Crocs Case

Supply Chain Management

Group 3
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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

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

Company Timeline

3 friends to sail
Crocs conception

Synder joins
Rapid expansion

2003
2002

Continuous growth
(Rev= $335 M)
IPO year
(Mkt. Cap.= more than $1 B)

2005
2004

Immediate success
Ronald Synder,
consultant
Rev= $1.2 M

2007
2006

Synder as CEO
Acquisition of Finproject
NA (Croslite formula)

Flextronic team joins,

(going worldwide)

Q1:
Mkt. Cap.= $2.7
B

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

Q1. Core Competencies

Three important phases of Crocss 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

Q1. Core Competencies

Small
retailers

Large
retailers

Manufacturer
Crocs

Retailers
8

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 staf
Strategically crocs started working with small retailers and after its
success large retailer approached the company. This enable crocs
to negotiate favorable terms.

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

Q.2 Exploiting Competencies

(vertical)
Supplier

Compounding

Molding Assembling
Warehousing

US

ITA

CHN

CAN

EU

CAN

MEX

ITA

Distribution
Center

DEN

Retailers

Small

Large

Stronger control over the supply chain

CHN

FL

BRA
Company-owned

MEX

BHI

IND
Third-party/
Contract

11

Q.2 Exploiting Competencies (M&A)

Supplier

Compounding

Molding Assembling
Warehousing

Distribution
Center

Retailers

US

ITA

CAN

CHN

CAN

DEN

Small

EU

CHN

MEX

MEX

ITA

FRA

Large

High capacity and high responsiveness

CHN

BRA

IND

THA

IND

FL

BRA

CHN

BHI

IND

IND

THA

JPN

OWN

Company-owned

Third-party/
Contract

12

Q.2 Exploiting Competencies

(extension)
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

13

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 suppliers 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

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

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 tarifs

16

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 trendshifts

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THANK
YOU!
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