New Balance Athletic Shoes Case

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Operations Management and Management Science Case Study Capacity Planning New Balance Athletic Shoes Summary James Davis is the president and general manager of New Balance Athletic Shoes. The Boston, Massachusetts based company began producing corrective shoes and arch supports in 1906. New Balance garnered a reputation for quality specialty footwear when in the 1950's it began producing running shoes for men. It is the beginning of 1978 and Mr. Davis has a number of important decisions to make regarding the future of his growing company. In recent years the demand for running shoes has experienced explosive growth. The increasing popularity of the sport of running requires James Davis to carefully evaluate the accuracy of the…show more content…
Mr. Davis has made mention of various concerns regarding company employees such as finding good stitchers and supervisors, keeping morale high, and preventing unionization. Mr. Davis has also located an available production facility in Ireland. This site does have the advantage of having a lower labor cost, a lower facility cost, lower equipment costs, and savings from both a tax holiday and available grants. While the Ireland location does have certain benefits, there are a number of critical drawbacks. The negative aspects of the Ireland facility are a slightly lower capacity potential, and very costly international freight costs. Both of these factors greatly reduce Irelands estimated after tax earnings, and are the reasons we are recommending Ireland as the second worst choice for New Balance. The next site to be considered is the Lawrence facility. This location has qualities that should appeal to New Balance. The Lawrence site is the largest of the company's options, has local government willing to offer relocation assistance, and is close to the Everett St. location and its network of material suppliers. In addition to these qualities; it has been found that there are a number of local experienced shoe workers in need of work. Although these factors make Lawrence attractive to the company, they are offset by the site's shortcomings. Lawrence has a higher labor costs, moderate rental costs, a short lease

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