Reference no: EM133508615

The sportswear manufacturer Nike has over $25 billion in revenue. Its products are recognized around the world, and experts value the Nike brand at some $20 billion alone. But who produces all the shoes and apparel that make up the $25 billion in revenue?

In 2013, Nike roughly produced 900 million units. Given that Nike employs 48,000 people, that corresponds to 18,750 units per employee each year. This would constitute an impossible amount of work to be carried out by a Nike employee. To achieve this production volume, Nike outsources most of its production to 800 contract factories around the world. This increases Nike's workforce to over 1 million people.

Facing challenges in both workplace conditions and quality, in the late 1990s Nike made a major move in implementing the lean production system. A Toyota consultant was hired to help translate TPS to the needs of Nike's footwear operations, which is where the company had decided to implement lean principles first.

The features of the Nike implementation of the TPS included, among other things:

• Organizing production around the flow of the footwear.

• Balancing the production process using takt time.

• Eliminating waste through the reduction of buffers and work-in-progress inventory.

• Involving the workforce in quality control and process improvement.

• Stabilizing the process by reducing variability and standardizing work.

Nike also developed a Manufacturing Index that the company now uses to evaluate its contract manufacturers on the dimensions of quality, cost, delivery, and sustainability. Factories that meet or exceed the current standards are rewarded. As a result of these efforts, Nike reportedly was able to achieve substantial improvements in productivity, defect rates, and delivery times.

QUESTION

Vietnam is the country that has the most workers involved in Nike contract manufacturing. Though wages have increased in Vietnam, the country's 2014 minimum wage rate was still under $150 per month. Does Nike's emphasis on lean operations help or hurt its Vietnamese workforce?