Case Study - Centralised distribution at Nike

 'centralised and specialised, but not standardised

Nike has a central customer service centre (distribution centre) located at Laakdal in Belgium. The centre is 200,000 square metres in size and serves 45,000 customers in EMEA with footwear, apparel and equipment. The centre receives products from supplier factories around the world for distribution to retail clients both before the start of all four seasons each year, and during a given season. Prior to the start of a season, when work is at a peak, the workforce stands at some 2,300 operational staff. Off peak, that drops to 1,350 staff. Deliveries are very time-critical, given the seasonal nature of the business. Retailers demand In-store availability on day one of a new season. The centre Is a clear example of a company deciding to centralise receiving, storage and shipment to customers at one location in Europe. The benefits Include consolidation of inbound shipments, lower inventory levels and better delivery service (in comparison to fragmented warehouses scattered around Europe). This does not mean, however, that the logistics operations are standardised for all flows of goods and all customers.

Not every shipment is handled In a standard way through a single distribution pipeline:

• About a quarter of the volume of shipments Is shipped to customers directly. These are larger shipments, such as full pallets for larger customers - for which there is no need to consolidate with other shipments. As a result, it is cheaper and quicker to make these shipments directly.
• New growth areas that are served from the centre are Russia, Turkey and South Africa. For Russia, the first satellite centre with small inventories was recently opened to enable faster local replenishment of selected products.
• Selected shipments to selected retailers are dealt with by a materials handling operation at the centre. This mainly involves labelling and re-packing operations.
• Some retailers share weekly point of sale data with Nike, enabling it to replenish inventories based upon actual sales.

Questions -

1. What are the reasons for a company, such as Nike, with a centralised distribution centre to ship some products directly to customers, not through the distribution centre?

2. What are the reasons to start satellite centres when a company such as Nike has a centralised distribution centre?

3. What are the pros and cons of locating materials handling operations, such as labelling and packing, in a distribution centre, as opposed to in a factory?

4. What are the pros and cons for a company such as Nike to take on these materials handling services as opposed to leaving them to retail customers?

WORD COUNT: 3500

Minimum 22 references with at least 12 academic.