Decisions Regarding Private-label Production

Special Note: Chain retailers are very conscious of the need to carry only private-label models/styles that are easy and less expensive to produce so they can sell their private-label shoes at attractively lower prices than name brand athletic footwear. As a consequence of their efforts to order only models/styles that are simpler to produce, production run set-up costs for private-label pairs are 75% below those for branded pairs. Thus, production run set-up costs are $250,000 per plant for making 50 models/styles of private-label shoes; $625,000 per plant for 100 models/styles; $1 million per plant for 150 models/styles; $1.5 million per plant for 200 models/styles; $2.0 million for 250 models/styles, and so on. Chain retailers are very conscious of the need to have private-label designs that are easy and less expensive to produce so they can sell their private-label shoes at attractively lower prices than name brand athletic footwear.