crocs - with 2010 update

Download Crocs - with 2010 update

Post on 19-Nov-2014




4 download

Embed Size (px)


How the hole went from the shoe to the bubble... and maybe back.


  • 1. Marianna Malaspina, Global Supply Chain Management, Prof.D. Klotz,Fall 2008

2. The Product
3. Financial data
4. Simple and functional product, yet very new and funky.
Global world strategy
Supply chain that provided a competitive advantage: 2-3 weeks, in season,productreplenishment.
Core strategy
5. Crocs Supply chain: 1st phase
Immediate purchase of the Canadian Manufacturer and acquisition of proprietary resin croslite (comfort and odor resistance)
Canada for 100% of production
In Italy
Molding ofCroc shoe
By Foam Design in Canada
In various assortments
Denver Distribr
New pellets with color
6. Crocs Supply chain: 2nd phase (2005)
Starting from 2005, large contract manufacturer in China
In various assortm.
Molding of shoe
By Foam Design in Canada
In Italy
New pellets with color
Denver Distrib.
Molding of shoe
China Manufacture
In various assortm.
7. What a difference 5 years make
2002:1 model, 6 colors
2007: 250 models, including: Ocean Minded, YOU by Crocs (fashion) Bite footwear models;licensing agreements with Disney, Nickelodeon, Marvel, DC Comics and Warner Bros., and introduced a limited edition line of footwear and Jibbitz charms featuring such popular characters as Cinderella, Ariel, Mickey Mouse, Sponge Bob Square Pants, Dora the Explorer, Spiderman and Batman; Introduced Crocs at Work line that offers Crocs shoes targeted towards healthcare and food industry professionals; Developed Crocs Rx line: the Relief, the Cloud and the Silver Cloud. Targeted towards consumers who require specialized footwear that provides relief from certain medical conditions, such as diabetes, plantar pain, heel pain, metatarsalgia, achy feet and post-op conditions; and Entered into and extendedexisting collegiate licensing agreements with various colleges and universities, and our sports licensing agreements with, among others, NFL, NHL, MLB, AVP, NASCAR and more recently the Olympics, Gaelic Athletic Association and Australian football league
8. Manufacturing
In 2007:
17% manufactured by Company owned premises in North America, Italyand Brazil
56% footwear products from third-party manufacturers in China
27% footwear products from third-party manufacturers in Bosnia, Vietnam, Romania and the U.S.
Crocs also kept the Florida manufacturer for just one high volume product with a Made in the USA label
Continuedmanufacturing in Canada as well, in part because of duty considerations (e.g.: Canada/israel no duty, with Crocs sales at 1.2 million pairs in 2006 in Israel).
Continued the compounding in Italy: this resulted in SC inefficiencies in this phase of Crocs development
In 2006 Crocscontrol of the compounding activity, creating state-of-the-art compounding facilities in Canada, China and Mexico.
Change inwarehousing model: from contract warehousing in Colorado to company own warehousing (added to each factory) with direct shipment from manufacturing premises to big Clients DCs.
The goal: controlling the strategicorder fulfillment function in Asia
9. Must have enough injection molding machines

  • Purchase molds from 2 suppliers: by 2007 lead time crashed from 3 months to 6 weeks as supplier realized Crocs potential.

Must have enough molds for desired products.

  • For this purpose, molding machines would be transferred between production locations: e.g.: if demand increased in the US, might move production to Mexico, closer to customers. Productions for products with relatively dependable forecast would beswitched to China.

10. In general: products for Europe made in Europe, products for Asia made in Asia.Flexibility and lead time
11. Geographical Sales
In 2007:
U.S. sales: 52% of total revenues, (compared to 68% in 2006 and 93% in 2005), 13,000 stores.
International sales: 48% of total revenue, 19,000 international customer store locations, including 25 Company-operated retail stores in a variety of locations including Canada, Finland, United Kingdom, Singapore, Hong Kong, Japan, China and the Netherlands
An interesting forecasting aspect: products generally equally sold in each market: test product in the ss seasonin the southern emisphere and the result would be indicative of how Europe and the US would respond.
12. Company Owned Stores
U.S Retail Stores
Crocs Kiosks138
Crocs Retail Stores4
Crocs Outlet Stores6
International Retail StoresCrocs Kiosks36Crocs Retail Stores25
13. Retailing channels
Initially: small retailers
Willing to take more risk
Willing to work with Crocs on problems such as stock out and shipment delays, while large retailers charged hefty penalties for an order past cancellation date.
Important for brand building and presence even after majority of sales went to large retailers.
By 2007: 75% of sales large retailers
(shoe stores, department stores and sporting goods sales)
14. Logistics
18% shipped from Company owned manufacturing facilities (940,000 sf) and third-party manufacturers directly to the customer.
82% fulfilled by20 distribution locations strategically located throughout the world. Crocsowns warehouses in Australia, Brazil, California, Colorado, Canada, Finland, Hawaii, the Netherlands, India, Japan, Mexico, Puerto Rico and Singapore.
and by third-party operated distribution centers located in Canada, Colorado, Dubai, the Netherlands, Hong Kong, Japan, Kansas, Korea, New Zealand, and Taiwan (750,000sf).
1.7million square feet of space : flexibility to meet rapidly changing business requirements and positions Crocsto support the growth of all of their brands (e.g.flip flop sandal explosion in 2006: projected 250K, sold 2.5M).
Production capacity at 1M above actual monthly plan. This additional 1M can be turned on at a minute notice.Quite impressive.
In December 2007,agreement with Manhattan Associates to provide warehouse management systems within all Company-operated distribution centers. The implementation of their software is scheduled to be strategically rolled-out in all locations over the next 24months.
15. The supply net after 2005
Canada Compounding + Mnfct
19,000 International Retailers
Italy compound + mnfc
Bosnia and Rumania third party mnfctr
13,000 US retailers
Sporting Goods
Vietnam third
Party mnfct
Colorado wrhs
Mexico Cmpndg
Florida Mnfctr, 1 high volume prodct + wrhs
China 3rd p. Mnfctr 55% of Pr.+ compndg+ wrhs
Brazil Company owned mnfc
+ wrhs
16. Things get complicated
Expansion into products lines beyond croslite molded shoes.
Crocs acquires Ocean Minded a designer and manufacturer of high quality leather and EVA based sandals primarily for the beach, adventure and action sports market

  • Additional complications in the supply chain and production process

17. Higher costs of materials15
18. New planning system

  • Adoption of ERP

19. Launch of inventory module global viewof inventory
information for the planning system, which wasbrought online.

  • Each countrys generating their requirement plan + global planning activity for each model type: global planning personnel worked with the local staff on the requirements for each market.

20. No excess inventory but this has dramatically changed in 2008 21. Yes to acquiring excess capacity16
22. The stock (or what a difference a year makes)
23. New planning system

  • Adoption of ERP

24. Launch of inventory module global viewof inventory
information for the planning system, which wasbrought online.

  • Each countrys generating their requirement plan + global planning activity for each model type: global planning personnel worked with the local staff on the requirements for each market.

25. No excess inventory but this has dramatically changed in 2008 26. Yes to acquiring excess capacity18
27. The importance of a committed strategy
The Crocs phenomenon has by now crashed as a Wall Street favorite, but we thinkthey havefound a very fit logistic model and the product has real value, especially the original one.
We wonderif part of its recent debacle may not be due to too much of a good thing: how did the company expect to be able to handle an exponential increase in SKUs while maintaining almost real time response for over 33,000 global customers at a low price?
Maybe a slowdown would have been advisable, consolidatingthe brand and the Companys already remarkable organizational skills before taking on additional different products which contributed to distract the Companyfrom its core expertise.
Brief comments
28. Thank you for listening to me!
Do you have any question?

  • Crocs web site

30. Crocs 10-K 31. Crocs: Revolutionizing an Industrys Supply Chain Model for Competitive Advantage,Stanford Graduate School of Business case, 2007 32. Rick Munarriz, Ugly Shoes, Pretty Profits, The Motley Fool, May 4, 2007 33. Crocs Losing Foothold Among Young Consumers,