Nike 2010 Annual Report Download - page 19

Table of Contents
There could be a significant disruption in the supply of fabrics or raw materials from current sources or, in the event of a disruption, we might not be
able to locate alternative suppliers of materials of comparable quality at an acceptable price, or at all. In addition, we cannot be certain that our unaffiliated
manufacturers will be able to fill our orders in a timely manner. If we experience significant increases in demand, or need to replace an existing
manufacturer, there can be no assurance that additional supplies of fabrics or raw materials or additional manufacturing capacity will be available when
required on terms that are acceptable to us, or at all, or that any supplier or manufacturer would allocate sufficient capacity to us in order to meet our
requirements. In addition, even if we are able to expand existing or find new manufacturing or sources of materials, we may encounter delays in production
and added costs as a result of the time it takes to train suppliers and manufacturers in our methods, products, quality control standards, and labor, health and
safety standards. Any delays, interruption or increased costs in the supply of materials or manufacture of our products could have an adverse effect on our
ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long−term.
Because independent manufacturers manufacture a majority of our products outside of our principal sales markets, our products must be transported
by third parties over large geographic distances. Delays in the shipment or delivery of our products due to the availability of transportation, work stoppages,
port strikes, infrastructure congestion, or other factors, and costs and delays associated with consolidating or transitioning between manufacturers, could
adversely impact our financial performance. In addition, manufacturing delays or unexpected demand for our products may require us to use faster, but
more expensive, transportation methods such as aircraft, which could adversely affect our profit margins. The cost of fuel is a significant component in
manufacturing and transportation costs, so increases in the price of petroleum products can adversely affect our profit margins.
In addition, Sojitz America performs significant import−export financing services for most of the NIKE Brand products sold outside of the United
States, Europe, Middle East, Africa, and Japan, excluding products produced and sold in the same country. Any failure of Sojitz America to provide these
services or any failure of Sojitz America’s banks could disrupt our ability to acquire products from our suppliers and to deliver products to our customers
outside of the United States, Europe, Middle East, Africa, and Japan. Such a disruption could result in cancelled orders that would adversely affect sales and
profitability.
Our success depends on our global distribution facilities.
We distribute our products to customers directly from the factory and through distribution centers located throughout the world. Our ability to meet
customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies depends on the proper operation of our
distribution facilities, the development or expansion of additional distribution capabilities, and the timely performance of services by third parties (including
those involved in shipping product to and from our distribution facilities). Our distribution facilities could be interrupted by information technology
problems and disasters such as earthquakes or fires. Any significant failure in our distribution facilities could result in an adverse affect on our business. We
maintain business interruption insurance, but it may not adequately protect us from adverse effects that could be caused by significant disruptions in our
distribution facilities.
We rely significantly on information technology in our supply chain, and any failure, inadequacy, interruption or security failure of that technology
could harm our ability to effectively operate our business.
We are heavily dependent on information technology systems across our supply chain, including product design, production, forecasting, ordering,
manufacturing, transportation, sales, and distribution. Our ability to effectively manage and maintain our inventory and to ship products to customers on a
timely basis depends significantly on the reliability of these supply chain systems. Over the last several years, as part of the ongoing initiative to upgrade our
worldwide supply chain, we have implemented new systems in all of our geographical regions in which we operate. Over the next few years, we will work
to continue to enhance the systems and
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