Intersecting Lean, CSR & Procurement: Nike’s New Supplier Sustainability Index and Program (Part 1)

Earlier this month, Nike announced some major changes to how it monitors and manages supplier and supply chain corporate social responsibility (CSR). Earlier coverage suggests that the manufacturer and retailer will "launch a new manufacturing index in 2012 that will place factories' sustainable practices 'on equal footing' with the traditional supply chain measures of quality, cost and delivery. The index will now include environmental and labor-sustainability metrics, according to the report. And Nike will use that index to evaluate its suppliers."

Even though Nike's move might seem like superficial spend lip service (as if telling a fat teenager to "Just do It" by buying a pair of $150 sneakers and running laps will magically make them fit), there's actually quite a bit of thought and nuance to what they're up to. In an interview on GreenBiz.com, a Nike executive suggests this move is an extension of lean thinking and that "the culture of empowerment that is core to making lean really work...It requires...management [to] understand that the worker is the closest to the process and to the act of manufacturing and therefore has the greatest insight. And that actually what you need to do is put greater value on the worker and enable the worker to feel empowered, so that they can speak out and speak up and talk about where they can see improvements could happen."

The bottom line is that for Nike, "lean is one of the components [of] how we think about building better working conditions. Because we think it's the business conditions that enable a lot of the additional work we do." In a somewhat fractal way, Spend Matters has also suggested in the past that embracing lean leads to better sourcing and supplier management outcomes. Lean factors force you to focus on total cost over the lifecycle of a part or supplier relationship. For example, in direct materials sourcing and supplier management in discrete manufacturing environments, as companies become more sophisticated in lean, we generally begin to observe more standardized, company-wide approaches, the proactive management of supply risk, total cost-based sourcing models, demand management programs incorporating suppliers, reduced product complexity, synchronized processes part standardization/SKU rationalization, reduced inventor, joint product design and collaborative cost take-out efforts.

- Jason Busch

First Voice

  1. Wybrand Ganzevoort:

    Excellent article Jason. Bringing suppliers closer and empowering front line workers in the process has a significant impact on sustainability as well as Quality, Delivery and Cost. I truly believe that Nike has it right in recognizing that Lean is about empowering people rather than the tools.

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