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Crocs Case study

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Supply Chain Management Group presentation

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Crocs Case study

  1. 1. Crocs Case Supply Chain Management Group 3 1
  2. 2. 2
  3. 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 3
  4. 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 4
  5. 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 5
  6. 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). 6
  7. 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 7
  8. 8. Q1. Core Competencies Small retailers Large retailers 8 Manufacture Retailers Crocs
  9. 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. 9
  10. 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 10
  11. 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 11
  12. 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 12
  13. 13. Q.2 Exploiting Competencies (extension) 13 ○ 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. 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 14
  15. 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. 15
  16. 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 16
  17. 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 17
  18. 18. THANK YOU! 18

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