Intersecting Lean, CSR & Procurement: Nike’s New Supplier Sustainability Index and Program (Part 2)

Please click here for the first post in this series.

Yesterday we shared some of the insights surfaced by a interview featuring Hannah Jones, Nike's vice president of sustainable business and innovation. The gist of the story is that Nike views CSR within its supply chain and with its rationalized/consolidated tier one suppliers as a core component of a broader lean and strategic sourcing approach rather than simply as a compliance challenge to overcome. It's a great interview and if you have the time, we recommend you check it out in its entirety.

In the discussion, Jones suggests that "sourcing strategy and our sustainability and working conditions strategies are one in the our industry, the traditional conversation between a buyer and a supplier is one of cost, delivery on time, and quality. Those are always the driving kind of indicators [determining] the question are we going to give you more orders or less orders? And so now what was done is we've said: sustainability. And I want to emphasize [that] when I say sustainability it includes workers' rights. Sustainability is one-fourth of that equation now."

Moreover, Nike is trying to change the fundamental mindset of its suppliers: "we've changed also from a 'make your systems less bad' [approach] to actually describing a vision of good. It's saying if you're going to be on the journey with us...we're going to need you to really think about investing in your workers, investing in lean and investing in efficiencies and green."

In our own research examining the intersections of lean and strategic sourcing, we identified four primary benefits of bringing lean thinking to sourcing:

  1. Greater buy-in from key functional areas -- operations and purchasing
  2. Better likelihood of implementing identified savings
  3. Improved quality and reduced waste
  4. Ongoing additional savings opportunities

In thinking about sustainability and labor practices in its supply chain, Nike has cleverly expanded on the third benefit of lean by tying the notion of quality and production to worker treatment and empowerment (i.e., happy workers in supplier facilities who have vested outcomes and incentives tied to the broader picture vs. piece price cost are likely to produce and oversee the production of goods which contribute to the broader goals of the customer -- Nike).

What are some ways to create a lean approach to sourcing and supplier management? We'll share our recommendations and conclude the Nike story in the final post in this series.

- Jason Busch

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