Discover more from PackageX Comics
How Nike drives customer loyalty with logistics, and challenges Nike faces by centralizing logistics operations in an ERP
I switched things up this week and did some digging into the customer experience, logistics technology, and logistics team at Nike. Everyone I know who buys Nike products is loyal to the brand, so, in the spirit of this newsletter, I wanted to explore the role logistics plays in this.
I already knew that Nike primarily distributed products from its 2.8 million square-foot distribution center in Memphis, Tennessee, but was surprised to learn that Nike is building out a regional distribution network with a dedicated rail called the “sole train”.
With the dedicated DC, Nike controlled a significant part of its last mile logistics in the US to influence better customer experiences. But with the train and new DCs in California, Pennsylvania, and Dallas, the company can add greater speed to the last mile which is especially important for ecommerce, the channel responsible for 27% of Nike sales.
Nike delivers convenience while reducing ecommerce logistics costs
At the heart of the Nike experience is the loyalty program that, until just weeks ago, offered free shipping on any order as the main benefit of signing up. This was even better than Amazon — free shipping for free. No paid membership required or minimum order threshold. They were beating the company that defined logistics-driven loyalty at their own game.
But company margins were decreasing due to higher logistics costs so now Nike requires a minimum order of $50 for free shipping.
Nike is also aiming to decrease logistics costs while delivering additional convenience for customers with store pickup. Nike recently enabled store pickup functionality on its ecommerce site and the fulfillment option is being promoted at the top of every page.
This is a step in the right direction for driving loyalty by logistics but there are still some kinks to iron out. For example, store pickup selections on category pages do not flow through to PDPs and there is no multi-fulfillment checkout. In other words, you can’t pick up one item from a local store and get another item delivered from the same cart.
While the checkout logistics are imperfect, Nike has counterbalanced it with great UX design and multiple shipping options that balance cost with convenience. Signed-in Nike members get standard shipping for free and can select faster “Expedited” or “Express” shipping at discounted rates.
Nike logistics data funnels into an ERP
Some of the ecommerce logistics kinks might stem from the ERP by SAP that Nike has used since the 1990s to manage supply chain, inventory, and logistics.
According to the company’s job board, nearly every logistics employee who interacts with SAP must also use spreadsheets, signaling an inefficiency in SAP’s ability to effectively share logistics data. First-mile product leads who review TMS data must even advise fixes in SAP while regional transportation analysts must create and maintain dashboards via Tableau and Alteryx to troubleshoot delivery issues.
I’m sure Nike knows that an ERP is not the best tool for managing logistics but it’s hard to cut ties with software when it's so embedded in company culture.
Nike teammates catch ERP rebounds
Similar to how ecommerce UX design offsets shortcomings in checkout logistics, Nike’s logistics employees — or teammates as Nike calls them — offset shortcomings in Nike logistics technology.
In the distribution center, teammates such as “DC Athletes” work with “Inventory Coaches” to hustle inventory off the dock while “Traffic Pointguards” dribble order routing tables in a WMS.
On the customer-facing side, marketplace operations specialists “respond to routine questions regarding order status and tracking information” for Nike’s largest retail accounts and communicate with customers and teammates by phone, email, and reports.
Outdated logistics technology is the root cause of analog communication and manual reports, but it’s clear that Nike is creating some interesting applications with all the data in SAP. For example, marketplace operations analysts “use data driven decision engines to influence how ecommerce inventory is strategically placed across the network” to balance a premium consumer experience with logistics costs.
Nike also has logistics veterans like Wayne Cochran who started as a retail planner around the time SAP was implemented and, after 20 years, is now the head of manufacturing and logistics for Nike Air. Within the confines of the current technology, he has created a strategy to build resilience, visibility and transparency into the supply chain.
With teammates like this, it’s harder to notice when technology is blocking growth. However, if Nike wants to increase margins and further improve customer experiences, a change is in store that doesn’t include an ERP on logistics’ first string.