Explore a company using Enterprise systems and identify the key challenges they faced during Covid 19. (Converse)

 Converse

Introduction

Converse is an American lifestyle brand, that most commonly distributes, and licenses sneakers, skating shoes, lifestyle brand footwear, apparel, and accessories. Converse was founded in 1908 and later bought by Nike in 2003. Today the company's portfolio includes products under the Converse, Cons, Chuck Taylor All-Star, Jack Purcell, One Star, and Star Chevron trademarks. 

As of 2019, Converse sold products through 109 company-owned retail stores in the United States and 63 stores in international markets. The growth of Converse as a casual fashion accessory contributed to $1.7 billion in revenue in 2014 and $2 billion in 2015.

From bankruptcy to Success

For Converse, it was a long road from leader to bankruptcy to successful multi-brand, multi-channel player. The road became rocky in the 1970s when competitors like Puma, Adidas, Nike and Reebok came on the scene. The company lost its long-time status as official shoe of the National Basketball Association. Loss of market share and other business issues forced Converse to file for bankruptcy in 2001, it was then bought by an investment group.

How?

Distribution

The most pressing need was replacing the 400,000 square foot distribution center in Charlotte, N.C., that serviced Converse’s production facilities in Asia. The center’s warehouse management system used a pick-to-cart system that took five-to-seven days to process an order. through continuous work and development, Converse now has two distribution centers that total almost one million square feet to provide storage capacity and handle distribution of two brands to wholesale, retail and ecommerce customers. Today, that cumbersome five-to-seven day order turnaround has been reduced to just two.

Investment in Intelligent material handling systems

Converse decided to approach a material handling specialist firm in order to progress their digital transformation and revolutionize their distribution centres. Solutions provided by the company’s 200 engineers include leading-edge conveyor and sortation systems, voice- and light-directed order fulfillment equipment, PLC controls, robotics, mezzanines and structures. The company also implemented a WMS systems. The system was built to accommodate Converse’s value-added services, and all of these systems are projected to work for 10-15 years, as well as being very scalable, so Converse can grow as a brand.

Impact of Covid-19

Sales Decrease

Converse like other brands, struggled heavily during the pandemic, with stores closing all around the world, there was an expected decrease in sales. In 2020, Converse's parent company, Nike, posted a 780 million dollar loss during the fourth quarter alone due to the required closure of stores globally. In order to understand how drastic the effects were, we can see that in that same period, one year ago, Nike posted a profit of 989 million dollars.

Supply Chain Issues

In 2021, congested ports and factory closures in Q1 due to COVID related issues, negatively impacted the flow of products to stores, fulfillment centers and wholesale partners. All footwear factories in Vietnam were closed due to government mandates relating to COVID related issues resulting in a ten week slow down in production.

Adaptation

However, Nike continued to adapt as the pandemic progressed. In 2022, Nikes Q1 reports show revenue went up by 16% compared to last year. Nike direct sales were also up 28% and gross margin improved to 46.5% as compared to 44.8% in Q1 last year.