Supply Chain Management Group presentation

1. Crocs Case
Supply Chain Management
Group 3
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2. 2

3. Company Description
● Footware company (Colorado, USA)
o Impressive rapid growth & profitability
o Popular (customers & retail clients)
● Product features:
o extremely comfortable
o odor resistant material (Croslite)
o funky, bright colored
o ventilation holes
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4. Company Description
● Product designs:
o Beach & Cayman (main, 62% sales)
o over 31 models
● Other product lines:
o clothing & accessories, backpacks, Jibbitz
o shoes with conventional materials
● Initial targeting:
o people who spend too much time standing
● Success:
o innovative and highly flexible supply chain
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5. Company Timeline
2003
2002 2004
2005
2006
2007
● 3 friends to sail
● Crocs conception
● Immediate success
● Ronald Synder, consultant
● Rev= $1.2 M
● Synder joins
● Rapid expansion
● Synder as CEO
● Acquisition of Finproject NA
(“Croslite formula”)
● Flextronic team joins,
(going worldwide)
● Continuous growth
(Rev= $335 M)
● IPO year
(Mkt. Cap.= more than $1 B)
● Q1:
Mkt. Cap.= $2.7 B
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6. Q1.Core Competencies
Highly flexible and responsive Supply Chain
○ The existing supply chain required that retailers to forecast demand and
anticipate orders of certain season (push System). however, it leads to:
○ Overstate (unsold inventory and loss)
○ Understate ( loss of potential profit)
○ Crocs developed a revolutionary supply chain system that allowed retailers
to place smaller pre-books and to order within a season (combination of
push and pull system).
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7. Q1. Core Competencies
Three important phases of Crocs’s Supply Chain:
○ Purchased Foam creations in 2004, own the resin croslite
○ Started production in China, then added capacity through contractor
manufactures in Florida, Mexico and Italy in 2005.
○ To increase responsiveness, Crocs developed own manufacturing
operations in Mexico, Italy, Brazil and India.
○ Flexibility to the unexpected demands and low inventory level
○ Close relationship with retailers
○ Efficient and flexible distribution model
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8. Q1. Core Competencies
Small retailers Large retailers
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Manufacture
Retailers
Crocs

9. Q1. Other Competencies
Marketing
○ Significant investment in advertising and promotional activities
○ The company participated in tradeshows, concerts, festivals, sports event,
and face to face Marketing
○ Launch the world at once
○ To increase efficiency crocs brought in-house representatives and own
sales staff
○ Strategically crocs started working with small retailers and after its success
large retailer approached the company. This enable crocs to negotiate
favorable terms.
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10. Q1. Other Competencies
○ Croslite material
○ Unique material (comfortable, light, odor resistant)
○ Easy to be produced in any color
○ Top management
○ Experienced top management
○ Top management was able to quickly identify limitations of footwear
industry
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11. Q.2 Exploiting Competencies (vertical)
Supplier Compounding
Molding Assembling
Warehousing
Distribution
Center
US
EU
ITA CHN CAN DEN Small
MEX ITA
IND
BRA
BHI
CAN
CHN
MEX
Large
Retailers
Company-owned
FL
Stronger control over the supply chain
Third-party/
Contract
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12. Q.2 Exploiting Competencies (M&A)
Supplier Compounding
Molding Assembling
Warehousing
Distribution
Center
Retailers
US
EU
ITA CHN CAN DEN Small
MEX ITA
IND
BRA
BHI
CAN
CHN MEX Large
Company-owned
BRA IND FL
THA
THA
CHN
JPN
IND
FRA
CHN
IND
OWN
Third-party/
Contract
High capacity and high responsiveness
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13. Q.2 Exploiting Competencies (extension)
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○ Current Situation
○ Wide range of product line (Beach and Cayman, CrocsRX, accessories)
○ 96% of sales come from shoes
○ License agreement with Disney, Universities, Sport teams
○ Uniqueness = croslite material
○ Growth by product extension
○ Developing new product categories
⇒ More efficient use of material
⇒ Alternatives of footwear or material
○ Expanding license agreement
⇒ Should seek more opportunities to have more agreements

14. Q.3 Alternatives Merits & Demerits
● Further vertical integration into materials
o Can make the supply chain more stable
o Not bring much benefits (current supplier is responsive enough,
inexpensive raw materials) for the cost
o lose supplier’s good deals (become competitors)
● Growth by acquisition
o Increase responsiveness and capacity quickly
o Diversified brand portfolio
o Not necessary to develop new manufacturing technology , facilities
and qualified human resources
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15. Q.3 Alternatives Merits & Demerits
● Growth by product extension
o Increase brand awareness
o Backup by SC to fast introduction and supply
o Strategic cannibalization (Crocs can cannibalize its products itself)
o Dilute brand image. But it can be minimized by acquisition of non-
croslite technology. Thus, Crocs would focus on its core business.
So, Crocs is most likely to succeed by Acquisition and product extension.
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16. Q.4 Production & Inventory Strategy
Production strategy
● Pre-booked orders (small quant.) + forecasting
● Coloring postponement (until order received)
● Excess manufacturing capacity (molds & molding machines)
● Easily transferring molds
● Single mold, corslite material to enjoy low tariffs
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17. Q.4 Production & Inventory Strategy
Inventory strategy
● Pre-booked orders (small quant.) + forecasting
● SKU (stock keeping unit)
● Drop shipping
● Inventory module
● Low cost inbound transportation in local level
What can go wrong?
Excess manufacturing capacity >> increasing overhead cost
Rely on historical data for forecasting>> industry subject to trend-shifts
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18. THANK YOU!
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