Group

No.
8
Devanshu Kulthe
Shishir Sharma
Rituraj Dhir
Satyadeo Thakur
Nitin Tewari
Satvik Jani

Case
Overview

Operation
Strategy

Recommen
dation

Case
Overview

Operation
Strategy

Recommen
dation

Distribution Channels
Big Box

National Sellers

Urban Chains

Wal-Mart, Target, Sears

Sales estimated to $12bn

Foot Locker- 4000 store,

10% of Nikes sales were
50% of Foot Locker sales
The Sports Authority- 400
US stores, broader product
line
, Finish Line- 598 Stores,
closeout sales.

Strong ties with arbiters &

tastemakers of fashion
Sold brands at heavy
discount or catered very
specific needs of
customers.

Case
Overview

Operation
Strategy

Recommen
dation

New Balance
Unique Proposition of variable width.
Top selling product 990 series was worth $100
Emphasis on cutting edge R&D and meeting performance oriented
customer needs.
Provide JIT to retailers to reduce their costs
Kept excessive inventory to meet needs
Core competency- manufacturing and not marketing unlike others
Culture- Team oriented & empowering people
Endorsed by No One- Focus more on performance
Product Design Team
Incremental development of existing models
Incorporation of new technologies

Case
Overview

Operation
Strategy

Recommen
dation

Sales & Distribution

Category

No. of Accounts No. of Outlets

Total New
Balance
Revenues

Speciality Retailers
Elite Running
Stores

250

350

25000

New Balance
Stores

70

130

75000

Independent
Stores

3100

3500

150000

Key Retailers

Case
Overview

Operation
Strategy

Recommen
dation

Sales & Distribution

State of the art distribution centers which uses
technology to support and strengthen retailer
relationships.
New Sales force automation system helps representatives
to access inventory information , place orders and check
inventories.
Shipping quickly and accurately.
All these factors combined resulted in the ability to build
loyal customers.

Case
Overview

Operation
Strategy

Recommen
dation

Supply Chain Management

75 % of the volume is outsourced.
25 % of product assembly took place in U.S.
Cut through assembly (Imported finished soles + raw material for
uppers).
Sourced-upper(Imported finished upper + soles).

Asian
Suppliers

Supplier A
Soles
Finished
Upper
Upper Kits
Finished
Supplier B
shoes
Soles
Finished
Upper
Upper Kits
Finished
Lead Time=
shoes
7 weeks(2001)

Materials
Warehouses

Lead Time=5
weeks

Skowhegan,M
E
#1
Skowhegan,M
E
#2
Skowhegan,M
E
#3

4 weeks (2005)

Distribution
Centres
Supplier C
Finished
shoes
Supplier D
Finished
shoes

Lead Time=5
weeks

Lawrence,ME
Ontario,ME

Lead Time=3
weeks

Manufacturing
Plants
Skowhegan,ME
Norway,ME
Norridgewock,M
E
Lawrence,ME
Boston,ME

Lead Time=
8,9 days(2001)
2-3 days (2005)

Case
Overview

Operation
Strategy

Recommen
dation

Warehousing, Manufacturing and Distribution

$9 million or 4.5 weeks raw material inventory in three
warehouses.
Different process flow for cut through assembly &
Sourced Upper.
8.5 to 2.5 days lead time reduction through process
improvements.
Cost

LABOR

MATERIAL

OVERHEADS

Case
Overview

Operation
Strategy

Recommen
dation

Workforce
Lengthy Recruitment process.
6-8 weeks training with buddy "to enhance
teamwork.
Flexibility due to non union system.
Motivation by hourly based pay to team
based pay.

Case
Overview

Operation
Strategy

Recommen
dation

NB2E
Goal is to 100% deliver product within
24 hrs.
Batch production to pair by pair flow
production.
Remove Brute Force.
Reduce manufacturing cycle time.

Case
Overview

Operation
Strategy

Recommen
dation

Decision ?
React to Adidas-Reebok deal.
Better promotional tactics.
Operational improvements via NB2E.
Reduce Domestic manufacturing

Industry
Overview

Operation
Strategy

Recommen
dation

Current Operations Strategy

Unlike its competitors, NBAS focuses much more on
manufacturing & operations than on marketing.
The focus on width sizing & fit dictated product design.
New Balance has remained private. Hence, is financially
more flexible and free-flowing company than the public
listed companies.
Has a function-over-fashion approach : performance
product.
New Balance workforce: Hourly compensation system &
workforce training.

Industry
Overview

Operation
Strategy

Recommen
dation

Current Operations Strategy

Focuses on design and innovation to compete in the market.
TheNew Balance Executive Excellence (NB2E) : enhancing the product-quality as well as the
efficiency in manufacturing.
Domestic manufacturing ; Unlike competitors approach of outsourcing production.
Imported most of the finished soles (2 suppliers in China) and raw materials from Asia.
Placed smaller orders between 2000 & 10,000 on a weekly basis.
New Balance forged closer long term partnerships with its suppliers.

Assuming that the total U.S. market for athletic footwear was 400 million pairs
in 2005, how costly was New Balance decision to maintain 25% of its
manufacturing in the United States? What is your assessment of that decision?

Total market share of New Balance in U.S.= 3%.

No. of pairs delivered by New Balance= 3% of 400 millions = 12 millions.
One third of 25 % U.S. manufactured was cut-through assembly and
accounted for $13 more than the similar product manufactured in Asia.
Extra money cost = .25*(1/3)*12= 1 million.(1)
Two third of 25 % U.S. manufactured was sourced upper pairs and
accounted for $0.50 more than the similar product manufactured in Asia.
Extra money cost = .25*(2/3)*0.50 = 0.8333 million.(2)
Total extra money cost= 1.83333 millions.

(1)+(2)

Assuming that the total U.S. market for athletic footwear was 400 million pairs
in 2005, how costly was New Balance decision to maintain 25% of its
manufacturing in the United States? What is your assessment of that decision?

No. of pairs delivered by New Balance= 11.3% of 400 millions

= 45.44 millions.
In-House Production (25%)
Cut-through assembly (One- Third of 25%)
$13 more than the similar product manufactured in Asia
Extra money cost = .25*(1/3)*13*45.44= $49.23 million

Sourced upper pairs (Two- Thirds of 25%)

$0.50 more than the similar product manufactured in Asia
Extra money cost = .25*(2/3)*0.50*45.44 = $7.57 million

Total extra cost= $56.8 million (Approx.)

While developing and assembling products domestically the learn and

Industry
Overview

Operation
Strategy

NB2E

NB2E Initiative
Traditional Process (Brute
Force)
Batch Production
Increased inventory to
meet the product demand
Improved product
availability for all product
colors, sizes and width
Increase in sales
High inventory cost

NB2E Process
Pair-By-Pair Flow
100% product availability
within 24 hours
Reduced inventory levels
Less material wastage
Quality improvement
Strong relationship with
retailers
Complete realignment of
factory operations

Industry
Overview

Operation
Strategy

NB2E

Importance of NB2E Initiative

Reduces
Inventor
y Cost

Reduces
Lead
Time

Increase
d
Operati
ng
Margins

NB2
E
Increase
s
Efficienc
y

Increase
s Agility

On-Time
Delivery

Industry
Overview

Operation
Strategy

Recommendati
on

Changes in Operations Strategy

Thank You!