We believe in putting our energy where we have the most impact. Our footprinting work has confirmed that the finished goods manufacturing part of our value chain is where many of our biggest impacts on people and the environment are felt. Our systems mapping has helped us understand the interrelationships and identify our points of leverage in the complex manufacturing supply chain.
Our overall goal is to raise the bar for performance in our contract footwear, apparel and equipment manufacturing. We are working in our own supply base and we share our experiences in order to be a catalyst for positive change across the industry. We are on track to meet our manufacturing commitments and have begun to look ahead, redefining what manufacturing will look like for NIKE in the future
During FY12 and FY13 we made progress in transforming our relationships with contract factories by using our Manufacturing Index (MI) to help determine whether to buy from them. A component of the MI is the Sourcing & Manufacturing Sustainability Index (SMSI), which combines ratings for lean manufacturing, labor and health, safety and environment. Our FY20 target is for all contract factories from which we source to be at the bronze level or above on the SMSI. The MI also assesses strategic metrics including country risk, leadership planning and development, and transparency in which we have included public reporting on labor and environment at the factory group level as one of the criteria for gold-level status.
Decisions about whether to source from a factory are complex. Our indices provide a way to score factories on a diverse set of factors, providing a valuable decision-making tool and helping to improve the efficiency of the sourcing process (See how we measure sustainabilty in sourcing & manufacturing). During FY13, 33 factories entered the source selection process and 70% were approved. The average time a factory spent in NIKE’s sourcing selection process was 152 days, down from 246 days in FY12.
The SMSI also gives us a platform to incentivize performance improvements. Factories rated below the bronze level are required to pay for third-party audits until their performance improves. Bronze or better factories receive audits from NIKE and third-party auditors. During FY12 and FY13 we began offering beyond-compliance assessments to contract factories to help them measure and achieve higher levels of performance, and also began to advise bronze-rated contract factories on a range of topics, including energy, water and human resource management.