crocs case study operations management

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Operations Management

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  • 1. CROCS
  • 2. Crocs What are they? Clog design Comfortable Waterproof (used on boats) Light Bright colors Competitors include Nike, Sketchers and Decker
  • 3. Styles and Gear62% ofsale fromCaymanand BeachStyles25 models in a wide variety ofcolors and patternsBranded Apparel, Fury,Ocean Minded, Jibbitz
  • 4. Celebrities Wear Crocs
  • 5. Crocs Timeline2002 Crocs isfounded by 3friends sailingin theCaribbean; 1stpair of shoessold2003TotalRev$1.2Mil2004FormerFlextronicsExecutive RonaldSnyderis namedPresident;AcquiresFinproject NA2005RonaldSnyder isnamed CEOand enactsglobalmarketpenetrationstrategyFeb2006Crocsgoespublic;TotalMarketCap of$1 Bil2006 GlobalSupply chainbrought inhouse; Crocsownedmanufacturing(Mexico & Italy)& compounding(Canada, China& Mexico)facilities openedOct 2006AcquiresFury SportsManufacturer2006Year endRev of$355 Mil;TotalMarketCap of$1.7 BilJan 2007AcquiresOceanMinded, LLC Designer&Manufacturer ofSandals
  • 6. SWOT Analysis Strengths Croslite proprietary resin Odor free & water resistant Molds to wearers foot Capable of modular assembly Executive team and firm vision Superior supply chain managementIf the products sellextremely well, we willbuild more in season,and will be back on theshelves in a fewweeks. Were notgoing to wait with a hotnew product until nextyear, when hopefullythe same trend is alive.CEO Ronald Snyder
  • 7. Supply Chain Management Manufacturing 20% of footwear products produced in-house inNorth America and Italy 3rd party manufactures in China, Italy, Romania,and USA provide the balance Crocs owned compounding facilities in Canada,China, and Mexico
  • 8. Supply Chain Management Distribution / Warehousing Facilities inColorado, Canada, China, Italy, Hawaii, Mexico &Europe Warehousing and distribution centers added tomanufacturing facilities
  • 9. Supply Chain Management Sales 11,000 domestic & 8,000 international retail stores Direct sales through internet and mall kiosks Tradition retail sales through large retail chainsand boutique shops
  • 10. SWOT Analysis Weaknesses 2 suppliers of resin ingredient for Croslite material Rapid expansion of operations could impactservice, product quality, increase costs 136 employees as of 06/2004 and 2,900 as 12/2006 Divided customer opinion over looks
  • 11. SWOT Analysis Opportunities Expand Fury or other similar product lines Increased vertical integration Manage backlog more efficiently
  • 12. SWOT Analysis Threats Styles and fashion changes (fad) Backlog of orders becomes problematic Could result in cancelled orders, decrease inrevenue Increased from $6.7M in 2005 to $74.6M 2006 Increased competition, counterfeiting andlawsuits
  • 13. Strategy Increase Vertical Integration Utilize additional suppliers of resin Bring additional manufacturing in-house tomaintain high degree of flexibility and minimizebacklog A single facility accounts for 55% of footwear products Continue to expand warehousing / manufacturing /distribution all in one centers
  • 14. Strategy Limit over diversification of product lines Focus on high margin products Improve current information system to handle rapidoperations expansion and financial controls Protect intellectual property rights and trademarks Develop stand alone retail stores similar to Applesmodel for increased brand recognition Acquire or develop a different brand to diversify
  • 15. Strategy FinancingCROCS 2006 IPO ProceedsAggregate Offering Proceeds $104 millionUnderwriting Commissions $7 millionOther Expenses $2.5 millionNet Proceeds $94.5 millionRepaid LOC Facility $14.1 millionUpgraded Info Technology $8.7 millionCapital Expenditures $23.8 millionAcquisitions $15.4 millionIPO Proceeds Available $32.5 million Solvency Ratios Liability to Assets 30% LT Debt to Equity 0.06% Liquidity Ratios Quick Ratio 1.49 CFO /Avg. CL 18%Finance utlizing LT Debt and $20million from the remaining IPOproceeds. Maintain strong cashposition to counter increasedweakness in CFO.
  • 16. Crocs Today20062900 Employees 4157 employees25 footwear models 250 footwear models20.5% of footwear manufactured internally 21% of footwear manufactured internally2 suppliers of key resin input used tocreate croslite materialMultiple suppliers and 3rd party broker ofkey resin input used to create croslitematerial0 stand alone outlets and retail stores; 83Kiosks430 global kiosks, outlets, and retail storesaccounting for 31% of footwear sales96.5% of sales due to footwear 96.3% of sales due to footwear$355 million in total revenue $1 billion in total revenueMarket Capitalization $1.7 billion Market Capitalization $1.8 billion2011
  • 17. Crocs Stock Performance
  • 18. Any Questions?