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 company's sales forecast. Mr. Davis knows that precise forecasting is the key to providing good-quality service by meeting customer demand. Another effect of increasing demand on New Balance is the necessity for expansion. Mr. Davis must evaluate a number of options for expanding production capacity in order to meet increased demand for his company's products.
This report will attempt to offer James Davis sound advice in regards to the evaluation of sales forecasts and expansion options. We will also present Mr. Davis with an alternate sales forecast and an evaluation of New Balance's sales representative network.
Analysis:
Upon reviewing New Balance's 1978-1981 domestic sales forecast, it is decided that James Davis may have reason to be apprehensive. Davis needs to be sure that the forecasted sales increases, which range from 117% to 286% of 1977's sales, are truly warranted. Although Davis knows that demand for running shoes is skyrocketing, he should also know that that does not guarantee sales. The maturing preferences of the shoe consumer have been evident in the ever changing ratings of Runner's World magazine's top ten shoes. Upon reviewing the lists...