Operational Excellence
It is a long way to know a good horse, a good person to know what to change
What do you expect when you decide to expand your new product portfolio? Received by customers, quality products, convenient transaction process …? Whatever you choose, the end result for anyone doing business is to expect a steady increase in revenue and profit each period. To do this, you need to solve the problem of reducing production costs and increasing output in each factory.
However, this depends heavily on the characteristics of the industry that the business offers to make a compatible adjustment. With the shoe industry, the big name Nike also underwent certain changes when deciding to invest in the business of self-designed shoes – Nike By You, to get the success it is today.
Sweet fruit of Nike By You
In 2016, OPEX was invited to cooperate with Nike in this long-term project and brought certain changes such as:
To get this result, you need to start investigating the source of the problem. First, let’s find out with OPEX …
Nike’s difficulty in joining a new race
Nike By You first appeared on the market since 2000, is a pioneering brand in personalizing the design. Nike By You helps a normal person to design their own Nike shoes, but the cost is still quite high and the delivery time is up to 1.5 – 2 months. This is the limit that makes consumption not produce breakthrough growth.
Through the website, customers can easily sample shoes according to the brand’s suggestions. Guests have the choice from dozens of previous models such as Air Max 97 or Flyknit Free 3.0. Then, they began to choose materials (cowhide, synthetic leather, woven fabric, knit fabric …) until the color of every detail or decorative accessories. In particular, customers can print the name on the product such as the wife’s name on the left, the husband’s name on the right with many different colors.
Typically, the response time from when the customer orders to delivery on the US market is about 3-4 weeks. High season, guests in other countries have to wait quite a long time, sometimes up to 5-6 weeks. This is the problem that businesses need to solve because waiting can be a factor affecting the decision to place an order, especially to buy as gifts.
Because the shoes are made in Vietnam and the transportation time is limited, along with the problem of selecting the required materials requires a high degree of meticulousness and precision. For example, there are more than 100,000 types of materials to be managed and synchronized. And to create a custom-designed shoe according to the customer, the workman needs to go through many steps from selecting materials to sewing shoes.
A Nike By You shoe factory often has to produce from 16 to 20 models, each model has many options for different parts (for example: shoe soles, shoe uppers, shoe straps … all have many choices. both in material, color, design). This has made the factory limited in capacity. The quantity of raw materials is large and orders must be waited for 2-3 months, while requests must be ready. This results in a huge amount of materials to be stored in the warehouse, resulting in a large cost of inventory per pair of shoes sold.
In addition, a large number of models and a variety of materials lead to skill requirements of workers who must be skilled and multi-skilled to ensure quality and output.
In addition to the need to solve time problems and manage raw materials better, Nike also tries to reduce the production cost (MCO) of this segment to ensure the product reaches consumers at a price that can. acceptable.
Currently, speed is the decisive factor for customers to choose you or competitors, you can read more about the project Leading delivery speed reduction – Lead time here.
This is a long-term project and needs to change from the inside step by step. Therefore, OPEX went to the factory, investigated every corner of the problem to advise this business of Nike, focusing on optimizing production costs.
The key to reducing production costs, increasing Nike By You shoes
For Nike self-designed shoes, the biggest problem the factory is facing is the time to ship a pair of shoes at the request of customers. The material management system is also having problems, so the preparation time before starting the sewing is also longer.
Through work and research, OPEX realized the problems and quickly adjusted. Specifically:
Handling inventory: Because there are hundreds of thousands of types of raw materials that need to be stored to ensure that there are manufactured goods, the need for optimal inventory management is first. Inventories usually account for 60-70% of the cost of a pair of shoes. By managing the inventory level for each item, the cost of capital is reduced and the material turnover is shortened.
Because there are so many options, almost every pair of shoes is unique, so of course every stage has to be converted, for example from white sewing thread to red sewing thread. Therefore, implementing Quick Change Over is a mandatory requirement.
Normalizing the details so they can be shared is also a way to reduce the number of conversions. In addition, developing multi-skills so that when there are fluctuations in orders and personnel in the department does not affect much on productivity and quality. At the same time, continuous improvement and standardization activities also help to reduce production costs.
Managing human resources is not easy, especially with non-mass production like Nike By You. Each pair of shoes will be in charge of the person, this factor accounts for 50% of the finished product is beautiful or not. However, because of the high human dependency, this living resource needs to be properly cared for and nurtured.
OPEX proposal of uniform skills guidance to employees will help to limit who does not interfere with the general process. An employee with similar skills will replace it even though this stage was not their main job.
Lesson from Nike By You
For manufacturing enterprises in particular and all industries in general, reducing the time to create products while ensuring the quality of the output is extremely important. This will determine where your business stands on the map of brand valuation in the market.
If you want your customers to think of you first as a fast and good supplier, then optimizing the factory by shortening lead time is not to be missed.
In addition, businesses can reduce costs in many ways, and build a systematic process to support reducing material inventories, reducing wastage, reducing productivity loss due to conversion, reducing error in manufacturing and lifting skilled workers.
To do all of the above is a labor process and draws experiences and successful applications in each factory and industry. The achievements that OPEX and Nike By You achieved are not coincidental. It is a journey of OPEX and its partners in tinkering, research and application in every stage of the factory.
With experience, solid expertise and a desire to help businesses build strong manufacturing systems, Faith believes that they can do more than projects like Nike. And yes, for more than 15 years working in Lean Manufacturing, OPEX team has been able to support and successfully improve many processes across different industries.
If you want to know more about other successful projects, you can find out here or contact OPEX, let’s talk and analyze the problems that businesses are having and find the best solution.
OPEX Consulting – Operational Excellence Your Bussiness
