Introduction
New Balance has released a new line of youth-oriented athletic footwear. Athletes between the ages of 12 and 18 are their primary focus; Because no rival is working to make it more accessible to young people. Brands with as much clout as Nike and others on the international stage tend to cater to younger male athletes (those aged 18 to 24), whereas the New Balance Company considers the needs of runners of all ages. London’s Olympic champions have beaten the U.S. record for most gold medalists, earning them widespread acclaim at home and abroad (Melendez et al., 2018). Furthermore, it would show that he is making progress toward bettering himself. The company was impressed that young people participate in athlete gaming and have the competitive spirit to succeed. As a result, it makes sense as an expansion objective for the business. Predictions indicate that the multibillion-dollar athlete market will expand by 18%, which is good news for the company’s subsequent products and services. James, the winner, received a brand new pair of running sneakers, dubbed Sneaker 2013, that are moderately high-tech and priced reasonably. However, predicted cash flow has been required to examine if this project would benefit the company and provide more significant returns in the future to safeguard the earnings and operations of the newly developed product.
For the most part, human labor is necessary to produce shoes. As a result, it is vulnerable to shifts in several interconnected factors, such as supply and demand for land and labor, as well as changes in environmental regulations and consumer preferences. As a result, to maximize profits, many of the world’s largest consumer markets have begun outsourcing their footwear production, distribution, and retail to countries with lower labor costs. Raw materials are obtained, processed into finished products (shoe materials, shoemaking, finished items), and finally branded and distributed to end users (Mandaza, 2015). This is identical to the sneaker supply chain, which typically takes 18 months from the beginning of shoe design to the end of shoe production. Increases in labor costs, differences in tax policies across countries, tariffs, and fluctuations in the exchange rate are all supplier challenges in the supply chain.
The quality of a link in the supply chain can significantly affect how well and efficiently the partnership works and the success of the supply chain as a whole. Partners in the supply chain must identify areas with poor connectivity and take steps to prevent shifts in supply network capacity (such as production/distribution capacity and inventory) and supply chain performance to get the most value out of the supply chain. The theory of constraints (TOC) is one way that could be used in supply chain management (Mabin & Balderstone, 2020). The central idea of the Theory of Constraints is that every system, including businesses that want to make money, has at least one constraint that stops it from getting more of what it wants and, in turn, defines the system’s output. In business, a limitation is anything that slows down production or development.
Therefore, the firm’s productivity drops significantly because of its inability to cope with this constraint. It is possible to draw parallels between the TOC and the supply chain, in which a single point of failure can have a devastating effect on the entire system. The supply chain is only as strong as its weakest link. In the event of a production slowdown and subsequent delivery delays at the upstream supplier, for instance, the lead time for the downstream manufacturer and distributor would increase, resulting in product shortages at the retailer. The store’s ability to provide good customer service would suffer due to being unable to meet its customers’ needs due to a lack of stock. In this case, the supplier’s production capacity will be the bottleneck in the system (the supply chain). According to the Theory of Constraints, suppliers’ production capacities will serve as the “drum” that establishes the rhythm for the entire supply chain (Copacino, 2019). The “buffer” is the supplier’s stockpile, which buys time for the business to recover from disruptions in the upstream supply chain. To avoid having final sales or distribution rates exceed the supplier’s production capacity, the “rope” connects the upstream and downstream supply chains.
The principle of limitations can also be applied to the Sneakers case study to mitigate supply chain concerns. Nike has encountered many supply chain challenges that have caused delays in delivering its items to designated locations. Creating a seamless flow of goods is necessary to ensure that products reach the market at the proper time. Using the theory’s description and recommendation, Nike’s supply management can employ the theory of constraint by devising methods for resolving the challenges causing delays and impeding the efficient and timely delivery of Nike products to their desired destinations. Problem identification is the first step. For instance, if the products are delayed at the port before shipment, the causes should be investigated (Mabin & Balderstone, 2020). Some items take longer than expected to arrive at the port due to a lack of cargo space or the incompetence of the shipping firms. In such a circumstance, it is vital to continue with the shipping process despite the circumstances. This is only possible by using the theory. Exploiting the restriction so that it functions effectively requires concentration on effective distribution by concentrating on how the constraint might be exploited. The shipment of certain Nike products to South America via the West is a classic instance in which the company has experienced delivery delays.
According to the Theory of Constraints, every process has a single bottleneck, and increasing overall output is possible only by addressing this bottleneck. As a crucial implication, optimizing factors that are not restricted will not significantly advance the goal (increasing profits). This is why the Theory of Constraints (TOC) aims to focus on the bottleneck until it is no longer a bottleneck in terms of throughput, at which point the focus will shift to the following constraint in line. Taking out Constraints (TOC) is effective because it may direct an organization’s resources in such a way that they are laser-focused on increasing profits while simultaneously eliminating the most significant roadblock standing in the way of doing so (Melendez et al., 2018). The gradual structural development of African economies, where primary sectors dominate, is rooted in the continent’s low industrial manufacturing level. Tariff hikes on African factories’ exports have also contributed to the problem. Tariffs on raw materials exported from Africa tend to be relatively low, whereas those on value-added goods made in Africa tend to be relatively high. Differences in industrial production contribute to the economic and wealth gap between high- and low-income industrialized and developing countries. Those with a high standard of living tend to export manufactured goods with high added value, while countries with lower standards of living tend to export commodities with little to no added value (Mandaza, 2015). Price fluctuations are a constant threat to low-income nations, which causes their economy to fluctuate wildly.
The principle of rarity serves as the foundation of the sneaker collecting pastime. They have something that no one else has seen or heard before, which is associated with credibility, in the same way, that the rise of hip-hop music and the birth of sneaker culture in the 1980s was. These three locations provide a brief introduction to sneaker culture. Nike purposefully conceals production figures to generate significant pre-release buzz and ensure a sellout of its newest sneaker design. Being “a cool brand in a cool store” is crucial to this marketing buzz, which can only exist in a physical location (Copacino, 2019). This is directly related to scarcity, after all. Many people cannot afford the hefty prices well-known sports brands charge for their footwear. Buying costly sneakers may be seen as a kind of ostentation. The obligatory markups from wholesale to retail are another factor in the high prices of luxury footwear. Sneaker buyers are well aware of these two characteristics, and as a result, they anticipate paying a high price for a brand new sneaker.
Conclusion
Because the product’s emphasis is on technology and money rather than labor, the corporation may face problems if creating such a product hits any technological challenges. Organizations should carefully pick product development staff with appropriate experience operating complicated equipment and working with cutting-edge technologies to mitigate these hazards. There are always monetary dangers in undertaking any job. However, this threat can be mitigated via careful financial planning and forecasting. However, cash flow projections have been made by the corporation. It is also essential to create budgets for production, advertising, financial statements (such as income and balance sheets), and projections.
References
Copacino, W. C. (2019). Supply chain management: The basics and beyond. Routledge.
Mabin, V. J., & Balderstone, S. J. (2020). The world of the theory of constraints: a review of the international literature. CRC Press.
Mandaza, M. (2015). Lean six sigma and theory of constraints for service: Model definition and validation at ABSA (Doctoral dissertation, Stellenbosch: Stellenbosch University).
Melendez, J. R., Zoghbe, Y. A., Malvacias, A. M., Almeida, G. A., & Layana, J. (2018). Theory of Constraints: A systematic review from the management context. Revista Espacios, 39(48).
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