New Balance: Shoe Fits - ' Second Wind ' (
Page 9 of 12 )
Second Wind
Automatic replenishment, though, can be stultifying. Taken to the extreme, it
would mean New Balance would never introduce new products—a guarantee of
death even for a company that has tried to limit the influence of fast-changing
fashion on its shoe sales.
So while Mescon will make sure New Balance's popular 991 running shoe is always
in stock at its retail outlets, "fringe" styles—such as the company's Dunham-brand
"adventure sports" styles, suited to endeavors like mountain biking and rock
climbing—aren't restocked the same way.
With Holland's system, New Balance now gets a living, breathing snapshot of
which shoes are selling, where they're selling and, indirectly, why they're
selling.
"Sell-through" data from each retailer is dumped into a massive text file each
week. That file gets pulled into a Dimensional Insight database, so it can be
analyzed in detail—by shoe style, by color, by size, by width, and by retailer.
New Balance executives view the results electronically and can click deeper
for further details.
"The sell-through data is the first indication [if] things are going
off our plan," Mescon says. This allows the executives to increase or decrease
planned production faster than waiting for a sales rep to confer with a customer
before adjusting a forecast. And the collaboration with retailers makes it easier
to accommodate unexpected demands, such as the re-introduction of PF Flyer sneakers.
That brand is remembered mainly by the parents of urban and suburban youth,
but retailers expect the retro shoe to sell well. New Balance plans to meet
that demand.
Meanwhile, Nike will continue merely to allocate supply, instead of sating demand.
The current example: new sneakers based on a $90-million endorsement deal with
high-school basketball wunderkind LeBron James. If he's the next Michael Jordan,
he'll be the face and endorsement meal ticket for professional basketball for
the next decade.
However, Nike is deliberately rationing the supply of the LeBron James shoes
to its retailers in the name of maintaining "buzz."
"The shoes should be in the hands of retailers to sell on Dec. 26," Shanley
says. "But [Nike's] not going to give retailers as many pairs as they
want. It's frustrating for the retailers because they know the demand's going
to be enormous. But this is standard for Nike."
While Nike and Foot Locker officials say they've reached a truce of sorts in
their squabble, Foot Locker will not be receiving any LeBron James shoes until
early 2004.
"Are we happy about this?" asks Foot Locker's Brown. "No. But we're working
with Nike to make sure we get these shoes in the future."
In the meantime, Holland continues to tweak both the format of New Balance's
forecasts as well as the data they're built on. The aim is to give the sales
force information that will gain new customers or keep existing ones.
For instance, Holland recently figured out a way to pop out "open orders" from
the system, says Vandemore.
By pulling data on factory runs from the manufacturing-planning system and comparing
that to records of orders placed by its retailers, the tweak now lets a sales
coordinator like Vandemore know which customers' orders haven't been fulfilled.
That extra piece of data lets reps tell individual customers what product is
stuck in the pipeline and how it will affect their inventory levels when it
finally arrives. As a result, the reps can revise follow-on sales accordingly—before
customers are alienated.
Holland also has developed a means of measuring each sales rep's forecasting
prowess. She compares the accuracy of their latest forecasts against their forecasts
of six months earlier—and actual orders for the current month. "We chose
a six-month window because that's when we're making our buy decisions," i.e.,
instructing factories on what to manufacture.
"What we're hoping to see," Holland says, "is that as their forecasts get better,
our forecast also gets better. We've been doing that now for about a year. At
this point it seems to be getting better."
New Balance's O'Brien—the man with 200 styles to manage—says forecasts
are making a tough job easier. "I would say we've had easily a 50% improvement
in accuracy. I can't say that it has meant a 50% improvement in how we handle
our inventory, but it makes our decisions maybe 25% better. I have more faith
in my numbers."
Projects: Management 
