“Made in America” sounds nice, but what does it take to fulfill the promise of manufacturing products in the US? It’s not easy, but New Balance is stepping up to the challenge.
The 116-year-old Boston-based footwear manufacturer has five US facilities between Massachusetts and Maine that employ roughly 1,000 workers. Joe Preston, New Balance’s CEO, summed up the top-line benefits of “Made in America” production in three words: “control our destiny.”
New Balance aims to strike a…well, balance between domestic and overseas production in a meaningful way. From a supply-chain perspective, it’s easier to reach the market. And secondly, from a consumer standpoint, the company can get closer to shoppers.
- “The closer we can get from when they’re purchasing the product and using it, and being able to react from that, makes us much stronger,” Preston told Retail Brew in an interview.
Prior to the pandemic, New Balance had ramped up production, COO Dave Wheeler told Retail Brew. But disruptions of the global supply chain made it abundantly clear that local production is extremely critical to the overall resilience of the company’s supply network.
As Wheeler put it, the promise of “Made in America” is the “heartbeat” of the company, though domestically produced shoes account for only a slim portion of its global sales. The company finished 2021 with about $4.4 billion in total revenue and expects to end 2022 above $5 billion, Preston said.
- In fact, most New Balance shoes are produced overseas, which includes a company-owned factory in the UK. New Balance also outsources most of its global product overseas to contract manufacturers, which Wheeler explained comes with its own host of problems.
For one, Preston said that today, roughly one-third of New Balance’s global inventory is in transit, and the troubles that come along with that do not affect the company’s domestic product.
Wheeler said transportation delays and shipping costs can be a burden, as the company has suppliers in 115 countries—more than half of all countries in the world. Preston added that the most acute cost over the past couple of years with regard to the cost of goods has been distribution, given higher gas prices spiking throughout the process.
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To overcome supply-chain snarls from over the past few years, New Balance’s logistics experts have worked with carriers to shift order origins and destination ports to make sure products get to their destination.
- “Transportation has been one of the biggest issues over the past few years,” Wheeler said. “Just the onslaught of hard-good demand versus services during the pandemic and that shift has really caused a lot of transportation, congestion, as well as shortages of empty containers.”
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That being said, contract manufacturing is still very much a vital component of the business, said Preston, adding that it “allows us the scale that we need.”
“We believe we’re a better partner with our contract manufacturers because we actually make shoes,” Preston said. “We’re designing, developing the processes, training the people, and that, in and of itself, gives us a leg up when we’re talking to our contract manufacturers on what’s the most efficient way to make product and what’s the best way—from a quality standpoint, craftsmanship standpoint—to make product.”
However, the utility in local manufacturing has been evidenced in a few ways. Early in the pandemic, when masks were not as readily available, New Balance had designed and started production on a face mask and in three months, the company was able to make 1 million masks. Early in the pandemic, Wheeler said domestic suppliers were able to step up despite their own issues.
But as New Balance looks to bolster domestic production, he said the company will need more domestic suppliers to help source raw materials for new products. A major obstacle to “Made in America” production, Wheeler said, is to have a reliable source of raw materials—whether it’s rubber, sole materials, or fabric.—KM
