New Balance has amassed a worldwide following for its iconic sneakers. And personally, growing up in Massachusetts, I’ve always felt a bit of hometown pride for the Boston-based sneaker brand. So when I heard they were joining the Zero100 Community, I was keen to learn more about how they are approaching digitization and decarbonizing their supply chain operations.
From embracing digital methods to re-shoring part of its operations, New Balance is on a journey to create a more responsive, resilient, and responsible business.
Although they didn’t know it yet, the brand’s early commitment to digitizing its design, development, and production had prepared it for what was around the corner in 2020 and beyond.
DIGITAL DOUBLE PLAY
Improving both planning and sustainability
New Balance invited our research team to its headquarters and one of its five US factories in Lawrence, MA, where we spoke to three of the company’s senior leaders: Dave Wheeler, Chief Operating Officer; Gabriella Wortmann, Vice President for Global Planning and Operations; and Kevin McCoy, Vice President for New Balance’s domestic manufacturing program, MADE.
In the fall of 2020, Gabriella said New Balance found itself in a severely constrained supply environment for the first time. They tried to equitably distribute their limited stock to their customers and were forced to rethink their approach to supply chain planning:
"Forecasting is a very straightforward exercise when demand variability is stable. But when things are extremely volatile and you have a lot of constraints, you realize that Excel is no longer helpful in creating that signal for the supply chain. That’s when we realized we had to replace our entire supply chain planning suite."
Today, New Balance is in the final stages of implementing a new enterprise resource planning (ERP) system as well as a new supply chain planning tool. They made the unique decision to dismiss more established technology solutions and opt for newer tech partners that offer greater flexibility and adaptability.
Simultaneously, New Balance has set ambitious targets to drastically reduce carbon emissions across its value chain and is applying digitized solutions to reduce its carbon footprint.
Gabriella explained this dual-action approach: “We want to make sure our manufacturing partners can plan their workload in the most efficient manner to reduce waste; waste in time because of changeovers, waste in materials, waste in the number of hours needed to be worked to catch up to something that is unplanned, or waste that is created by buying smaller batches of materials.”
There are additional sustainability benefits to New Balance’s digital transformation. Dave says that New Balance’s digital imagery technology produces highly effective 3D images depicting real-world sneaker design. These 3D images ensure that everyone who contributes to the product lifecycle is better equipped to deliver the finished product, and it also reduces the need to produce physical prototypes.
Automation is unlocking new capabilities
New Balance MADE is an integral part of company heritage and culture.
Since the company’s inception in 1906, New Balance has consistently supported American craftsmanship and jobs, continuing to invest in domestic manufacturing operations. The company believes that its MADE product line is a competitive advantage for three reasons: (1) it enables product innovation and creativity, (2) it showcases the craftsmanship of its skilled associates, and (3) it meets significant US and global consumer demand.
New Balance is the only major athletic shoe manufacturer that has consistently maintained factories in the United States, doing so for over 75 years. The team shared with me that New Balance MADE US is a premium collection that represents a limited portion of the company’s US sales and contains a domestic value of 70% or greater.
To address the dual pressures of global supply chain disruption and the imperative to decarbonize, New Balance has focused on additional re-shoring – the practice of bringing manufacturing and services back from overseas.
New Balance’s MADE program is comprised of company-owned and operated factories working to scale their local manufacturing capabilities to satisfy increasing customer interest in MADE products. The factory I visited was just outside of Boston, but there are several others peppered throughout the region, and there's a sister program in the UK doing the same thing.
While these local factories have been in operation for decades and play an important role in the brand’s heritage, it was the challenges brought on by the pandemic that helped leaders further recognize the role factories can play in the company’s future. When Covid first hit, New Balance’s Lawrence factory quickly pivoted to respond to immediate consumer demand for PPE. This accelerated the business’ confidence in its own local manufacturing capabilities. As Kevin told me: “We designed a mask on Monday, we vetted the materials on Tuesday, we built the manufacturing line on Wednesday, and we started production on Thursday… it was a turning point. It gave the company the belief that anything is possible and, for me, it was the impetus of innovation.”
It was a turning point. It gave the company the belief that anything is possible and, for me, it was the impetus of innovation.”
Local manufacturing is rarely cost-effective for American manufacturers because of the significantly higher labor costs involved. So central to the success of New Balance’s local manufacturing is a willingness to invest in manufacturing automation and other digital enablers to drive down costs, and guarantee consistent, high-quality production.
We saw this for ourselves on the sneaker assembly line in the factory. It wasn’t overly robotic or manual: the manufacturing team were all operating machinery (mechanically stitching the upper, morphing from 2D layers to the 3D shoe, heat pressing to attach the sole), with seamless hand-offs between stations to keep the system moving at an energetic pace.
Automation is also allowing the company to invest in its employees – skilling and reskilling to ensure a digital manufacturing future.
As the MADE program grows, it is fueling more sustainable partnerships with domestic and even local suppliers that are driving improvements in both decarbonization and quality. Dave gave us more detail: “The supply base for our MADE network is critically important. Obviously, we need a reliable source, and we try to make that local wherever possible. I think we’ve done a terrific job, especially over the past five years, to identify suppliers that are locally available.”
Likewise, internal partnerships are getting stronger. Product designers, for example, are now able to physically sit beside the shoemakers in local factories to discuss new designs and how they translate to the production line; it's a two-way conversation that’s improving both design and manufacturing. As we heard from Dave, “I’m a strong proponent of talking to the people that make, to help influence how we redesign.”
THE ROAD AHEAD
Ramping up domestic sustainability
In 2022, the MADE network produced just under two million parts of locally sourced components and, in 2023, will produce enough to satisfy the entire MADE in USA demand.
Kevin told me the MADE program is now looking to expand operations and product lines and is using the opportunity to work with designers and suppliers in new, more sustainable ways: “What I am most proud of is some of the work we have done with our supply base. We are working on a program where, by the end of 2023, about 50-75% of the textiles we will be putting in our program will be made in the USA with environmentally-preferred materials; a lot of recycled polyester, a lot of recycled materials plugged into that.” At the same time, Dave hints at plans to scale the brand’s circularity capabilities to allow shoes to be repaired rather than replaced.
By the end of 2023, about 50-75% of the textiles we will be putting in our program will be made in the USA with environmentally-preferred materials.”
New Balance is championing initiatives that our Zero100 community can learn from. Their digital system investment is leveraging newer tech partners to keep up with surging demand while also reducing waste and carbon emissions. And their MADE re-shoring initiative is utilizing automation to create better and safer jobs for their employees, in addition to building new partnerships with local and sustainable suppliers. Our research team is excited to continue working with the New Balance operations team, gaining insights and sharing learnings with the Zero100 Community to accelerate Zero Percent Carbon, 100% Digital supply chains.