New Balance: Forecasting for Market Leadership

By Larry Barrett  |  Posted 2003-11-17 Print this article Print

New Balance had nearly faded into irrelevance six years ago. Then, accurately forecasting demand with smarter applications like SRC Software and Agilisys became a sport for the entire company and its retailing partners. Now it's making up ground quickly,

You are a salesman for the New Balance Athletic Shoe company. Youre driving to Boulder, Colo., one Monday in July to meet with the regional buyer from your top account, The Sports Authority. Your cell phone rings. Its Jim Tompkins, president of New Balance.

"Is your forecast right?" he asks. "Where are the orders to back it up? Why did those orders slip another month? What are you going to do to get back on plan today?"

This isnt how you expected your week to start. But the personal attention isnt unique today—Tompkins is calling every salesman whose top account has fallen behind on purchases. The source of his omniscience: The "Top Accounts report, an update distributed at noon every Monday that gives New Balance managers a clear-eyed look at sales figures for the past, present, and forecasted future.

"The salespeople have nowhere to hide," says sales planning manager Teresa Holland, who is responsible for making sure the companys forecasts are accurate, both in the United States and in foreign markets.

She smiles as she remembers that Monday in July, the day her software project changed the way New Balance executives run the company.

Tompkins and other top managers at the companys headquarters in Boston, Mass., can now view a finely detailed report for each style of shoe in New Balances lineup: the to-date sales for the year and month for each major retailer that New Balance serves; the sales of that shoe (or its predecessor) for the same period last year at that retailer; the orders for that retailer that have yet to be filled by New Balances factory or warehouse; and what the sales rep had forecast for the current month. In addition, the report includes "sell-through" data—the number of the shoes actually sold by the retailer in the past week and month.

So it isnt hard for Tompkins to call a salesman when orders dont meet forecast. And the salesman is not likely to be very surprised that the call came in. Every member of New Balances sales force has access to every last detail of customers histories—down to the last size-13 triple-E basketball shoe that was ordered—for every retailer they do business with in North America.

The "Top Accounts" report is Hollands personal creation, an outgrowth of an overhaul she directed of how New Balance figures out what shoes it will need to put into the market, months before they are needed. Now its factories produce fewer wasted pairs of shoes, and retailers sell more of what customers want.

Its Economics 101: Matching demand with supply. But the not-so-simple execution of better forecasting has helped New Balance spring back from near irrelevance in the athletic-shoe market six years ago. The company is giving market-leader Nike fits in its approach to the feet of both weekend warriors, where the volume is, and serious athletes, where the profit is greatest. "No other brand is threatening [Nike] for dominance, in both running and athletic shoes, says David Campbell, a financial analyst at Davenport & Co.

The companys sales worldwide have more than doubled, from $560 million in 1997 t0 $1.3 billion in 2002. The 131 percent growth in sales have occurred during a period in which overall sales of athletic shoes in the U.S.—its home market— have fallen from $545 million to $503 million, according to the National Sporting Goods Association.

Most critically, Hollands project is helping to keep the company from experiencing the troubles that became a nightmare for Nike, whose founder Phil Knight two years ago claimed his company lost $100 million in sales when it tried to put in place a new system for managing manufacturing and distribution.

Now, the swoosh can hear New Balances footsteps. Where Nike controlled 24.7 percent of the athletic shoe market in 1997, thats down to 17.8 percent. The big gainer? New Balance, at 7.9 percent, up from 2 percent. And while Nike claims to have improved its system for managing its inventory and is spreading that system around the world, the company said on Sept. 18 that its revenue in the U.S. was down 2 percent, to $1.25 billion, in the first quarter of its current fiscal year. Its athletic-footwear business declined 5 percent from a year ago.

Keeping retailers like The Sports Authority and Foot Locker happy is key to the New Balance comeback. Foot Locker, for instance, is the worlds largest athletic-shoe retailer, with annual sales of more than $4.5 billion. The New York-based chain has been engaged in a well-publicized spat with Nike over the pricing and promotion of Nikes high-end shoes. At one point, Nike refused to ship its most profitable shoes to Foot Locker—either to keep those products from being included in some of the chains free-shoe promotions or, as some analysts believe, to punish the retailer for reducing the amount of shelf space it allocated to Nikes most expensive shoes.

New Balance, on the other hand, "really takes care" of its retailers, says Foot Locker treasurer Peter Brown. "They do an outstanding job of getting the right shoes to us in a timely fashion."

For the full story, including a detailed look at New Balances infrastructure realignment for sales and budget forecasting, please download the story below.
Senior Writer
Larry, of San Carlos, Calif., was a senior writer and editor at CNet, writing analysis, breaking news and opinion stories. He was technology reporter at the San Jose Business Journal from 1996-1997. He graduated with a B.A. from San Jose State University where he was also executive editor of the daily student newspaper.

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