Crocs (A): Revolutionizing an Industry's
Supply Chain Model for Competitive
Advantage
Group 3
Noorzihan Abd Karim
Noor Asnida Amri
Nor Asma Warnee Habib
Naz Hairi Ali
Based on 2
seasons (spring
& fall)
Buyer would
pre-books early
of the year
Delivery on
Aug till Nov
Production is
based on
schedule
shipment
Retailer need
to estimate
demands in
advance
Case
Standar
Introduction
d
practice
in
footwea
r
industry
Produ
ct
featur
es
-Croslite
material
molded to the
shape of
wearers foot
-Large
ventilation
hole
-Bold color
- Odor &
water
resistant
Caps
Other
produc Shirt
socks
ts
Backpack
kneepad
s
decorativ
e insert
( Jibbitz)
The Crocs Supply Chain
Phase 1 : Taking over production
Buying Foam Creation (Manufacture of Crocs shoes)
Purpose : 1. Own the proprietary croslite resin
2. Control manufacturing
Raw
material US &
Europe
3 party
compoundi
ng - Italy
rd
Mold +
Assemble
Canada
Warehouse
d+
Packaging
+ Shipped
- Denver
Phase 2 : Global Production Using Contract
Manufacturer
Added capacity via contract manufacturer in China,
Florida, Mexico, Italy
Raw
material US &
Europe
3rd party
compound
ing - Italy
Mold + Assemble
Canada
Mold +
Assemble
China
Warehoused
+ Packaging
+ Shipped Denver
The Crocs Supply Chain
Phase 3: Bringing the Global Supply Chain Inhouse
Took control of the compounding activity delaying
colorizing decision
Added warehousing operation & other value added
activities to each factor
Q1 : Crocs core
competencies
Flexible
supply
chain
model
Quickly react to change in demands especially
in selling seasons / fashion trends
Excess capacity in manufacturing facilities. Eg:
Injection molding machines
Ability to adjust to demand location. Eg: Moving
molds
Owners
hip of IP
Croslite material was unique (light-weight,
moldable, comfortable, easy to clean)
Moving to in-house compounding able to
protect the IP
Marketi
ng
Strateg
y
Assign representatives to stores
Participate in trade shows in every industry that
could benefit from the product
Went to sport tournament, concerts, festival to
talk about the shoes lead to word of mouth
Good relationship with small and large retailer
Q2 : How do they exploit these competencies in the
future? Consider the following alternatives:
Flexible
supply
chain
model
Owners
hip of IP
Marketi
ng
Strateg
y
Improving Crocs' reputation with the retailers
due to a reliable partnership as compared to its
competitors
Crocs doesn't have to mark down its shoes at
the end of the season because of its efficiency
in closely matching production to sales
Compounding
facilities in Canada, China, and
Mexico: reducing its reliance on the Italian
company
New facilities has improved Crocs' supply chain
network and eliminated the risk of total
collapse
New shoe model tested in the southern
hemisphere to indicate the northern hemisphere
acceptance
Q2 : How do they exploit these competencies in the
future? Consider the following alternatives:
Further
vertical
integratio
n into
material
Purchasing suppliers of raw material will ensure
that Crocs will have more control over
production costs in the future
Exclusive access to raw material
Growth
by
acquisitio
n
Jibbitz (shoe accessories) diversified brand
portfolio- will not have to develop new
manufacturing technologies
Acquire companies that already have proven
business model and whose products
complement Crocs strategy or product lines
Growth
by
product
extensio
n
enable the company to leverage its brand into
more products and create additional revenue
and profit opportunities
introduce new products with minimum
marketing efforts
Q3:To what degree do the
alternative in Q2 fit the companys
core competences and to what
degree do they defocus the company
away from its core competences?
Look at the strength and weaknesses on
the company core competencies itself
How the company identify and overcome
the problems (if any) and how to maintain
their strength
GROWTH BY
PRODUCT
EXTENSION
STRENGHT
WEAKNESE
SS
Ability to meet
customer
expectations
Economies scale
and scope
Making product
obsolete before
competition
catches up and
copies design
Increased
production cost
Increased
capacity
allocation and
possibility of
excess capacity
Possibility of lack
of supplier and
retailer
coordination and
as result low
response and
flexibility in future
QUESTION 4
How should Crocs plan its production and
inventory?
Primarily focus on producing molded shoes in
CHINA
Do quick assessment of other region in the world
and the duty structures
Transferring adequate production & eliminating
adjustment schedules for the short run
Focus on other countries where excess capacity
could be leased
Implemented the global inventory planning
system (ERP)
QUESTION
How should4 Crocs plan its production and
inventory?
How do
QUESTION
4 the companys gross
margins affect this decision?
Crocs Gross Profit Margin
2004
2005
2006
2007
47.0%
56.0%
56.5%
58.8%
QUESTION 4
How do the companys gross margins affect
this decision?
Affects ordering behavior of inventory and
supplies
Higher margins can afford to keep more
inventories in stocks
Lower turn over rate
Gives access to more cash on hand to buy into
more steps in its supply chain
QUESTION
How should4 Crocs plan its production and
inventory?
How do
QUESTION
4 the companys gross
margins affect this decision?
Industry Comparison
Crocs
Deckers
Outdoor
Nike
Timberlan
d
Gross Profit
Margin
56.5%
46.4%
43.7%
47.3%
Inventory
Turnover
3.5
5.0
6.5
7.4
