Student

HOW HAS NEW BALANCES OPERATIONS STRATEGY SUPPORTED ITS COMPETITIVE OBJECTIVE

New Balance has made many key operating decisions that have set it apart from much of its competition. New Balance has always maintained that it is a company focused on manufacturing and operations rather than on marketing. This foundational principle guides the strategy around which the company is organized and run. This is a strategy that greatly differs from much of its competition, which focuses on very outwardly on publicity and celebrity to create reputation. One of the key differences between New Balance and its competitors is that New Balance has remained a private corporation. In doing so, New Balance has the ability to be a much more flexible and free-flowing company than its publicly traded counterparts. This freedom has allowed the company to use slightly unorthodox marketing, manufacturing, and sales techniques to attract a loyal customer base. Recently, New Balance has started to focus more on design and innovation in its product offerings in order to stay competitive in the marketplace.

HOW COSTLY WAS NEW BALANCES DECISION TO MAINTAIN 25% OF ITS MANUFACTURING IN THE US?

New Balance continues to manufacture 25% of its volume as final product assembly in one of five factories in the northeastern United States. Some of these domestically assembled shoes are “cut-through-assembly” product, meaning New Balance imports finished soles and the raw material for the uppers from Asian suppliers, allowing the company to finish manufacturing the uppers in the United States and then attaching the uppers to the soles. The other domestically assembled shoes are “sourced-upper” products, meaning New Balance imports finished uppers and soles from Asian suppliers and then finishes the assembly by attaching the uppers and soles in the United States. Although the company relies on foreign suppliers for the majority of its production, it still manufactures about a quarter of its products in the United States, which is more expensive than 3 using foreign companies. While this may seem like a costly decision, the fact that New Balance is able to maintain a quarter of its production domestically, while its competitors do not, allows the company to have a distinct image in the minds of its customers. This is one way that the company is able to set itself apart from the likes of Nike and Adidas. Another advantage to producing shoes domestically is the fact that the transportation period from manufacturing to warehouse is significantly shortened. Even with these positive aspects, the company may want to look at ways to decrease this total cost, possibly by outsourcing a portion of the “cut-through-assembly” shoes to an Asian supplier, since it is $13 more expensive for each pair of shoes produced domestically. This would lower costs and increase profit, while shoes are still produced domestically to help maintain the company’s positive image. Another option is to increase the number of “sourced-uppers” produced in the United States, since it is only 50 cents more expensive to produce domestically while at the same time decreasing the amount of “cut-through-assembly” units produced in the United States. This option may allow the company to maintain its current 25% production in the United States, while lowering the total cost of producing domestically. If New Balance takes this recommendation and outsources a larger portion of the “cut-through assembly” shoes, less manufacturing will be done in the United States and therefore, some plants in the country can be closed. We suggest that the plants in Norway, Maine; Norridgewock, Maine; and Boston, Massachusetts be closed, as they are located farthest from the materials warehouses.

HOW SHOULD THE DAVIES REACT ADIDAS/REEBOK MERGER?
New Balance to stay true to its identity and the legacy it has created for itself over the years. However, in order to remain competitive we recommended a number of changes in the manufacturing and the supply chain areas of the company to increase efficiency and cut costs.

WHATS ASPECTS OF NEW BALANCES OPERATION AND STRATEGY SHOULD THEY CHANGE?