Crocs & AAA Supply
Chain
Group 1
Aayush Gupta (19302) | Manish Kapgate (19329)
Priyal Jaiswal (19253) | Sushmita Das (19371)
The AAA Supply Chain
A A A
AGILE ADAPTABLE ALLIGNED
• Agility has become essential • Best companies need to • Achieving alignment of goals
because demand and supply constantly innovate and of partners in supply chain
constantly fluctuate, while adapt their supply chains entails alignment of
consumers are highly to the changing market information, responsibilities,
demanding. conditions. tasks, risks, incentives, etc.
• Firms need to have a • Lack of alignment between
contingency plan in place to the goals of different partners
deal with emergencies that in supply chain will prevent
might disrupt supply chain the supply chain from
and hence maintain agility achieving best performance
The Thumbs Rule
AGILE ADAPT ALLIGN
• Provide data on changes in supply • Track economic changes, especially • Redefine the terms of their
and demand to partners in developing countries, because as relationships so that firms share
nations open up their economies to risks, costs, and rewards equitably.
• Develop collaborative relationships global competition, the costs, skills,
with suppliers and customers • Companies must align incentives,
and risks of global supply chain
so that when companies try to
• Design products so that they share operations change.
maximize returns, they also
common parts and processes • Decipher the needs of your maximize the supply chain’s
initially and differ substantially only ultimate consumers not just your performance.
by the end of the production immediate customers
process • Companies must try to predict the
• Develop new suppliers that possible behaviour of supply chain
• Keep a small inventory of complement existing ones partners in the light of their current
inexpensive, non-bulky components incentives.
that are often the cause of • Ensure that product design teams
bottlenecks are aware of the supply chain • Companies must perform analysis
implications of their designs to predict what competitors would
• Put together a team that knows do if they raised prices or entered a
how to invoke backup plans new segment.
Key Learnings
01 Globalized complex supply chains
This means a shock can occur anytime , anywhere and demands companies to be
agile and adaptable
Proactively monitor structural changes
02
This is the key to to having an agile response to change in supply chains in case
of a shock
Commonality, postponement and standardization
03
These characteristics in a product allow re-engineering during the period of
supply chain adaption.
04 AAA supply chain does not need huge investment
Most companies already have the infrastructure to implement the AAA
approach , a change in mind set is required
Fundamentals of Crocs supply chain
Reach with smaller retailers
• Grass-root reach with smaller retailers for superior
brand recognition
• Custom configuring packaging to meet their needs
Production near Markets
Quick Replenishment system
• Manufacturing was situated close to the
• Crocs offered shoes in direct response to
destination market, as opposed to the
consumer demand, eliminating the risk of
industry practice of production in
stockouts or discounting
nations with lower labour costs such as
• The quick replenishment system convinced
Asia or South America
retailers to provide exclusive retail space
for Crocs products
Unique Products Early worldwide launch
• Crocs products were unique in design with • To gain Brand Recognition & an
bold colors which differentiated it from others exclusive consumer connection with croslite
footwear
Evolution of the Supply Chain
• As compounding in the single location of
• To reach the global market, Crocs Italy was inefficient, Crocs created
started with contract manufacturing in compounding facilities in Canada, China &
China Mexico
• Crocs also added capacity through • This enabled them to delay the colourizing
contract manufacturers in Florida, decision & adding further flexibility – and
Mexico & the US also provided IP protection for the Croslite
resin
Shift to Shift to in
Taking over Decentralized Decentralized
contract house
production Compounding Warehousing
manufacturing manufacturing
• Sourcing raw material pellets from • Contract manufacturers outside Asia
the US & Europe couldn’t cope with Croc’s supply chain • Decentralised the warehousing
• Shipping it to a 3rd party model operation and taking complete control
compounding company in Italy • Thus, Crocs began to develop its own of the operation,
• Shipping the product back to manufacturing sites in Mexico, Italy & • This led to a reduction in the
Canada for moulding & assembly Brazil inefficiencies of a central warehousing
• Finally shipping to a distribution • It also replaced an inept Romanian location in such a large global supply
company in Denver contractor with a Bosnian one, to serve the chain
European market.
• Crocs also retained the Florida contract to
leverage the Made in USA label
Challenges and Responses related to SCM
Challenge - High Duty Embargos
Response - Manufacturing & supply was
Challenge - Infeasible to move Moulding Machines synchronised between geographies to optimise
Response - the Moulds themselves were frequently duty charges between nations
transferred globally to meet production needs
A B
C D Challenge - Updating Supply Chain Software
Challenge -Uncertain Demand Forecasting
Response - Future plans to modernise the existing
Response - Manufacturing capacity of 1 million
database system with a global inventory module, in
pairs/month was maintained, which could be
addition to geography and product based planning
switched on at a moment’s notice
Challenges and Responses related to SCM
Challenge – Centralised Contract Warehousing
Response – Initially, all the warehousing
operations were handled solely in a facility at
Challenge – Inefficient Centralised Compounding
Colorado, which made labelling and shipping
Response – Initially, compounding was done only in inefficient.
Italy, which resulted in supply chain inefficiencies of Crocs added warehousing facilities to each to
shipping to each production site. factory to counteract these inefficiencies
To counteract the inefficiencies, Crocs moved A B
compounding in house for each production facility
D Challenge – Market Demand for New Products
Challenge – Serving Small Retailers
C
Response – New products tended to be more
complicated, hence Crocs acquired Ocean Minded to
Response – Small retailers were not serviced from
incorporate the necessary core compentencies
distribution centres, products were shipped directly to
them, and cartons had customised SKUs
Operating Performance
8
7.4
6.5 6.6
Efficiency Parameters 5
4.3 4.7
5.6 6
3.5
Inventory turnover Ratio: Crocs has very low inventory turnover ratio than the industry
average . Crocs built the product after seeing the actual demand to avoid unsold inventory. Agile
supply-chain reinforced with excess capacity helped crocs to function with less inventory. Inventory Turnover Ratio Receivables Turnover Ratio
Receivables turnover ratio: Crocs has higher receivables turn-over ratio than the industry
average. It signifies that Croc’s accounts receivable is efficient and it also enjoys a high-quality
customer base which is a result of the healthy relationship of Crocs with its retailers. Crocs Deckers Outdoor Nike Timer-Land Industry Mean
Returns on Assets: The return on assets is very high for Crocs which signifies that the 34%
company is using its assets efficiently to generate revenue.
18%
Profitability Parameters 14% 14%
13%
10% 9%
Net Profit Margin: Crocs has very high net profit margin as compared to its peers. Crocs has 6 7%
3% 3%
times more net profit margin than the industry average. This is possible due to its highly efficient
supply chain and superior quality product.
Net Profit Margin Return on Assets
Crocs Deckers Outdoor Nike Timer-Land Industry Mean
Growth Parameters
Revenue Growth: Crocs’s revenue has increased 62 times in 4 years ( from 13.5 mn $ in 2004 to REVENUE IN $ MN
847.4 mn $ in 2007) . By 2007, Crocs was selling in 90 countries with production facilities in 3
847.4
continents.
The product range consisted of 31 footwear models and other accessories. 354.7
108.6
It was also growing inorganically through acquisitions, but the majority of growth was organic. 13.5
2004 2005 2006 2007
AGILITY
➢ In House Manufacturing- Company owned manufacturing operations ensured quick
response to consumer demands. It gave Crocs the flexibility to change the production needs
as per demand
AAA in
➢ Bringing manufacturing closer to the customer- Manufacturing facility in each
Crocs
geographic region enhanced the ability to respond to the local customer needs
➢ Vertical integration of Manufacturing- Crocs integrated compounding activity in its
supply chain creating compounding facilities in Canada, China and Mexico. Now the
compounding could be done as per customer demand.
➢ Excess Capacity- Crocs acquired excess capacity to quickly ramp up production in case of
sudden increase in requirement. It helped crocs maintain an agile inventory. Also moulds
could be transferred from one plant to other in very short notice to meet varying
production needs.
➢ Factory Warehousing- Crocs added warehousing operations to each factory enabling fast
replenishment to customers directly from the factory
ADAPTABILITY ALLIGNMENT
AAA in
• Shift from the seasonal ordering model- Taxation Alchemy- Crocs shipped products
Crocs enabled the retailers to order flexibly in between countries such that it incurred the
as per the demand. This reduced the risk of lowest tax duty costs and utilized free trade
unsold inventory and stockouts of the
retailers. It resulted in improved relationship
with the retailers
agreements between nations
Building Competencies- Crocs started its
Crocs
own compounding and warehousing facilities
• Global Launch- To gain the first mover which were decentralized to stay close to a
advantage, Crocs launched globally very major chunk of the market
early.
Technical Upgrades- The age-old database
• Evolving product assortment- A wide system was updated with a modern SCM
variety of products were either already being Inventory module to streamline cost savings
offered or were in the pipeline to cater to a and faster delivery across the supply chain
wide variety of market segments
Retailer Service- Both large and small-size
• Varying Demand- To adapt to the varying retailers were catered to using tailored
demand excess capacity was maintained. strategies such as delivery centers and
Also moulds could be transferred from one customized packing for large and small-scale
plant to other in very short notice to meet retailers respectively
varying production needs.
Thank You
