Breaking Free From theBy Larry Barrett | Posted 2003-11-01 Print
New Balance had nearly faded into irrelevance six years ago. Then, accurately forecasting demand for its shoes became a sport for the entire company and its retailing partners. Now it's making up ground quickly, in its footrace with Nike.Pack"> Breaking Free From the Pack
The system Holland inherited was an improvement from the days when sales quotas were simply pushed down from headquarters, with the forecast basically being last year's number plus some gut estimate of growth for the coming year.
The sales force would disavow the quotas, even as footwear flew off the factory floor. "They would say, 'Those weren't our numbers, those were your numbers,' " says Stan Mescon, the head of New Balance's sales-planning department. So New Balance often got stuck with excess inventory.
In 1997, New Balance put the shoe on the other foot. "We decided, let's let the reps give us what they think are their numbers," Mescon says, "with some topline direction." The management, after consulting with New Balance's major retailers, would set a general sales goal, while leaving the details of how to hit that target to the sales force.
The approach required information sharing on an unprecedented levelnot just with the sales force, but with retailers as well.
New Balance's management and sales team began meeting with executives of its top retailers each season, to develop a consensus on goals for overall sales.
The retailer's buyers and merchandisers, along with New Balance's product teams and sales force, hash out the details of reaching the agreed-on goals, down to production runs for each shoe style.
In theory, New Balance would have the ability to manage its marketplace account by account, region by region. But to make it work, Holland's spreadsheets had to be replaced completely.
In 1997, New Balance brought in iProcess demand-planning software from the manufacturing-software division of SCT Corp. in Malvern, Pa. The software ran on Windows NT and could pull in data from files generated by the company's existing planning system.
The software helped Mescon's team take into account such predictors of demand as general economic indicators, current orders, historic sales data and competitive plans. The team produced forecast numbers for each style that could be given to New Balance's manufacturing and sourcing managers to guide how they planned for production capacity.
But it wasn't what Holland was looking for. "When we do the [overall] New Balance forecast," says Holland, "what we've realized is that the sales reps really are the ones who know what's happening with each of their accounts. We wanted to be able to give them a tool [with which] to forecast more accurately."
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