Crocs Revolution an Industry Supply Chain Model for Competitive Advantage

7/25/2019 Crocs Revolution an Industry Supply Chain Model for Competitive Advantage

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CROCS: REVOLUTIONIZING AN INDUSTRYS SUPPLY CHAIN MODEL FOR COMPETITIVE ADVANTAGE

Prepared by:Syndicate 6Hannah Fadhilah / 29115 387Hariswoyo / 29115 418Hyang I. Mihardja / 29115 270I Nengah Sagita / 29115 388Iman Siregar / 29115 384


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Ronald Snyder The CEO Expertise:

Manufacturing Operation Merger& Acquisition Sales& Marketing

Shifting Design & Distribute businessinto Manufacturing Company

Purchase Canadian ManufacturerFinProject NA Formula Resin Croslite

Build a strong Team Think Big Global Vision IPO Continues Improvement Strategy

Crocs Supply Chain Acquisition & Product Extension


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2002 Crocs is founded by 3 friends sailing in the Caribbean; 1st pair of

shoes sold

2003 Total Rev $1.2 Mil

June 2004 Former Flextronics Executive

Ronald Snyder is named

President ; Acquires Finproject NA

Jan 2005 Ronald Snyder is named CEO and

enacts global market

penetration strategy

Feb 2006 Crocs goes public; Total Market Cap

of $1 Bil

2006 Global Supply chain brought in house; Crocs owned

manufacturing (Mexico & Italy) &

compounding (Canada, China & Mexico) facilities opened

2006 Year end Rev of $355 Mil; Total Market

Cap of $1.7 Bil

Jan 2007 Acquires Ocean Minded, LLC Designer & Manufacturer of Sandals

CROCS INC. HISTORY


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#2. The chemicals are combined in a compounding facility where color dyes are added

CROCS SUPPLY CHAIN

#1. The raw materials in pellet form are shipped to compounding facilities

#3. The compounded colorized pellets are molded and assembled

#4. The finished products are shipped to warehouse to be packed

#5. The finished products are

shipped to retail/ customer

Compounding Molding & Assembling

Warehousing


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SUPPLY CHAIN DEVELOPMENTPhase 1 : Taking Over ProductionTo own the Croslite formula and control manufacturing

Phase 2 : Global Production Using Contract Manufacturers

To added

the

manufacturing

capacity

due

to

entering

Asian

and Europe markets.

Phase 3 : Bringing the Global Supply Chain InHouseDue to inefficient shipping of materials and reduced manufacturing flexibility, Crocs took control of the

compounding activity and warehousing


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Raw Materials (various

companies in EU and US)

Raw Materials (various


Thirdparty compounding company in

Italy


Italy

Molded and

Assembled in Foam Creations (Canada)

Molded and

Assembled in Foam Creations (Canada)

Warehoused, Packaged and

shipped to customers by Thirdparty distribution company in

Denver

Warehoused, Packaged and

shipped to customers by Thirdparty distribution company in

Denver

PHASE 1


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PHASE 2

Raw

Materials (various companies in EU and US)

Raw

Materials (various companies in EU and US)


Italy


Italy

Molded and Assembled in

Foam Creations (Canada) and

Contract Manufacturers

in China, Florida,

Mexico and

Italy


Foam Creations (Canada) and

Contract Manufacturers

in China, Florida,

Mexico and

Italy

Warehoused, Packaged

and shipped

to customers by Thirdparty

distribution company in

Denver

Warehoused, Packaged

and shipped

to customers by Thirdparty

distribution company in

Denver


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PHASE 3

Raw Materials

(various


Raw Materials

(various


Company

Owned

Compounding facilities in

Canada, China, and Mexico

Company

Owned

Compounding facilities in

Canada, China, and Mexico


Foam Creations

(Canada) and Contract

Manufacturers

in China,

Florida, and

Romania, Company

Owned

Manufacturing Operations in Mexico and Italy (Brazil and India

soon)


Foam Creations

(Canada) and Contract

Manufacturers

in China,

Florida, and

Romania, Company

Owned

Manufacturing Operations in Mexico and Italy (Brazil and India

soon)

Warehousing operations to each factory,

Chinese warehouse

owned by one of the Crocs suppliers but run by Crocs

personnel and Crocs systems,

other warehouses were owned by Crocs or were being

transitioned to Crocs

ownership

Warehousing operations to each factory,

Chinese warehouse

owned by one of the Crocs suppliers but run by Crocs

personnel and Crocs systems,

other warehouses were owned by Crocs or were being

transitioned to Crocs

ownership


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CROCS SUPPLY CHAIN vs TRADITIONAL SUPPLY CHAIN

Focused oncustomer needs Fast responseto demand changes (Be able

to make the product during season and shipthem to customers quickly)

High collaborationwith suppliers Retailers dont need to take a big risk byplacing large orders, they could placesmaller pre-booked orders and order more

when they saw how well the product sold

Slow responseto demand changes Lack of collaborationwith suppliers Retailers had to estimate the orders

(Fashion was subject to trends that were

difficult to predict) Risk of underestimating or overestimatithe orders

No change to place orders within the

season

CROCS SUPPLY CHAIN TRADITIONAL SUPPLY CHAIN


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#1. What are Crocs core competencies?

Highly Responsive and Adjustable Supply Chain Process

Fast on increasing productivity when demands increaseFast on delivering the product, factories is anywhereCustomizable product styleHigh chance on collaborating the productMoveable marketplaceBe able to fulfill both small and large retailGood Planning and WarehousingBe able to combine in-house and outsourcedcomponents


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Onshore (geographically close tomarket)

Offshore

In-house Warehouses Canada Prod.

Mexico ProdItaly Prod- Europe Compounding

Compounding

R&D (in Italy)

Outsourced Florida Prod China ProdBosnia Prod

ON-SHORE OFFSHOREIN HOUSE OUT SOURCE


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Further Vertical Integration

into materialsRelatively low cost chemical materialAvailable in Europe and USAOutsourced give more flexibility and advantage

In houseOutsource

#2. How do they exploit these competencies in

the future?

Compounding Molding &Assembling

Warehousing &Distributors


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which could be time consuming and costly!Materials used are low cost chemicalsCan be produced by any companyLittle advantage of taking this in-house

This would requireCrocsto getinto thechemical industry

#3. To what degree do this alternative fit the companys core

competencies and to what degree do they defocus the company awafrom its core competencies?

No, It does NOT fit the companys core competencies


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#2. How do they exploit these competencies in

the future? (continued)Growth by AcquisitionAcquire medium size companies whichsupport the diversification of the product forsustainable purpose

Total $ 9.6 Million (Oct06)

$ 13.5 Million (Dec06)

$ 1.75 Million (Jan07)

#3. Does if fit to core competencies?Does it defocus away its core competencies?

Yes, it doesfit to the company corecompetencies. However Acquisition oflarge,mature companieswould substantially

defocusCrocs.


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Growth by Product ExtensionStrong relationship with its retailers

Obtain information on potential new productsDeveloping new product;gardening, boating, medical, fashion, etc.

Take advantage of the companys flexible supply chainLook at markets where customer demand is volatile

Utilize large amount of existing retail shelf spaceShelf space is a valuable commodity can add more productsLight weight higher product density per sq. foot of floor spaceCustomers could serve themselves better display of all sizes

Other product extensions such whih can help thebrand image

Yes, It does fit the companys core competencies

#2. How do they exploit these competencies in the future? (continued)

#3. Does if fit to core competencies?Does it defocus away its core competencies?


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# 4. How should Crocs plan its production and inventory?

Compared to the competitor, Crocs have a low inventory turnoverrate, it may point to overstocking,

Proposed Plan

1. Continuing each geographic region to response local customer2. Crocs various the product.3. Keep the molding capacity higher than production target such

as > 1 million/month capacity4. Low Inventory, allow company to:

1. Reduce holding cost - less money on rent, utilities,insurance, theft and other costs of maintaining a stock ofgood to be sold

2. Increases net income and profitability3. More quickly increase responsiveness to changes in

customer requirements


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#4. How do the companys gross margins affect thidecision?

Compared to the competitor, Crocs has the best profitability

ratio rate 56,5%. It means Crocs has a strong foundation toexpand.

This will allow company to run under low inventory level aninvest to the other region in the world.


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Crocs Supply Chain Model is a good example of

How a supply chain strategy of a company can influence all the other aspects of the company such as Marketing , Acquisition , etc.

This is because the Supply Chain was efficient

and was able to exploit the core competencies of Crocs.

SUMMARY


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THANK YOU

any question?


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THANK YOU

any question?


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CROCS Rapid GrowthIn 2002 , Lyndon Hanson, Scott Seamans & George Boedecker Found Canadian Foam Clog Shoes. In 2003 CROCS sold its first shoesIn 2007 :

Revenues $ 142 millions (Q1) 3 times 2006 (Q1)

Gross Profit (% of Sales 59.4%) exhibit 3 Expected Revenue $ 670 millions $ 680 millions Industry Comparisons; Decker Outdoor, Nike, Timberland (exhibit 4)

Highest Gross Profit Margin 56,5% Lowest Inventory Turn Over Extremely Highest Growth


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Purchase of Foam Designs to have sole control over

Croslite resin Started company owned manufactures in Mexico

and Italy Arrangement with Bosnian company Integration of inhouse compounding in Canada,

China and Mexico Consistency in molding machinery to facilitate

interchangeability

QUALITY MANAGEMENT &

CONTROL WITH HIGH GROWTH


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GLOBAL CONSIDERATIONS Off shored equipment to rapidly meet

demand

Online inventory module and planning system to meet requirement for each market

Reduced paying higher tariffs by shifting

production to

countries

who

can

export

the

product duty free.


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PERFORMANCE ANALYSES & MEASUREMENT SYSTE


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CUSTOMER EXPECTATION

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Crocs Revolution an Industry Supply Chain Model for Competitive Advantage