Crocs: Revolutionizing an Industry's Supply Chain Model for

• As Crocs grew, it added additional shoe designs. The two original models, Beach and Cayman, accounted for about 62 percent of footwear sales in 2006.
• April 2007, the company had a wide range of shoes and other products.
• 31 basic footwear models, ranging from sandals to children's rain boots to shoes designed for professionals, such as a nurse, who had to stand all day.
• Some of its shoes were made under a license agreement with Disney.

PHENOMENAL GROWTH!

Producing a Crocs Shoe

• The raw materials for the croslite in Crocs shoes are relatively inexpensive chemicals purchased in pellet form from suppliers such as Dow Chemical. these chemicals go through a compounding process. This process is where they add the colors.
• Croslite components are made by injection molding. This requires certain machines and molds for each style and size.
• Parts are then molded and assembled.

Footwear Supply Chain

The footwear industry was oriented around two seasons-spring and fall. Normally buyers would book orders for fall delivery in January. These orders were received at the beginning of the year and would be planned for delivery in August, September, October and November.

This production and supply model had obvious limitations. Estimates had to be made about what their customers would want far in advance of the selling season and fashion was subject to trends that were difficult to predict.

Questions

1. What are Croc's core competencies?

2. How do they exploit these competencies in the future? Consider the following alternatives:

a. Further vertical integration into materials.

b. Growth by acquisition

c. Growth by product extension.

3. To what degree do the alternatives in question 2 fit the company's core competencies, and to what degree do they de-focus the company away from its core competencies.

4. How should Crocs plan its production and inventory? How do the company's gross margins affect this decision?

THE CROCS SUPPLY CHAIN

Shoes comprised 96 percent of company revenues in 2006. Crocs also branched out into other accessory products, such as caps, shirts, shorts, hats, socks, and backpacks. Crocs made other acquisitions in 2006 and early 2007 in the sports protection equipment and apparel market and in action footwear. These acquisitions further broadened the company's product line.

Crocs looked at the supply chain from a very different perspective than traditional shoe companies. They decided to develop a model focused on customer needs. When a customer needed more product , they would get it.

Under the Crocs model, retailers would not need to take a big risk in January by placing large orders for their fall season.

Benefits to and Considerations and Benefits of the Crocs Supply Chain Model

• Small Vs. Large Retail Customers.
• Dealing with explosive growth.
• Shifting Production to Reduce Duty Payments.
• New, More Complicated Products.
• Introducing New Products
• Supply Chain Planning

The original Crocs show was a clog design. Visually its two most distinctive features were large ventilation holes and bold colors, but the key to the shoe was the croslite material. The material molds into the shape of the wearer's foot, providing an exceptionally comfortable shoe. It was light, did not skid was odor resistant , and did not mark surfaces. Crocs generally sold for about $30.

Revenue in 2003 had been$1.2 million. By 2006., it was $355 million, with a new income of $64 million. Crocs went public in February 2006 with an initial market capitalization of over $1 billion. Sales outside of North America grew from 5 percent of total revenue in 2005 to 25 percent in 2006.

Crocs Inc.

Sales Efforts

In 2002, three friends from Boulder, Colorado went sailing in the Caribbean. One brought a pair of foam clog shoes that he had bought from a company in Canada. The clogs were made from a special material that did not slip on wet boat decks, was easy to wash, prevented odor, and was extremely comfortable. The three, Lyndon "Duke" Hanson, Scott Seamans and George Boedecker, decided to start a business selling these Canadian shoes to sailing enthusiasts out of a leased warehouse in Florida,

Crocs started its sales efforts on a grass-roots basis in the U.S. Trade shows geared toward gardening, boats and pool supplies were the main focus. They also made themselves visible at events such as concerts, festivals and sports tournaments.

Origin of the name

The founders wanted to name the shoes something that captured the amphibious nature of the product. Alligator had already been taken, they chose to name the shoes "Crocs."

Topic

CROCS

Crocs: Revolutionizing an Industry's Supply Chain Model for Competitive Advantage.

By

Amy Rowan and Lainie Denton

At the time of Snyder joining the company it was headquartered in Colorado, but essentially distributing shoes made by the Canadian manufacturer Finproject NA. One of Snyder's first moves was to purchase Finproject. which he renamed "Foam Designs."

October 2003

Snyder encouraged the company to think big. He brought in a number of key executives and built infrastructure in preparation for growth. and launched the product worldwide.

"We needed to launch everywhere in order to have us be the brand that had sustainability. We were in every country you can think of before anybody else had a real capability to ship product in other countries besides the U.S. "

The shoes were an immediate success and their customer base expanded to a wide range of people who spent much of their days standing. Ronald Snyder, a college friend, became a consultant for the company. Snyder became President of Crocs in June 2004 and then on to CEO in January 2005.

• Crocs developed a supply chain that provided a competitive advantage in addition to the popular product and global strategy.
• The Crocs model did not impose limitations on retailers as traditional industry practice. They could fill new orders within the season, quickly manufacturing and shipping new product to retail stors.