New Balance Athletic Shoes (UK) Ltd

American-owned New Balance Athletic Shoes (UK) Ltd is the only global training shoe company still operating in the UK. While all its major competitors have fled to Asia, New Balance retains faith in its Cumbrian facility at Flimby, near Maryport, where it has been a leading employer since 1991.

Flimby makes high-performance shoes for the group’s European, Middle Eastern and African markets, and in 2005 to meet growth in these markets the factory was challenged to triple its annual output by 2012 - to three million pairs of shoes.

The conventional solution was to expand existing facilities, and indeed an adjacent plot of land was acquired for a new factory. At £1.5 million it wasn’t going to be cheap.

However, the Flimby plant had already embarked on a lean journey with promising results, so the company asked MAS North West for help in continuing its lean programme and in particular to review existing procedures to determine what capacity improvements could be made within the current operation to get more output from the existing set-up.

The senior management team hired a local cinema to give the entire workforce a detailed overview of their 'Executional Excellence' programme. MAS practitioner Ian Wilson gave the workforce a brief introduction to lean tools and techniques as this had been identified by the senior management team as the mechanism to use to attain their plan.  A series of workshops to introduce the basic principles of lean manufacturing as they might apply to the Flimby factory followed, then the employees were challenged to analyse their own working procedures.

Working with MAS practitioners they substantially refined an existing cellular layout to make it more efficient but in less space – with the freed up space used to create more cells. They also reconfigured procedures within each cell so that four operatives could now handle work previously done by five; and surplus staff was redeployed into the additional cells.

While creating the new layout, 5S workplace organisation was used to ensure that the efficiency standards required within and around the cells were maintained. The factory became free of a once ubiquitous clutter of components, encouraging staff to be constantly mindful of good housekeeping.

Key to the success of the project was a strong focus on managing the organisation through major change and gaining buy-in from the 200-strong workforce to enthusiastically support the transformation.

During a period of potential uncertainty the New Balance management team made time to communicate fully with employees. Key staff enrolled on The Manufacturing Institute’s Accelerated Route to Lean Manufacturing to develop a sound understanding of all areas of lean transformation.

A 'train the trainer' approach developed non-managerial specialists to champion smaller projects and take responsibility for rolling out best practice across the operation. These improvement teams received practical, hands-on project support from the MAS practitioners, thus transferring the required skills and knowledge to enable them to create improvement ideas and be accountable for the results – a crucial part of the change process.

Within two years Flimby clocked up a 35 per cent productivity improvement in 35 per cent less space. Output increased from 10 to 14 pairs of shoes per person per hour, while at the same time improved inspections led to a matching improvement in first time quality. Crucially there was no need for a new factory.

Said factory manager Andy Okolowicz: "I'm amazed at the fantastic improvements in productivity and space saving achieved after training."

But sorting out the factory was just the beginning. Manufacturing high-performance athletic shoes is one thing: getting them to the consumer is something else entirely. Tackling that problem led to Flimby’s rapid order response initiative, which has turned conventional systems upside-down.

The retail shoe business traditionally works in six-monthly 'seasons'.  Each retailer predicts likely demand six months in advance and the Flimby factory produces the shoes required and sends them to a huge warehouse in the Netherlands, from where customers draw stocks for their stores. But there are problems.

Explained Ian Wilson: "The shoe sector – particularly training shoes – is notoriously sensitive to the dictates of fashion, so the accuracy of those six-monthly forecasts was poor. Approximately only 64 per cent of the shoes which had been manufactured were actually sold in the season.  The remaining 36 per cent – literally tens of thousands of high-quality training shoes – had to be heavily discounted just to move the stock left in the warehouse, with inevitable effects on the company’s balance sheet."

The business improvement team crossed the Channel to work closely with a leading retail company to test their theory. In particular, they applied value stream mapping to follow the shoe trail from forecast to sales in great detail, something that had never been done before. These mapping workshops enabled the working group to improve supplier performance but there were additional unexpected benefits. Both companies gained useful insights into each others’ businesses by sharing information and by taking a more collaborative approach to improvement. The two companies now have a much closer working relationship.

In a radical reworking of the system, the factory produced only 50 per cent of the predicted sales forecast, and the retailer also used lean tools to provide sales information literally on a week-by-week basis, to ensure that stocks could be topped-up if required.

 
The results were dramatic. In season stock availability rocketed from 54% to over 90%, with New Balance able to receive an order at the start of the week and deliver to the French distribution centre seven days later.

The rapid order response initiative is a win-win situation. New Balance no longer had to resort to financially damaging discounting. The retailer was able to reduce stock levels from 143 days' supply to below 100 days.

Ultimately, the consumer benefits because the shoes on sale are always at the height of fashion as they are based on sales of only a few days before.