I had the opportunity to speak with a Nike executive about how the company has moved into the world of mass-customization. Many people have heard about their partnership with Flex to build mass-customized shoes in Mexico, which is a big shift for the company from it’s largely Asia Pacific supplier network. Although it is certainly not abandoning Asia, Nike is moving towards more near-shoring due to the need to mass-customize and meet many of the requirements for VELOCITY that we have discussed in this blog recently.
Nike went about creating a three-tiered customized supply chain for their shoes. Shoes are a relatively complex assembly, and are hand-made for the most part in China. In fact, Nike hired a manager to go over and begin production of shoes in a Nike-owned Chinese factory, run by one of their employees. They approached the employee about buying the factory from them, as they made the move to a complete off-shore provider.
As Nike moved into an e-commerce strategy, they decided to offer three levels of customization. The first was their Core Customized shoe, which had 15-20 choices. The price point was around $200, but with the customization, “some customers designed some really ugly shoes. A midpoint was a simpler, faster model with 4-6 choices, that could be made in 2 weeks or less. The third was a more standard shoe that they called the “Sub-7”, which is one where they take an order, the product is customized onshore or near shore with some stock inventory and light customization and personalization. This is 7 days from click to delivery. Nike also realized their expertise wasn’t in doing quick turn manufacturing in country, so they have made an agreement with Flex around what they call their “Manufacturing Revolution” – which is focused on mass production of slightly customized shoes and manufacturing them near shore, which in this case is Mexico.
The Sub-7 body of work involves taking finished goods and component inventory, and pulling it together with some personalization. For example, one was the elite sock, where a printer is run over a tube sock, which prints a number, initials, colors and in 5 minutes is shipped in a box to a consumer. A sock that sells for $20 now goes for $35. These proof of concepts turned into a broader scaled up project with Flex.
This is considered the “bottom of the pyramid” as it appeals to the broadest population, and is the lowest cost. There are a limited number of people for the mid-tier and the pyramid peak which is the core customized product. Most people can’t decide around 20 choices, and were designing really ugly products! By creating it more easily, with fewer options, teams can now buy shoes with names and numbers on them, hats, shirts, socks, all through Nike.com and outfit an entire team relatively cheaply. And it is selling exceptionally well.