New Balance Corporation Operation Management Recommendation Essays Examples

New Balance Athletic Shoes originated in America in 1906. The owner, William J. Riley, wanted to create a company that produced a superior type of shoe the people knew would fit comfortably and relieve foot discomfort. At first, New Balance only sold arch supports and shoes that were custom made according to specifications from a doctor. In 1935, he formed a partnership with Arthur Hall, but the company went in a new direction in 1961 when it introduced The Trackster, the first shoe specifically made for running, and distributed it through retail stores. The New Balance corporation is not the largest in the world, but there are a number of characteristics that made it unique in the marketplace of athletic shoes. Through the use of 15 topics to analyze the processes of production, it is possible to create a plan for growth without sacrificing the positive differences that set New Balance apart from the competition.
An analysis using the SWOT (strength, weaknesses, opportunities, threats) technique shows effective methods New Balance employs and areas that need improvement. The strength of New Balance lies first in the quality of the shoes manufactured. In addition, the company has an excellent corporate culture and a dedicated sales force. It understands the needs of its primary customers, and openly demonstrates social responsibility. The method of production allows for low inventories and very short time between ordering and delivery to distributors. However, there are some problems with staying current with market trends regarding fashionable footwear as opposed to performance shoes, and for a time there were issues with delivering products in a timely manner. While this concern has been addressed, the memory of the situation still influences corporate decisions in a positive way.
The New Balance shoes have a reputation for excellent fit and comfort. For the athlete, the technology for cushioning allows for the best performance in sports applications. In addition, New Balance is the only company that offers three different widths for consumers that have problems find shoes for unusual sizes. However, with a market primarily focused on an age group from 26 to 29, the customers are maturing past a time when performance is the main reason for buying an athletic shoe. While comfort is still very important, the shoes also have to be fashionable with various color combinations, styles, and decorations. This new aspect to design has taken a period of time for New Balance to adjust, but the development department for this product line now takes only 60 to 90 days to redesign a shoe style. In contrast, the design for a performance shoe can take up to three years.
A major problem at one point was the ability to deliver products to distributors quickly. Suppliers of raw materials are in China to cut costs, but now the materials are shipped to factories in the United States for assembly inside the country. While the cost to do this is about $13 more than putting the shoes together in China, the delivery time to distributors is down to about 24 hours in most cases. In addition, this process does not require large, expensive inventories and also provides jobs for American workers.
Product innovation continues to be important to the New Balance company. It consistently looks to fashion trends to keep current with styles, continues to use new technology to improve the function of the performance shoes, and retains a research and design department to look to developing new types of shoes to maintain its reputation for high-quality footwear. For instance, athletes appreciate the new Absorb-EX-a premium visible cushions. Also, younger customers enjoy cushioning that is responsive to less impact to use on a daily basis. This type of constant improvement is what has created the reputation New Balance deserves.
Competitors such as Nike and Adidas promote the sale of their shoes in any retail store. But New Balance prefers to be distributed through small retail shops that pay close attention to personal service for its customers. The largest retail customer for New Balance is Foot Locker. There are two types of retail distributors for New Balance shoes: specialty dealers and key accounts. This allows the company to control distribution and sales to maintain quality service. It doesn’t use accounts in-house, relying instead on independent salespeople who are not employed by New Balance; the receive commissions and distribute only shoes from New Balance. The compensation and treatment they receive keep them loyal to the company for years.
As mentioned previously, New Balance uses suppliers in China to produce the sole and uppers for the shoes and they are sent to the United States for assembly. Originally, the shoes were assembled in stages and passed from one department to another. They found it was more efficient to move the pieces through a process called “cut-through-assembly”. This process changed from assembling batches of shoes to putting them together pair by pair. This method allows for a much shorter period of time between when the order comes in from the distributor until it is shipped from the factory. The goal is to have the shoes to the store within 24 hours, but definitely no later than four days; the longer delivery time is a result of surprise orders without sufficient warning.
Many companies now use Six Sigma methods of management, but New Balance prefers “lean manufacturing”. It is adopted from the New Balance Executional Excellence (NB2E) used by the Toyota Production System for producing cars. It is this method that allows for such a fast delivery time of the product from the factory and allows for several different types of shoes to be produced in a single day. Before New Balance started using the NB2E method, the factory would produce a large number of shoes and place them in inventory. The original performance shoe, the 991, was promoted heavily so in order to have all the sizes and colors, a large number were produced and stored. The sales of the shoe were successful, but the cost of maintaining the inventory was expensive. The switch to the NB2E methods demanded a total realignment of the factory from individual departments for each phase of assembly to a more continuous flow. It was a challenge to maintain production while the changes took place.
Working for New Balance is an experience deliberately promoted by the company. Employees are carefully screened and trained to become part of the team. Each employee receives an education in involvement, improvement, and leadership to encourage promotion. New Balance does not have a union employee base because workers are cross-trained from one department to another. While this allows for flexibility to go where help is needed, it does not allow for the strict job descriptions unions require. Also, the factories are constantly trying new ideas for improvement and union membership inhibits that type of work environment.
When analyzing all the components of the New Balance production and distribution processes, there are some areas for improvement. Suggestions are reviewed and implemented if it is decided they are feasible. Since the company is privately owned, management has the ability to do this without having to go through the channels of approval and planning. If a new process doesn’t work as expected, there is no problem with returning to the original method. New Balance understands its market and has set obtainable goals for growth and expansion. Without the need to satisfy stockholders, the corporation has the freedom to progress in a comfortable fashion while keeping the attitudes and values with which William Riley originally started the New Balance company.