New Balance exercises teamwork
By Jerry Harkavy
Associated Press
SKOWHEGAN, Maine — At a biweekly meeting at the New Balance athletic shoe factory, six members of a team called CS-39 work out a plan to become cross-trained in each other's skills.
Associated Press
On the following Monday, Lisa Sherburne learns "foxing," a stitch on the shoe's heel. On Tuesday, Michelle St. Peter shifts to "bonis," sewing the inner lining on the underside. Later in the week, Susan Viles picks up "second collar" and Dawn Johnson goes on to "heel close" and "OS collar."
Jennifer Nile, left, and Sara Little discuss the stitching on a New Balance athletic shoe during a biweekly meeting of manufacturing workers in Skowhegan, Maine. With technology and teamwork, New Balance has been able to maintain domestic production.
Becoming proficient in different skills is one way that 1,000 workers at five New Balance plants in New England have improved productivity and kept their jobs while other shoe manufacturers have moved operations overseas.
"I never thought they would be so driven, but they are," Tina Stevens, the supervisor of CS-39, said of the team members. "They want to stay here. They want to show people that this can work."
The shoe industry's move overseas has hit hard in Maine, where the number of jobs in the business dropped from nearly 27,000 in 1968 to about 3,500 today. Nationally, the industry declined from 235,000 jobs in 1972 to 28,000 this year, according to the U.S. Labor Department.
While fighting the trend, Boston-based New Balance has risen from No. 12 in U.S. sales of athletic footwear in 1991 to fourth in 2000, behind Nike, Reebok and Adidas, according to the newsletter Sporting Goods Intelligence. Those are the most recent figures available.
New Balance is the industry's last holdout with domestic manufacturing. It has plants in Skowhegan, Norridgewock and Norway, Maine, and in Boston and Lawrence, Mass. An Ontario, Calif., plant owned by a Taiwan-based company also produces New Balance shoes.
In New Balance's 19th-century brick building in Skowhegan, technology gives workers who make $10.50 an hour an edge over their counterparts in other countries who are paid as little as 25 cents an hour.
For example, operators in the stitching room use $100,000 machines equipped with two 35mm cameras that guide the stitch for accuracy, improving quality and cutting down on waste.
The leather, rubber, synthetics and other materials that make up an athletic shoe account for roughly 65 percent of production costs, said Sheldon Kilkenny, divisional manufacturing manager. Labor costs are the big variable, and the company admits that it pays a premium to make shoes at home.
New Balance can produce a shoe in 22 minutes of labor time, at a cost of roughly $4. By contrast, a plant in China, where the work is done in assembly line fashion, might require two hours, but the labor cost is 80 cents.
Import duties on foreign-made shoes offer some competitive relief, said Jim Davis, owner of the privately held company. "Hopefully, some day we can compete effectively without import duties, but right now we cannot."
Davis recognizes that overseas manufacturers will eventually adopt advanced technologies and that his company must continuously introduce new methods and equipment, such as its computerized embroidery machine with 15 sewing heads.
Some of the advances that reduce labor costs are the result of brainwork by people on the factory floor. Cutting room workers came up with the idea of putting inventory figures into a computer by themselves, eliminating the need for a $30,000 data entry specialist.
Training sessions and employee meetings promote worker involvement in the manufacturing process. Every department shuts down for five minutes a day to review the previous day's performance.
"There are no secrets here," said Kilkenny, whose workers are informed about production targets and costs. "We're all working toward the same goal."
Davis said domestic manufacturing enables the company to change quickly to make new styles or to shift production to respond to demand. Overseas manufacturers require a longer lead time and cannot react as quickly.
New Balance believes the "Made-in-USA" product resonates with customers, although some of its shoes are not allowed to carry that label because some components are imported. According to federal guidelines, a shoe is regarded as U.S.-made only if the level of domestic value is at least 70 percent.
Last year, New Balance had roughly 1,000 manufacturing workers, or more than twice the number of a decade ago. But because of a sharp rise in production during that period, the percentage of its domestic-made footwear has dropped from 70 percent in 1993 to 25 percent today.
Davis said his goal is to raise that to 50 percent, although he's not sure that's possible. Although any immediate plans to expand domestic manufacturing are on hold, he foresees establishment of a new factory as well as possible expansions of the Norway and Boston operations.
Because New Balance is privately held and not under pressure to squeeze out higher returns to shareholders each quarter, it has been easier for the company to resist the move overseas.
"We're willing to make a long-term investment," said Davis, who, with his wife, Ann, bought the shoe company in 1972. Annual sales have grown from $100,000 to $1.16 billion last year.
