The Final KickBy 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.The Final Kick
Of course, the impact of the improved forecasting really is most immediate and visceral on the individual salesperson. The performance of every single salesperson is laid bare to every single member of senior management. Visibility of the numbers fosters communication, Holland says. Like Tompkins' phone calls.
Tompkins and Fran Allen, New Balance's vice president of sales, made the first few rounds of calls. Now they're
made on a weekly basis by regional sales managers such as Steve Prince.
Sales reps, says Mescon, "are always on the hook, one way or the other." The result, he says, is that the reps are becoming better at their business. "The salespeople are much more accountable, and they're spending more time managing the business, especially the larger accounts."
Part of managing the business means finding ways to continue the torrid rate of growth that New Balance has seen over the last five years. To do that, the company intends to create athletic shoes that make women and children consumers of its footwear on the same scale as the male middle-aged athlete.
To make that happen, the company not only needs to design products that appeal to the other gender and the younger ages, but to gauge and respond to demands from all consumers faster and more accurately.
Expansion also will have to come from areas other than shoes. The apparel division, for example, last year chipped in a paltry $52 million in sales, roughly 4% of total sales. New Balance executives have laid down an ambitious gauntlet, asking sales representatives to raise that share to 10% by 2005.
As New Balance gets better control over its demand forecasting, it can afford to do things that might have been deemed too risky in the past, such as allowing customers to place their actual orders closer to the delivery date.
Rather than pushing retailers to make orders six months out, New Balance now can take orders five or even four months in advance of delivery. The company may even instruct manufacturers to build shoes before it has orders for them, if its confidence in its forecasting is high enough.
Holland's system also helps O'Brien deal with his 200 different styles of shoe. O'Brien has to forecast a basketball-shoe line, for example, which has, he says, "not just multiple widths but nine different colors."
Before the collaborative-forecasting system was put in place, O'Brien might have had to forego sales for fear of picking the wrong kind of shoe to order. "You don't want to buy that much inventory of a color that isn't going to sell," he says.
The forecasts now have power. They can make or break a new shoe design. Today, no new shoe goes to market until it's a big enough number on a rollup to be worth building. "We've been able to make decisions and cancel a project that we wouldn't have cancelled before," says O'Brien.
"A product manager may say his style is great, but the sales rep says, 'I'm only going to grow 10% or 20% with this account and I know I'm not going to get another five slots on the wall.' So some of those fringe styles just lose out," he says.
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