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