crocs revolution an industry supply chain model for competitive advantage
TRANSCRIPT
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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
companies in EU and US)
Thirdparty compounding company in
Italy
Thirdparty compounding company in
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)
Thirdparty compounding company in
Italy
Thirdparty compounding company in
Italy
Molded and Assembled in
Foam Creations (Canada) and
Contract Manufacturers
in China, Florida,
Mexico and
Italy
Molded and Assembled in
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
companies in EU and US)
Raw Materials
(various
companies in EU and US)
Company
Owned
Compounding facilities in
Canada, China, and Mexico
Company
Owned
Compounding facilities in
Canada, China, and Mexico
Molded and Assembled in
Foam Creations
(Canada) and Contract
Manufacturers
in China,
Florida, and
Romania, Company
Owned
Manufacturing Operations in Mexico and Italy (Brazil and India
soon)
Molded and Assembled in
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