Customer service is one of the keys to Nikes’ overall success especially on the internet. Nike takes the upper hand in providing the customer with exceptional and incomparable customer service. Nike boasts guaranteed express shipping and order processing. This is the most vital part of their e-commerce. If a customer cannot receive a good quickly and correctly they will opt not to by products via the website anymore. If Nike cannot quickly meet customer needs by timely processing and shipping they will see a dramatic decline in their flourishing internet retail sales.
The key objective in Nike order processing is to process, prepare, package and ship an order within 3-6 business days. Customers generally order between 1-10 items and sometimes more. Nike’s home shipping plant overseas has limited availability of hours to complete orders placed online as well as other limited resources. Nike has recently implemented a new type of product group among their general shoe line offered through their. Customers are now in addition to ordering already designed shoes, able to design their own custom sneakers. Nike is spending millions of dollars to manufacture these custom sneakers. They want to ensure that they are making a considerable profit return on these custom shoes compared to the basic Nike sneaker.
Recently, the Research and Development team was given a project by upper management to review and analyze the working operations involved with the custom shoe versus the non custom shoe. It is known that the custom shoe is going to bring in some amount of profit. However, the time used to complete the processing, preparation, packaging, and shipping operations for the custom shoe are considerably greater than the time used to for the non custom shoe. The objective of the team is to find a way to maximize total profit while offering both custom and non custom shoes.
Nike needs find out if it is really worth it to offer custom shoes on their website. It is up to the R&D team to find a method to solve this problem. Linear programming seems to be the best way to find a solid conclusion. The resource constraints within this problem are the limited hours available to perform each of the four operations involved, computer order processing speed and availability within the server, number of employees to perform tasks, and available amounts of shipping resources (i.e. trucks available to get orders out to shipping locations). After the R&D team has reviewed the current problem and its constraints they must examine the alternative courses of action to choose from. Nike produces the 2 types of shoes and must use linear programming to decide how to allocate the limited resources and report to management which is the most efficient combination of shoes to produce and sell. Should Nike devote more of its resource capacity to make more custom or non custom shoes? What ratio should Nike allocate its resources in? Linear Programming will figure this out. The number of items ordered must be greater than or equal to zero.
Profit from the purchase of regular shoes: $25
Profit from the purchase of custom shoes: $45
X1: Profit from Regular Shoes
X2: Profit from Custom Shoes
Model: Max [25X1+45X2]
s.t. .05X1+.35X2≤20 Order Processing
.15X1+.5X2≤30 Order Preparation
.2X1+.3X2≤22 Order Packaging
.15X1+.15X2≤12 Order Shipping
X1≥0
X2≥0
Order Processing
.05X1+.35X2≤20
.05X1+.35X2=20
X1=0, X2= 57.14
X1=400, X2=0
Order Preparation
.15X1+.5X2≤30
.15X1+.5X2=30
X1=0, X2=60
X1=200, X2=0
Order Packaging
.2X1+.3X2≤22
.2X1+.3X2=22
X1=0, X2= 73.33
X1=110, X2=0
Order Shipping
.15X1+.15X2≤12
.15X1+.15X2=12
X1=0, X2=80
X1=80, X2=0
Objective Function
25X1+45X2
25X1+45X2=600 25X1+45X2=1200
X1=0, X2=13.33 X1=0, X2=22.66
X1=24, X2=0 X1=48, X2=0
Solve for point B:
Processing & Preparation
.05X1 + .35X2= 20
.15X1 + 1.05X2= 60
.15X1+ .5X2= 30
.55X2 =30
.55 .50
X2= 54.55 → X1=18.15
Solve for point C:
Preparation & Shipping
.15X1 + .5X2 =30
.15X1 + .15X2 =12
.35X2 = 18
.35 .35
X2=51.43 → X1= 28.66
Extreme Points:
Conclusion:
The findings of the R&D team provided upper management with information through linear programming. They concluded that, in order for Nike to continue sales of both regular and custom shoes while earning optimal profits, they must complete 51 custom shoe orders and 28 regular shoe orders. Custom shoes require more time for three out of the four operations needed to provide the customer with the shoe within the necessary time frame. If Nike could successfully reduce the amount of time needed to complete custom orders, then their profits would increase.
Based on R&D’s findings, they came up with the following methods to increase productivity thus profits. Order processing could be fully automated so the need for human interaction with customers will not be needed in most cases. Order preparation could be simplified through the use of more highly automated machinery with capabilities for the mass handling of shoes. Packaging time can be reduced by grouping orders by the same type of shoe and/or shoe quantity. This order batching and task specification will help to create routine process when packaging, making the move more quickly. Shipping will not change in this situation because there is a standard amount of time allotted by Nike due to shipping policies of the company.
