New Balance has opened its fifth manufacturing facility in North America. This one is in Methuen, Massachusetts.
Source: New Balance
While many retailers are struggling to maintain relationships with overseas suppliers and manufacturers, against the uncertainty of the pandemic and wobbly foreign relationsone is doubling its presence in North America.
New Balance, a privately held business best known for its cushioned sneakers and vintage-inspired workout equipment, has opened a manufacturing facility in Methuen, Massachusetts, the company announced Monday. The move reinforces reliance on North America for manufacturing, as businesses trying to navigate global supply chains are hampered, said President and CEO Joe Preston.
The move comes as prominent business leaders are considering whether globalization as we know it is over. Larry Fink, chairman and chief executive officer of the world’s largest wealth management company, Black stonessaid last week that Russia’s invasion of Ukraine was reverse the world order that has existed since the end of the Cold War. Over time, that could make American businesses less dependent on foreign economies to thrive.
New Balance says the 80,000-square-foot space was recently renovated for about $20 million.
Currently, nearly 100 people work at the facility, where they make New Balance’s most popular Made 990v5 running shoes. New Balance said it aims to double its workforce size and production capacity by the end of the year. It will help produce an additional 750,000 pairs of sneakers annually.
“It’s part of our mantra of controlling our destiny, which has really worked over the past few years with Covid,” Preston said in a phone interview. “Supply constraints have certainly affected our business, but we can still grow.” [revenue] over 30% by 2021.”
The Boston-based shoe company is building on its current manufacturing capabilities in the US. Including the Methuen space, New Balance owns five manufacturing facilities across Maine and Massachusetts employing approximately 1,000 workers. These spaces help bring together its “New Balance Made” line of sneakers, which are at least 70 percent made domestically and make up a limited portion of sales in the United States, according to the retailer. New Balance says its worldwide sales hit $4.4 billion last year.
According to Preston, the goal is to continue to grow in North America – a move at the core of the brand’s “Made in America” ethos.
“It differentiates us from the competition, if we make the product and don’t outsource our entire manufacturing process,” the CEO said. “That helps with quality and craftsmanship.”
New Balance has approximately 1,000 employees in North America who work in its manufacturing facilities.
Source: New Balance
The footwear industry has been particularly affected by supply chain obstacles caused by the pandemic, including temporary factory closures in both China and Vietnam. Retailers including Nike and Adidas are extremely reliant on cheap labor and documents abroad.
Pre-Covid, about 70% of shoes sold in the US came from China, according to Footwear Distributors & Retailers of America. However, in recent years, the trade war between the US and China has prompted retailers to increasingly diversify their manufacturing presence into other countries in the hope of avoiding high tariffs.
But after that coronavirus pandemic occurred, and factory closures have hampered operators in places outside of China, including Vietnam. Russia Attacks Ukraine has increased uncertainty, as well as led to tensions between the US and China.
Matt Priest, president and chief executive officer of FDRA, said that unpredictability is forcing brands to make daily decisions, such as where to source their next batch of orders.
“There is a great geopolitical shift happening beneath our feet,” he said in a phone interview. “When you see what can happen in a place like Russia, where brands all over the corporate Western world collectively retreat for a few weeks … it just makes you think about the kind of change that’s happening. happening.”
Nike Last week said its facilities in Vietnam are all operating, but the time to bring goods from abroad to North America is still long. The company said it still took about six weeks more to ship from pre-pandemic levels, and two weeks longer than it did a year earlier. As a result, Nike says it’s increasing the timing of purchases in preparation for the fall, to try to keep store shelves stocked.
It seems like the easy answer would be to ramp up mass production in the US.
“If you can’t find people to work at a coffee shop on Main Street in your hometown, you certainly won’t be able to find workers for a shoe factory,” he said. “We don’t have the raw materials. We don’t have a supply chain here.”
New Balance says it sees low turnover of American workers in its factories. And, to be sure, the retailer still relies on overseas factories for the rest of its manufacturing operations. So it faces some of the same challenges as Nike and Adidas, but it can at least offset some of the obstacles with a presence in North America, according to Preston.
“The fact that you can get products to market faster, the fact that you can react more quickly to consumer trends if you’re closer to the consumer … that’s what manufacturing in water gives you,” he said.
And, he added, New Balance needs more capacity as it sees momentum for its running shoes and reaches a new generation of younger customers.
New Balance is the fifth-largest athletic shoe brand in the US, by dollar sales, with a 3.4% market share, according to data from The NPD Group. While that may seem like a small percentage, it trails only four competitors: Nike, Adidas, Jordan and SkechersNPD said.
“The brand momentum we have today stems from our performance and lifestyle businesses,” says Preston. “And it’s the intersection of the two that can really boost some of the energy.”
