Introduction First sold in 2003, in 2007 results were phenomenal Crocs- amphibious nature of the product- light, extreme comfort and odour resistance Crocs made of crostile material and bold colors simple, new and funky Launch worldwide- First in US, started with trade shows and attended various events- concerts, festivals
Strategies Buying the manufacturer- Foam creations (Canada) Contract manufacturers in Florida, Mexico and Italy Setup up manufacturing operations in Brazil Control of compounding activity Ownership of warehouses Inexpensive ingredients mix Worldwide launch
Issues Contractors and Manufacturers outside Asia not ready to adopt companys supply chain model -> Led to compounding in-house- manufacturing operations in Brazil
Central warehouse led to inefficiency -> added warehouse operations to each factory
Shifting production to duty free payments at Canada and Israel
Q1. What are Crocs competencies? Highly Flexible and Responsive Supply Chain System Highly responsive replenishment system Crocs owned the formula for proprietary resin Croslite Bringing the supply chain in house Contract manufacturers who did not adhere to flexibility and responsive demand were removed from the system Brought compounding in-house -> Added advantage of IP protection Warehousing and Distribution located near factory Faster access (6 weeks) to new Molding machines enabled them to meet the demand changes Moving production capacity(Molds) near high demand locations Maintained an additional capacity of 1 million pairs per month beyond the actual production plan Duty tariffs were included in the product development stage. Delayed Colouring decision in the product cycle dependent on the product demand Serving small and large retailers
Further vertical integration into materials Bringing the suppliers(sourcing) of raw materials in house is consistent with their Efficient supply chain management policy Increase the efficiency of supply chain system- More flexible and responsive -Raw materials being inexpensive can be easily sourced -Raw materials available according to demand -Multiple suppliers eliminated from the chain Difficulty in managing own supplier chain due to inexperience in the field
Growth by Acquisition New players get added to the supply chain difficulty in managing the entire chain disrupting their Global in-house policy As new entity gets added to the system difficulty in production planning/ inventory management etc. As fashion industry changes in months, the core competency can be well utilized to get in-time fashion footwear. People may not associate the brand image with fashion footwear
Growth by Product Extension Different products have different demand patterns to meet different demands need change in supply chain management Need more advanced methods to forecast demand and lead time management Q2. How should they exploit the core competencies in future? How will the supply chain configuration change with each of the strategies? Aspects of Demand Functional Product (Predictable Demand) Innovative Product (Unpredictable Demand) Product Life Cycle More than 2 years 3 months to 1 year Contribution Margin 5% to 20% 20% to 60% Product Variety Low(10 to 20 variants) High(millions of variety) Margin of error in forecasting 10% 40% to 100% Average stock out rate 1% to 2% 10% to 40% Average forces end-of-season markdown 0% 10% to 25% Lead time required for production 6 months to 1 year 1 day to 2 weeks Q3.How should Crocs plan its configuration and co-ordination decisions in order to manage its inventory in future? Can you suggest a framework? Crocs product can be categorized as functional product on the basis of above parameters Supply Chain Aspects Physically Efficient Process Market-Responsive Process Primary Purpose Low cost supply chain Quick response to unpredictable demand Manufacturing Focus High average utilization rate Excess buffer capacity deployment Inventory Strategy Minimize inventory throughout chain Deploy significant buffer stocks of parts of inventory Lead-Time Focus Shorten lead time Aggressive in lead time reduction Approach to choosing suppliers Primarily for cost and quality Primarily for speed, flexibility and quality Product Design Strategy Maximize performance and minimize cost Modular design for postponing product differentiation Supply chain of crocs can be categorized as market responsive with respect to the above parameters Evaluating the mismatch
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Innovative Product Functional Product Functional products should have efficient process So there is a mismatch in case of Crocs Pitfalls of Supply Chain Management and their symptoms Sr. no. Pitfalls Symptoms Seen 1 Inaccurate delivery status data No symptoms are seen because ERP is implemented. The data is collected from each countrys requirement plan. Moreover, product planning was based on pre-books for each model and information collected from retailers. 2 Inefficient information systems No symptoms are seen because there was a global planning system which co-ordinates with local staff for each market. 3 Ignoring impacts of uncertainty Mostly, the production is based on pre-booked orders. However, in case of a sudden increase in demand of the product, the acquired excess capacity in the form of molds and molding machines can be used. 4 Simplistic inventory stocking policy The uncertainties are taken care of because of the pre-books and the utilization of excess capacity. 5 Discrimination against internal customers Crocs never discriminated against internal customers. E.g. they shipped directly to the small retailers because they didnt have their own warehouses. 6 Incomplete Supply Chain The manufacturers are acquired as well as Crocs is distributor to small retailers. Framework Triple A Supply Chain Agility Alignment Adaptability Crocs needs an agile supply chain which could be achieved because of the excess capacity use in case of an increase in demand. Moreover they have good relations with the contract manufacturers especially in Asia. Croc has also promoted information flow with the home-grown database system for planning. Crocs needs an adaptable supply chain which is possible because Crocs is continuously searching for new markets and options for new supply chains. Crocs evaluated the needs of the ultimate customers (retailers) and hence the big retailers provided retail space. Crocs needs an aligned supply chain. They can exchange the information through a global planning system. The planning personnel worked with the local staff on the requirements for each market. Loopholes Crocs can easily cover upswings in demand by using the excessive capacity but it is not robust to sustain itself in case of downswings No foresight for downswings in demand The information was collected from retailer customers and not the actual demand and hence they might suffer from Bull-Whip Effect Lack of information about actual demand Crocs core competency was manufacturing shoes and other accessories and not developing software and there is a possibility that it may be work at best In-house inventory planning module Recommendations Forward Visibility Supply chain should be designed keeping in mind the demand downswings Outsourcing ERP They should focus on their core competencies and should outsource ERP implementation Thank-You