New Balance has opened its fifth manufacturing space in North America. This is in Methuen, Massachusetts.
Source: New Balance
While many retailers are struggling to preserve relationships with overseas suppliers and manufacturers, against pandemic uncertainty and shaky overseas relations, one is doubling its presence in North America.
New Balance, a private company known for its cushioned trainers and retro-inspired training equipment, has opened a manufacturing facility in Methuen, Massachusetts, the company announced Monday. The move strengthens its reliance on North America for manufacturing as companies seek to navigate an obstructed global supply chain, said president and chief executive officer Joe Preston.
The move comes as prominent business leaders are considering whether globalization as we know it is coming to an end. Larry Fink, president and CEO of the world’s largest asset manager, BlackRock, said last week that the Russian invasion of Ukraine has upset the world order that has been in place since the end of the Cold War. Over time, this could cause US businesses to reduce their dependence on foreign economies to grow.
New Balance said the 80,000-square-foot space recently underwent roughly $ 20 million in renovations.
Currently, nearly 100 people are employed at the facility, where they make New Balance’s most popular Made 990v5 running sneakers. New Balance said it aims to more than double the size of its workforce and manufacturing capabilities by the end of the year. It will help produce another 750,000 pairs of sneakers per year.
“It’s part of our general mantra to control our fate, which has really come into play in the last couple of years with Covid,” Preston said in a telephone interview. “Supply constraints have certainly affected our business, but we have managed to grow nonetheless [revenue] over 30% in 2021 “.
The Boston-based shoe company is developing its current manufacturing capabilities in the United States, including the Methuen space, New Balance owns five manufacturing facilities in Maine and Massachusetts that employ approximately 1,000 workers. These spaces help put together its line of “New Balance Made” sneakers, which are at least 70 percent produced domestically and make up a limited portion of US sales, according to the retailer. New Balance said its worldwide sales totaled $ 4.4 billion last year.
According to Preston, the goal is to continue growing in North America, a move that underpins the brand’s “Made in America” ethos.
“It sets us apart from the competition if we make products and don’t outsource all of our production,” said the CEO. “This helps in quality and craftsmanship.”
New Balance has approximately 1,000 employees in North America working in its manufacturing facilities.
Source: New Balance
The footwear industry has been particularly affected by supply chain obstacles fueled by the pandemic, including temporary plant closures in both China and Vietnam. Retailers, including Nike and Adidas, are incredibly dependent on cheap labor and materials overseas.
Before Covid, about 70% of shoes sold in the United States came from China, according to Footwear Distributors & Retailers of America. In recent years, however, a trade war between the US and China has prompted retailers to increasingly diversify their manufacturing presence into other countries in hopes of avoiding high tariffs.
But then the coronavirus pandemic struck and factory closures hindered operators in places outside of China, including Vietnam. Russia’s attack on Ukraine has increased uncertainty, as has the resulting tension between the United States and China.
Matt Priest, president and CEO of FDRA, said unpredictability is forcing brands to make day-to-day decisions, such as where to source their next batch of orders.
“There is this great geopolitical shift happening under our feet,” he said in a telephone interview. “When you see what can happen in a place like Russia, where brands from across the Western corporate world collectively retire within a few weeks … it leaves you in awe of the kind of changes that are taking place.”
Nike said last week that its facilities in Vietnam are all up and running, but that the window of time to send goods to North America from overseas remains lengthened. It still takes about six weeks longer to get the goods than pre-pandemic levels, the company said, and two weeks longer than the same time a year ago. As a result, Nike said it was increasing purchase timelines to prepare for the fall season, to try and keep the shelves stocked.
It might seem like the easy answer is to increase production in the US but, according to Priest, it’s an expensive option and workers can be hard to find.
“If you can’t find someone working at the Main Street bar in your hometown, you definitely won’t be able to find workers for a shoe factory,” he said. “We don’t have the raw materials. We don’t have the supply chain here.”
New Balance says it sees low turnover rates among its US workers in factories. And, to be honest, the retailer still relies on factories overseas for the rest of its production. So it faces some of the same challenges as Nike and Adidas, but can at least offset some obstacles with a North American presence, according to Preston.
“The fact that you can get the product to market faster, the fact that you can respond to consumer trends faster if you are closer to the consumer … this is what domestic production offers you,” he said.
And, he added, New Balance needs extra capacity as it sees greater momentum for its running shoes and reaches a new generation of younger customers.
New Balance is the fifth largest sneaker brand in the United States, in terms of dollar sales, with 3.4% market share, according to data from The NPD Group. While it might seem like a small percentage, it only follows four rivals: Nike, Adidas, Jordan and Skechers, NPD said.
“The brand momentum we have right now is rooted in our performance business and our lifestyle business,” said Preston. “And it’s the intersection of both that can really drive some energy.”