Operations Management and Management Science Case Study

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Operations Management and Management Science Case Study

Capacity Planning

New Balance Athletic Shoes


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
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Adidas and Nike, being larger more top heavy corporations, will naturally have longer time periods between research and development and product release. We suggest that New Balance take advantage of its smaller size by releasing the types of new products previously detailed at a faster pace than their larger competitors. It is in this area that we feel New Balance's demand forecast is flawed. The forecast's short term reliance on current products in the company's shoe line is an error that may cause New Balance sales. As evidenced by the average two year appearance in Runner's World ratings, the life span of a running shoe is short. We do not believe that New Balance can rely on the 320 to carry sales until their new trainer is available (>1yr.) to gain market share. New Balance needs to rapidly release newly developed, state of the art running shoes prior to both industry leaders to put the company in a position to capture additional market share.

In addition to believing that New Balance's product mix has been forecasted incorrectly, we also contend that it has been somewhat overestimated. The following alternate demand forecast estimates overall market demand, as well as demand estimates for specific consumer categories. Please take note of the assumptions that were made in the
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