supply chain negotiations
Profile of Contract Factories
At the end of FY11, NIKE, Inc.’s three product engines – footwear, apparel andequipment – source product from more than 900 contract factories that employ more than 1 million workers in 50 countries. Factories represented are “above-the-line” NIKE, Inc. contract factories. Above-the-line refers to all product manufacturing sites directly contracted by NIKE, Inc., licensees or agents delivering finished goods ready for retail and/or public consumption bearing the NIKE, Inc. brand logos and marks. Excluded, for example, are material suppliers. We began including Affiliate data in FY09; we formerly reported only on NIKE Brand data.
While there is a mutual understading between Nike corporate and its supply chain that a co-dependent relationship must exist for both sides to maintain profitability, it is clear that Nike has the upper-hand during all negotiations. From a pure supply and demand standpoint, Nike has the luxury of hand-picking suppliers from across the globe. If one supplier is not willing or able to "play ball" by Nike's rules, it can simply find another supplier. It is the contract-factory supplier needs Nike's business, and therefore is expected to uphold the expectations set by corporate.
During negotiations between Nike and potential suppliers, Nike requires that is suppliers agree to its Code Leadership Standards. On its Web page, https://www.nikeinclicensees.com/being-a-licensee/program-fundamentals/,
Nike asks the following of its suppliers:
"While Nike's Code of Conduct lays out the values, intentions and expectations we have of contracted factories, our Code Leadership Standards articulates the
steps for how factories can put these into practice and how we measure their
efforts and compliance. Code Leadership Standards (CLSs) are the detailed
guidelines/requirements on implementation of the Code of Conduct and should be available to all employees. The Code Leadership Standards cover the areas of Management, Environment, Safety and Health. Nike, Inc. requires the contractor to follow local legal regulations when they are stricter than our standards."
In addition to these leadership standards, Nike has created performance measurement standards by which its suppliers must adhere to the following minimum requirements, which are found at: https://www.nikeinclicensees.com/being-a-licensee/performance-measurement/:
MINIMUM REQUIREMENTS
As a responsible Licensee/Agent entering the new Pay2Play [P2P] program (see P2P details in the Maintain a Factory section), there are certain
performance expectations to adhere to. The expectation is ownership of
performance feedback, minimum quarterly reviews, maintenance of factory profile data accuracy in CROnline, management of external stakeholders during performance reviews, reporting of yellow and red factory action plans and future sourcing plans.