Crocs(A): Revolutionizing an

Industrys Supply chain model for

competitive advantage
BY-
SHALI NI PGP/ 17/ 166 KAUSTUBH PGP/ 17/ 141
RUCHI PGP/ 17/ 163 NEHA PGP/ 17/ 153
ROHI T PGP/ 17/ 162 OJASVI TA PARATE PGP/ 17/ 157


Introduction
First sold in 2003, in 2007 results were phenomenal
Crocs- amphibious nature of the product- light, extreme comfort and odour resistance
Crocs made of crostile material and bold colors simple, new and funky
Launch worldwide- First in US, started with trade shows and attended various events- concerts,
festivals

Flexibility- Enough injection mouldings, enough molds for desired products, excess capacity,
custom configure 24-packs
Industry Limitation-
1. Estimate demand 2. Fashion

Strategies
Buying the manufacturer- Foam creations (Canada)
Contract manufacturers in Florida, Mexico and Italy
Setup up manufacturing operations in Brazil
Control of compounding activity
Ownership of warehouses
Inexpensive ingredients mix
Worldwide launch



Issues
Contractors and Manufacturers outside Asia not ready to adopt companys
supply chain model
-> Led to compounding in-house- manufacturing operations in Brazil

Central warehouse led to inefficiency
-> added warehouse operations to each factory

Shifting production to duty free payments at Canada and Israel


Q1. What are Crocs competencies?
Highly Flexible and Responsive Supply Chain System
Highly responsive replenishment system
Crocs owned the formula for proprietary resin Croslite
Bringing the supply chain in house
Contract manufacturers who did not adhere to flexibility and responsive demand were removed from the system
Brought compounding in-house -> Added advantage of IP protection
Warehousing and Distribution located near factory
Faster access (6 weeks) to new Molding machines enabled them to meet the demand changes
Moving production capacity(Molds) near high demand locations
Maintained an additional capacity of 1 million pairs per month beyond the actual production plan
Duty tariffs were included in the product development stage.
Delayed Colouring decision in the product cycle dependent on the product demand
Serving small and large retailers





Further vertical integration into materials
Bringing the suppliers(sourcing) of raw materials in house is consistent with their Efficient supply chain management policy
Increase the efficiency of supply chain system- More flexible and responsive
-Raw materials being inexpensive can be easily sourced
-Raw materials available according to demand
-Multiple suppliers eliminated from the chain
Difficulty in managing own supplier chain due to inexperience in the field

Growth by Acquisition
New players get added to the supply chain difficulty in managing the entire chain disrupting their Global in-house policy
As new entity gets added to the system difficulty in production planning/ inventory management etc.
As fashion industry changes in months, the core competency can be well utilized to get in-time fashion footwear. People may not
associate the brand image with fashion footwear

Growth by Product Extension
Different products have different demand patterns to meet different demands need change in supply chain management
Need more advanced methods to forecast demand and lead time management
Q2. How should they exploit the core competencies in future? How will
the supply chain configuration change with each of the strategies?
Aspects of Demand Functional Product (Predictable
Demand)
Innovative Product (Unpredictable
Demand)
Product Life Cycle More than 2 years 3 months to 1 year
Contribution Margin 5% to 20% 20% to 60%
Product Variety Low(10 to 20 variants) High(millions of variety)
Margin of error in forecasting 10% 40% to 100%
Average stock out rate 1% to 2% 10% to 40%
Average forces end-of-season markdown 0% 10% to 25%
Lead time required for production 6 months to 1 year 1 day to 2 weeks
Q3.How should Crocs plan its configuration and co-ordination decisions in
order to manage its inventory in future? Can you suggest a framework?
Crocs product can be categorized as functional product on the basis of above parameters
Supply Chain Aspects Physically Efficient Process Market-Responsive Process
Primary Purpose Low cost supply chain Quick response to unpredictable demand
Manufacturing Focus High average utilization rate Excess buffer capacity deployment
Inventory Strategy Minimize inventory throughout chain
Deploy significant buffer stocks of parts of
inventory
Lead-Time Focus Shorten lead time Aggressive in lead time reduction
Approach to choosing
suppliers
Primarily for cost and quality Primarily for speed, flexibility and quality
Product Design Strategy Maximize performance and minimize cost
Modular design for postponing product
differentiation
Supply chain of crocs can be categorized as market responsive with respect to the above parameters
Evaluating the mismatch


Match


Mismatch

CROCS
Mismatch



Match
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Innovative Product Functional Product
Functional products should
have efficient process
So there is a mismatch in
case of Crocs
Pitfalls of Supply Chain Management and
their symptoms
Sr.
no.
Pitfalls Symptoms Seen
1 Inaccurate delivery status data No symptoms are seen because ERP is implemented. The data is collected from each
countrys requirement plan. Moreover, product planning was based on pre-books for
each model and information collected from retailers.
2 Inefficient information systems No symptoms are seen because there was a global planning system which co-ordinates
with local staff for each market.
3 Ignoring impacts of uncertainty Mostly, the production is based on pre-booked orders. However, in case of a sudden
increase in demand of the product, the acquired excess capacity in the form of molds
and molding machines can be used.
4 Simplistic inventory stocking policy The uncertainties are taken care of because of the pre-books and the utilization of
excess capacity.
5 Discrimination against internal
customers
Crocs never discriminated against internal customers. E.g. they shipped directly to the
small retailers because they didnt have their own warehouses.
6 Incomplete Supply Chain The manufacturers are acquired as well as Crocs is distributor to small retailers.
Framework Triple A Supply Chain
Agility
Alignment Adaptability
Crocs needs an agile supply chain which could be
achieved because of the excess capacity use in case
of an increase in demand. Moreover they have good
relations with the contract manufacturers especially
in Asia. Croc has also promoted information flow with
the home-grown database system for planning.
Crocs needs an adaptable supply chain which is
possible because Crocs is continuously searching
for new markets and options for new supply chains.
Crocs evaluated the needs of the ultimate
customers (retailers) and hence the big retailers
provided retail space.
Crocs needs an aligned supply chain. They can
exchange the information through a global planning
system. The planning personnel worked with the
local staff on the requirements for each market.
Loopholes
Crocs can easily cover upswings in demand by using the excessive capacity but it is not robust
to sustain itself in case of downswings
No foresight for downswings in demand
The information was collected from retailer customers and not the actual demand and hence
they might suffer from Bull-Whip Effect
Lack of information about actual demand
Crocs core competency was manufacturing shoes and other accessories and not developing
software and there is a possibility that it may be work at best
In-house inventory planning module
Recommendations
Forward Visibility
Supply chain should be
designed keeping in
mind the demand
downswings
Outsourcing ERP
They should focus on
their core competencies
and should outsource
ERP implementation
Thank-You