Presentation Transcript
Offshoring :Offshoring Nike and the Footwear and Apparel Labor Market
iMBA 544 – HR Management
Team Ideation
Offshoring :Offshoring Production relocation across national boundaries to take advantage of cost savings and other benefits in countries where products or services can be produced more efficiently. (Cheung, Rossiter, Zheng, 2008)
Pros & Cons :Pros & Cons Pros
Reduced Labor Costs
Improved Proximity to Materials
Superior Cultural Work Ethic
Cons
Cultural Differences
Cost of Monitoring a Global Supply Chain
Key Outcome Variables :Key Outcome Variables Labor Cost
Relative Labor Sources
Logistics Cost
Relative Socio-Political Risk Profiles
Potential Cost Savings :Potential Cost Savings Companies that globalize their cost structures to include low-cost countries can realize savings of 20-40% in the landed costs of their products. (Boston Consulting Group, 2004)
Relative Labor Costs :Relative Labor Costs
Nike :Nike Market Cap of $21.6 BB
2008 Revenue $18.6 BB
2008 EBIT $2.5 BB
Nike Labor Breakdown :Nike Labor Breakdown
Labor Availability :Labor Availability
Right HR Costs :Right HR Costs Huselid’s HR Scorecard
Benchmark industry labor force split
Nike is a leader in apparel and footwear manufacturing
To remain competitive, Nike must not trail the industry norms for labor cost
Potential Savings Erosion :Potential Savings Erosion
Recommendations :Recommendations No Cost advantage to move manufacturing to U.S
Nike can not afford to bring jobs home
Nike 2008 EBIT was $2.5 BB
US labor force = $6BB-$12BB increase
Huselid’s scorecard signals imbalance
Recommendations :Recommendations Strong alignment with Huselid’s HR Scorecard
- Policies in line with business strategies
- Assessment tools
- Tailored HR management programs
Recommendations :Recommendations Stick to offshore labor for production activities
Nike can still employ in the US
New technology can reduce overtime in offshore factories
Engineers, product development, technological advances
Questions & Answers :Questions & Answers Thank you for your time this evening.
You are invited to present any questions at this time
References