Solution to New Balance Case Study

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With a growing backlog at New Balance, expected growth of the running shoe market and the manufacturing constraints (35% bottle neck- see appendix 1) facing New Balance (NB) we evaluated their options and present our findings and choice of facility location in ascending order- Everett Street considers the commencement of a second shift or extensive use of overtime. This option is highly unattractive financially because of both higher expenses incurred by NB (Labor Cost), and lower projected earnings due to lower capacity (1500). From a Human Resource perspective, another shift may detract from the high moral and positive work dynamic of NB’s workers by placing too many persons in one are causing workers to feel disconnected with the company and worse, become unionize. Lastly the female employees necessary for the second shift disliked working more than 3-4 hours of overtime per week. Not wanting to compromise work quality and ethic this option not exercisable. (See appendices 2&3 ranking this option last in financial return on investment) Lawrence Facility places NB in a catchment area to augment its labor shortage with experienced quality workers at a lower wage rate (10%) compared to Everett. This was due to the closure of several local shoe factories and depressed labor market. NB will have local government financial and administrative Aid to ameliorate the cost of opening the facility. Overall operating cost would be lower due to the lower wage bill while overhead and operating cost would be about the same as Everett. However the site's shortcomings are the short term tenure of the lease (3 years) and the further distance away from the west coast increases lead times in the delivery of good to market. (See appendix 2 for financial return on investment and appendix 3 for factor rating on location feasibility) Ireland Facility provides financial advantages

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