli-
ers in turn have their own suppliers. For example, the suppliers of soles have
suppliers for synthetic rubber, suppliers for chemicals used to melt the rubber
for molding, and suppliers for the molds into which to pour the rubber. Suppliers
of laces have suppliers for their thread, for dyes, and for the plastic lace tips.
Figure 9.2 provides a simplified illustration of Nike’s supply chain for sneak-
ers; it shows the flow of information and materials among suppliers, Nike,
Nike’s distributors, retailers, and customers. Nike’s contract manufacturers are

FIGURE 9.2 NIKE’S SUPPLY CHAIN

This figure illustrates the major entities in Nike’s supply chain and the flow of information upstream and downstream to
coordinate the activities involved in buying, making, and moving a product. Shown here is a simplified supply chain, with the
upstream portion focusing only on the suppliers for sneakers and sneaker soles.

MIS_13_Ch_09 Global.indd 373 1/17/2013 2:28:54 PM