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Harvard Business Case

Syndicate Group – 4
 Fransiscus Adam Perkasa - 29319134
 Fahmi Ashadi Puksi
 Felicia Blandia Pardede
 Felik Widyo Makuprathowo
 Gita Lantika
 Hario Adit Wibisono
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1. Evaluate New Balance's current

operations strategy. What are the key
decisions implicit in this strategy?

Since,
1906
Current Condition :
New Balance claims to be an
operation based manufacturing
company rather a marketing
focused entity.
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1. Evaluate New Balance's current operations strategy. What are

the key decisions implicit in this strategy?

Slow pace of Introducing

Manufacturing new product designs Inventory Decisions
New Balance manufactures 25% of its The company has chosen to keep a
products in-house (Vis a Vis 100% The company focuses more large number of SKUs and high-level
outsourcing strategy followed by its on comfort and performance stocks to meet the demands of
competitors) through two processes and less on designs. As a downstream supply chain partners,
namely, Cut-through Assembly and result, the average life of unlike the Push strategy of some of
Sourced-upper Assembly with a lead-time their product is 3 years, its competitors. As a result, the
of 12 Weeks. The rest of 75% is compared to 60 to 90 days company does not need to give
outsourced from two Asian Suppliers with for the segment of the discounts to its buyers. Each type of
lead-time of 12 and 10 weeks at Lawrence sole can have about 20 different
market focused on fashion.
and Ontario Distribution centers. To SKUs of different lengths and
Reducing the company's widths. Due to the large number of
reduce lead time, they have lowered their
marketing spend to make SKUs, they had to keep large stocks
ordering quaintly and order more
customers aware of the of finished products (6.4 million
frequently on a weekly basis with order
spirit could be a direct result pairs of shoes were kept in their
size between 2,000 to 10,000 pairs per
order.
of this decision. distribution centers in 2005).

1. Evaluate New Balance's current operations strategy. What are
the key decisions implicit in this strategy?
Distribution Channels
The company did not focus
much on sales through own
stores. Own store sales
accounted for roughly 7.1% of
the total revenues of US$
1,060 Mn (Exhibit 3). The major
portion of revenues came from
Strategic Accounts (34%) and
other key accounts (43%).
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Sales Force
The company utilizes the
services of an independent
sales agent and gives them
commission incentives. To
protect the company’s interest
these agents are exclusive to
New Balance. In addition to
sales agents, regional managers
(company employees) are also
employed to take care of
specialty accounts which are of
strategic importance because of
the high sales volume generated
by them.
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4. Moving forward, how important is the NB2E initiative for New

Balance?

Our 1. PRODUCTION
NB2E PROCESS FROM
BATCH FLOW TO PAIT
Will prove to be a game FLOW / CONTINOUS
changer for the Company as far FLOW
as the issues that the Company 2. REALIGNMENT OF
is facing are concerned. FACTORY
OPERATIONS TO
Our Group think there
are several initiative will REDUCE
bring the impact of MANUFACTURING
these changes on the LEAD TIMES
operations
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4. Moving forward, how important is the NB2E initiative for New

Balance?

Moving the Production from Batch to Pair Flow / Continuous Flow

This will allow better matching for output with delivery orders which are to be sent to
downstream players in the supply chain. This will also improve job execution, better
tracking of work in process and thereby help in accurate delivery of products by
avoiding delays and mismatches. The time period to deliver the finished goods to
retailers after they place the orders will also reduce thereby benefitting all the
players in the supply chain. Retailers will be able to meet the same level of demand
with lower inventory levels resulting in higher profits. The company will be able to
move from a demand forecast based system to a purely demand-driven system.
This will also reduce forecasting errors in terms of colors and variety resulting in
lower mismatch costs.
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4. Moving forward, how important is the NB2E initiative for New

Balance?

Realignment of Factory Operations to Reduce Manufacturing Lead Times

This will help in reducing the inventory levels and still enable the company to make
different products available in the market. Reduced inventory levels will result in
lower obsolescence of finished products and lower inventory holding costs. The
realignment will also lead to resolving various quality issues which the company is
facing currently as all the processes will be revamped. This will also result in
removing all the non-value adding activities in the current process if any.