Coming Home

Posted: May 14 2014

 

                                                                

One would think, expect, and hope that a product with a “Made in America” label on it would be just that, made in America. And when Wolf vs. Goat proudly says that its products are Made in America, we mean just that. They are made in America. No further explanation needed. No caveats, clarifications, ifs, ands, or buts.

However, in the eyes of executives at New Balance, the definition of “Made in America” isn't so simple. It's complicated, nuanced, and flexible. In fact, according to New Balance's company policy, shoes labeled “Made in America” are those “where domestic value is at least 70%.” Not 100%. Not truly, entirely, made in America. Furthermore, to make matters even more complicated, the Company also has a line of products that are “Assembled in America” and these shoes are “assembled by U.S. workers using both imported and domestic material with domestic content of less than 70%.”

Now it should be noted that this is not an attempt to call out or ridicule New Balance. In fact, the only reason that New Balance is being used as an example is because it is the only example. New Balance is the sole mainstream sneaker company that even attempts to make some of their goods “entirely” in America. So, relative to industry standards and norms, their efforts are admirable, bold, and worthy of applause. Furthermore, their efforts come at a cost to the Company; the 25% of their sneakers that are “made in America” yield significantly fewer profits than their other shoes.

New Balance has been a leader in its commitment to domestic production, yet even it hasn't been able to find a way to make a 100% American made and assembled sneaker that will allow it to generate profit and continue operations. Until now.

How did they accomplish this? Well, in 2012 they bought IMEVA, a machine that, with 8 injection-molding stations, allows New Balance to convert plastic pellets into the one part of the shoe that American shoe manufacturers have always imported...the midsole.

But American shoe manufacturers imported the midsole for good reason: it's not cost effective to manufacture it domestically. New Balance knew that. In fact, they had been importing and continue to import midsoles for many of its models. Yet, they took a chance, invested in technology that allowed them to manufacture midsoles themselves, and began looking for ways to use its competitive advantage.

They found an opportunity in no time. You see, according to a statute found in the Berry Amendment, a piece of legislation enacted in 1941, the Department of Defense must buy boots, uniforms and certain other items that are 100% domestically produced whenever possible.* However, they can make an exception to the rule if American manufacturers don't have the capacity and/or capability to make what it needs. To date, the Department of Defense has used this exception to justify not following the Berry Amendment with respect to athletic shoes needed for boot camp, but following New Balance's investment in IMEVA, the DoD could no longer do so. As of 2012, New Balance had the capability to fulfill its needs.

But DoD officials were reluctant to change current policies. As it currently stands, the Armed Forces give recruits stipends of ~$65-$70 to spend on athletic shoes of their choice and military officials initially expressed a preference for things to stay that way. They didn't want to try to fix something that wasn't broke and requested that recruits continue to get these stipends and be offered an opportunity to pick from a variety of brands to find the shoes most appropriate for their feet and running styles.

Further concerns regarding the lack of a competitive bidding process for the shoe contract were also brought forward. However, in late April 2014, after shoe manufacturers including Wolverine suggested that they would also invest in the technology to produce a 100% American made shoe and compete with New Balance, the issue was resolved.

Starting in late 2014/early 2015, recruits, in accordance with the Berry Amendment, will be required to buy 100% American made sneakers.

* Interestingly, the U.S. Postal Service must also abide by this statute.

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