Nike Commodity Chain

Introduction

Nike is among the global leaders of sports shoes market. Production, distribution, and consumption of this product form a complicated process that includes several interconnected steps. Many resources are required, and the laws regulate the majority of the company’s operations. However, the situation in Nike presents some labor issues at different stages of its supply chain, and these issues will be investigated. The company pays intense attention to being sustainable and environmentally responsible, and different programs are applied to achieve it. Based on the research, various connections of Nike to the global economy will be outlined.

Factors for Production, Distribution, and Consumption of Nike Shoes

Nike shoes include different models of sports shoes for different sports and purposes. Their development, production, and consumption are complicated processes, and various resources are required at each stage. Nike develops its shoes by using different innovations, and this stage takes precedence over all other stages of the commodity chain. Nike shoes are produced with the use of innovative technologies and materials, and many specialists in special labs are responsible for their development. As the product concept is devised, the small amount of a new product is produced and tested. Even though Nike uses innovative technologies, as it has been mentioned above, in some cases, even more innovations are required for a new product. For instance, before Flyknit running shoes were developed, 195 prototypes were made and tested, and the best one was selected for mass production. To make the production process more favorable to the environment and to produce new shoe models, Nike modifies its production facilities (McAlister, n.d.). After product development and testing, Nike manufactures its shoes on a mass basis. In regard to manufacturing, Nike does not own any facilities personally. Instead of building its own plants, Nike makes deals with subcontractors, and they produce shoes in plants located in the developing countries, such as Vietnam, India, and Indonesia (Nike, 2017a). In order to be a responsible company and provide innovations, Nike has developed a program to control its whole supply chain and to avoid possible issues that may appear at each stage. Nike’s Code of Conduct is provided to all subcontractors, and they should follow this document if they want to cooperate with Nike and produce its shoes and other goods. This document provides minimum requirements concerning labor and other conditions on the factory, and if some subcontractors fail to follow them, Nike may refuse to work with this factory. In order to assess each factory, Nike evaluates cost, quality, and on-time delivery of each one. In terms of employees, Nike ensures that factory employees not only have proper working conditions, but are also skilled enough to produce goods of required quality by using innovative materials and techniques. Nike runs different programs to train its employees at the plants, as well as to engage them in healthcare and financial and educational networks (Nike, 2017b). Due to those practices, the employees improve their skills and are satisfied with their work enough to produce innovative products.

Nike also focuses on the new technologies and various innovations in the commodity chain. For instance, Nike Flyknit technology allows micro-engineering of each part of a footwear item, including each stitch that is created by Nike’s designers. In order to meet the requirements of professional athletes, athletic shoes correspond to all of them by being made as perfect as possible, including shaving of the shoe upper. This technology is also environmentally friendly because it allows reducing the average waste from shoe production by nearly 60% in comparison with traditional shoe production process (Nike, 2017b). From 2012 to 2016, due to innovations in shoe manufacturing process, Nike has reduced its waste by about 3.5 million pounds (Nike, 2017b). Nike tries to be transparent and accountable, and information about all producing facilities, their locations, and demographics is available on its website. The targets planned by Nike for 2020 are promising: the company aims to make all factories completely sustainable, to ensure that the workers share the profits of the factory, and to support the needs of the workers at the factories and outside them (Nike, 2017b). In terms of law commitment, Nike is influenced by various laws that regulate its production, distribution, and other aspects of business activities. The main issue is that the company has its facilities worldwide, and thus it should follow local laws of the country where production or distribution facilities are located. The company has already faced some legal issues related to the employees at its factories, and those issues will be regarded further in the paper. Moreover, the company tries to follow the laws that protect its patents and designs from being used by other competitors. For instance, in 2015, Nike was involved in three legal battles related to patents and designs it owned (Bain, 2015). Thus, the commodity chain of Nike is complicated as it is influenced by different factors, including global economy, labor resources, and international legislation.

From the initial production to the disposal of wastes, the usage of shoes leads to different environmental consequences. Shoes for athletes, including Nike shoes, are produced of mostly artificial materials, and they can be harmful to the environment as they become old and are thrown away. Nike, as a company that presents itself as a sustainable one, provides different initiatives to reduce its negative environmental impact on various stages of the shoes’ commodity chain. As it was already mentioned, Nike Flyknit technology is used during the production process of shoes, and due to it, the waste from the production is reduced, which in turn reduces the negative impact on the environment. One more technology used to cut waste during production is ColorDry technology — through its usage, the amount of wastes is reduced when fabrics are painted. In terms of reducing waste after shoes are consumed, Nike also has some programs. For example, the company collects used shoes to recycle them and use their materials for different purposes, including producing other materials for footwear and apparel (Nike, 2016). In general, Nike is a company that takes care of the environment, and its initiatives are provided on different stages of the commodity chain, mostly on production and consumption stages.

Issues in Commodity Chain

The commodity chain of Nike is not ideal as there are some issues present there. The first important issue is related to labor violations in regard to primary producers or those employees who work at the factories producing Nike footwear located in the developing counties. Despite Nike’s claims about watching all manufacturers and ensuring that they are responsible and provide acceptable labor conditions, there are still labor issues reported at the factories that produce Nike’s goods. In 1990s, Nike was blamed for using sweatshop labor in its factories in Indonesia, China, and Vietnam. The strategy of the company was based on minimizing costs of production in order to spend the sums on the promotional campaigns to increase sales. Thus, the production costs were minimized due to the use of sweatshop labor, characterized by very low wages and poor working conditions. Such practices used by the company were not supported by the public and caused different protests and boycotts in regard to Nike’s products. In fact, the problem became known by the public in 1991, when activist Jeff Ballinger presented a report that proved that Nike paid low wages and provided very bad working conditions in Indonesia. In 1992, new reports related to labor violations in Indonesia were published, and it was established that Indonesian workers were paid less than the legal minimum wage at Nike factories (Nisen, 2013). Moreover, there were protests against Nike’s unethical labor practices, and soon, they became numerous. Most protesters were activists and students, and protests covered global events, such as the Barcelona Olympics in 1992. The company tried to resolve the issue and it was successful in its efforts — however, they were not sufficient. In 1996, Nike officially established a department responsible for improving the working conditions of the workers in the factories. However, the complaints about labor violations continued, and starting from 1999, Nike became more active in its efforts to improve the image by eliminating labor violations at the factories. It established the Fair Labor Association, an organization responsible for monitoring working conditions at the factories and improving them. In 2005, Nike published a detailed report on its factories and working conditions. After that, similar reports started to be published regularly, and Nike became one of the industry leaders in terms of working conditions (Nisen, 2013). In addition to poor working conditions issue, Nike was blamed for using child labor in its factories. In 1990s, due to labor and economic deregulation, as well as because of the switching of the production to the developing countries, Nike used child labor at some factories. The issue was not directly dependent on Nike since the factories had their own contractors and owners. However, when the information about using child labor was first published in 1996, Nike experienced a new problem with its reputation. In order to improve the situation, Nike began to control its factories better and ensure that labor conditions were normal, and that labor rules were not violated (Mallen Baker, 2016). Thus, Nike managed to become a sustainable company and removed most of its labor issues.

However, despite the improvement in labor conditions, violations still exist in the factories, and Nike fails to be responsible for all of them. For example, in 2017, some reports presented the information about labor violations in Hansae, Vietnam, where Nike has its factory. Workers made claims about their wages being stolen and about regular verbal abuses. Moreover, labor conditions were inhumane, with high temperature at the factory. This situation, as well as other violations, led to several protests of activists. Nike tries to resolve the problems, but they still exist (Bain, 2017). One more potential issue of the commodity chain of Nike is related to both production stage and the stage of consumption. In general, shoe industry produces negative environmental effects both during the production process and in the products’ consumption, especially when the old shoes are discarded and new ones are purchased. Throwing shoes out causes the increase of different toxins in soil, water, and air. Thus, Nike and other producers of shoes provide different environmental initiatives. For instance, Nike introduced Reuse-a-shoe program aimed to recycle old shoes and to use materials from recycling for different purposes (The Shoe Industry, n.d.). Thus, Nike has some issues in its commodity chain, but it tries to resolve them. Furthermore, some issues exist on the production and consumption stages of the supply chain as well, and currently, they remain unsolved.

Conclusions

The investigation of the commodity chain of Nike footwear and the issues related to it shows that the diversified connections to the global economy are present for the company and its production processes. Nike tries to be sustainable and control its subcontractors that produce its shoes, and it provides reasonable work conditions and innovative technologies in the production process to satisfy both customers and employees. The commodity chain of Nike is related to the environmental aspect of the economy, and Nike tries to reduce this impact by providing recycling programs for shoes. The commodity chain is also related to labor economics, and some issues still exist there as Nike fails to avoid labor violations during the production process. In order to change its current situation, Nike should try to improve labor conditions further and eliminate the labor issues that exist in the developing countries by establishing strict control over subcontractors.

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