How Does Nike 'Really' Manufacture Their Products? (Explainer)

Nike is one of the most popular brands in the world, well-known for its high-quality quality footwear and athletic apparel. With more than a thousand retail stores and over 70,000 employees worldwide, it has reached a global revenue of approximately $42.3 billion.

It’s no surprise then that Nike is currently the largest supplier and manufacturer of athletic goods in the world. It’s famous for its ability to reap huge profits and keep costs low by using hundreds of factories and subcontractors. At the same time, Nike generates a significant amount of controversy due to the way it operates its supply chains, making news for its infamous ‘sweatshops’.

Below, we’ll outline exactly how Nike manufactures its products, and outline some of the reasons why the large company operates its supply chains in the way it does.

Overview of the Nike Company

Nike is an international conglomerate that produces a vast range of sporting goods. This includes virtually anything from athletic apparel, hats and shoes to accessories and equipment. Its customer base reaches the entire world: from Europe, North America, Middle East and Africa to Latin America, and Asia.

Originally called Blue Ribbon Sports, the company was founded by Philip Knight and William Jay Bowerman in January 1964. The company first began its operation in Eugene, Oregon.

At the beginning, times were of course tough. The company sold over a thousand pairs of Japanese running shoes in its first year, earning a mere $8,000. But they bounced back quickly. By the following year, their sales boosted to $20,000. The company soon opened a store in 1966 in California. From then on, it made greatly impressive sales, causing it to expand its operations.
In 1971, Blue Ribbon Sports changed its name to Nike and embarked on a major rebrand. It was also during this time that the company has started using its famous ‘Swoosh’ logo.

Nike went on to completely dominate the athletic shoe market in the United States (and, over time, the world). Television and print advertisements were used to further increase its impact – the famous “Just Do It” slogan was coined in 1988. In 1990, the company set up its headquarters in Beaverton, Oregon.

Today, Nike continues to attract consumers. It is still well-renowned for its excellent designs and high-quality products. It has also started using environmentally friendly materials in its products such as recycled materials, organic cotton, bamboo, and hemp.

How Nike Manufacturers Its Products

Nike, for the most part, outsources its production. They don’t own their own manufacturing plant. Instead, it relies on various factories all over the world to produce the goods it then sells. We’ll outline how this works in more detail below.

Outsourcing Products Overseas

Nike does not own any production facility. It enters into contracts with third parties to manufacture the products we all know and use. Due to the high demand for their goods, each of the factories the corporation uses specialises in creating a certain type of product. The company has to contract numerous factories to create and distribute the products efficiently and quickly.

Nike relies on a broad swathe of Asian-based manufacturers throughout its supply chains. It also owns factories across China, Vietnam, Cambodia and others where their products are made.

Nike’s supply chain is absolutely enormous – their products being crafted by over 1 million labourers in over 530 different factories and in over 40 nations.

Once the products are manufactured, they are then distributed to their retailers. At present, Nike has over a thousand stores and outlets in different parts of the world. It also distributes third-party stores – and those numbers escalate well into the thousands.

It’s therefore not surprising that Nike needs to produce large quantities of products in order to keep up with its global retail strategy.

Given that large brands like Nike outsource the manufacturing component of their supply chain, it is easy to see why many companies do the same, and even engage international sourcing experts to help them do it right.

Why Nike Outsources Its Manufacturing

Nike has manufacturing locations across various countries, especially in Asia. This includes Indonesia, the Philippines, Japan and Vietnam. They also have manufacturing sites in other countries, including in Italy.

However, most of its sites are found in China. That’s not really surprising since the country is vast, has plenty of residents willing to work and boasts a population of over one billion people. Nike contracts over a hundred thousand workers in over a hundred factories in China.

Here’s why Nike chooses to outsource its manufacturing in the way it does.

It Is Cheaper to Outsource

The primary reason why Nike outsources its products overseas is purely financial – because it is able to cut costs. The cost of wages in counties like China is low – the average wage of a private sector worker working in urban areas totals around US$9,000 a year. At the same time, the rate of production is high – the country’s total manufacturing output in 2020 escalated to $3,853.81 billion.

So, naturally, Nike is able to produce large quantities of products without having to spend the larger sums of money required in the United States or Australia.

Indeed, it is much cheaper to outsource in Asian countries than in North America. This is why a lot of major companies opt to contract factories and workers across the Asian countries. It’s in those countries they are able to maximize profit margins. They’re able to cut costs by paying less money for plant operations and employing factory workers at a lower rate.

By cutting costs, Nike is also able to invest in other aspects of the business such as advertising. Since it has more money to advertise its products, it is able to work with high-profiled celebrities and boost their own brand awareness. Moreover, by reducing its operational costs, Nike is able to attract company investors and retain them. It is able to have more money for increasing the profitability of the business.

Outsourcing Can Reduce Risks

By outsourcing its production operations, Nike has also made the effort to reduce its legal obligations to pay tax in its home base. It has also managed to create itself a system whereby they have adopted a smaller amount of risk when manufacturing its goods – namely, its liability under insurance.

Outsourcing Can Increase Competitiveness

Since Nike is able to produce products more efficiently while reducing costs, it is able to price the products more competitively. Its prices are neither too high nor too low. This is why a lot of people are able to afford Nike shoes and apparel. The products are reasonably priced and tend to be high in quality.

In addition, Nike is able to keep up with other companies that produce similar products. Therefore, it’s able to increase its competitive advantage – and that is why it is able to corner its target market.

Nike continues to be a supply chain powerhouse of the world

Nike is often thought as one of the most popular brands in the world. For decades, it has been admired by consumers everywhere across virtually all continents.

The company is highly skilled at designing and creating its products, and it’s managed to come from humble beginnings to the athletic powerhouse of the world. It’s used powerful marketing strategies to showcase its brand and boost their sales and continue to do so to this day.

Nike has proven that outsourcing can be a powerful strategy for leveraging business. Through its outsourcing, Nike was able to outdo its competitors and rise to the top.

Outsourcing, generally, can be a very useful way to improve the bottom line of any business that sells goods. Not only can you reduce your costs, but fuel growth and sustainability in the coming years. Today, adopting a business model that centers on outsourcing is crucial for any business that wish to stay ahead of its competitors.

Get in touch

If you’re thinking about outsourcing your manufacturing, then learn from Nike – the world’s economic powerhouse. Given that huge brands like Nike outsource their manufacturing for the various reasons outlined above, then you too can outsource your manufacturing.

At The Sourcing Company, we help businesses large and small take advantage of opportunities across the world when it comes to outsourcing manufacturing. With our expertise in international sourcing, your business can gain that competitive advantage in getting the right suppliers manufacturing your products, allowing you to expand your business and serve your customers. Get in touch with our team to learn more.