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SCM 5830

Nova Southeastern University


H. Wayne Huizenga School
of Business & Entrepreneurship

Assignment for Course:

SCM 5830

Submitted to:

Professor Ryan Atkins

Andres Lara
Magdalia Ayarza
Submitted by:

Jean Daniels
Mohammed Sadeek
Queenie Ramchandani

Date of Submission: 1/25/2015


Title of Assignment: Crocs Revolutionizing an Industrys Supply Chain Model For A
Competitive Advantage
CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any
assistance I received in its preparation is fully acknowledged and disclosed in the paper. I have
also cited any sources from which I used data, ideas or words, either quoted directly or
paraphrased. I also certify that this paper was prepared by me specifically for this course.
Student's Signature:
*****************************************************************
Instructor's Grade on Assignment:

SCM 5830

Instructor's Comments

Executive Summary
Crocs is a footwear manufacturing company specializing in shoes featuring its
proprietary Croslite material, a technology that allows each pair of shoes the soft, comfortable,
lightweight and odor-resistant features. Crocs prides itself on its highly flexible supply chain

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which consists of manufacturing facilities all around the world. The success of the company is
based on a unique business model which allows the company to control the supply chain of its
products. With this model, Crocs is able to revolutionize supply in footwear retail industry by
producing shoes throughout the season. In this paper, Crocs business model, strategies the
company could possibly adopt, production and inventory planning are all examined.
Background
Crocs Inc. is a world leader and casual footwear maker based in Colorado. It is
considered a shoe maker of a unique design that became popular in the early 2000s. The
company was established by three sailor friends: George B. Boedecker, Jr., Lyndon V. Hanson
III, and Scott Seamans. The croslite material that made them lightweight, comfortable, slipresistant, odor-resistant, and non-marking sole were highly favored by the market. A combination
of unique business strategy and growing popularity resulted in a phenomenal success of a period
of ten years.
Problem Statement
Crocs must tackle challenges of minimizing inefficiencies within the supply chain while
maintaining a business model of consistently meeting consumer demand

Core Competencies
Crocs had developed intense competencies which allowed for the companys rapid
growth. This included responsiveness to demand, flexibility and cost/price. These core elements
were a main factor in the companys business model. Adopting these competencies allowed for a
unique, new business model which was not typically practiced. Crocs initially did not want to

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develop their supply chain through vertical integration, involving ownership of upstream supplier
and downstream customers (Sanders, 2012, p. 76). They envisioned a competitive strategy which
aims to establish a profitable and sustainable position (Porter, 1998, p. 1).

Flexibility
Crocs has a highly flexible supply chain which can fill new orders within the season by
quick manufacturing and shipping of new products to retail stores. Therewith,the retail stores are
not limited to adjust their orders in accordance with the volatility of the demand in the selling
season. This is a competitive capability in the footwear industry which usually places bulk orders
for each seasons inventory several months ahead with little ability to adjust to changes during
the selling season and run risks of excess inventory or be out of stock.
Speed/Responsiveness
Crocs had in place fast manufacturing and shipping process(short lead time), fast
replenishment system and excess capacity and capability which enabled them to meet
unexpected increase in market demand at short notice. Positioning several manufacturing
operations around the world which cater certain markets created closeness to local customers and
allowed fast responsiveness to market trends.
Cost/Price
Crocs managed to keep costs of material low (proprietary closed-cell resin, croslite. They
had an efficient and standardized simple production process (injection molding) and no excess
inventory due to on-demand increase of production.

Through the competencies Crocs not only develops the presence, but gains capital to
acquire materials necessary to manufacture products. The popularity and sustainability attracted
consumers. The strategy in fulfilling demand with minimal what time developed strong
popularity among consumers. The company then produced variations of the product and
expanding into other products such as t-shirts and accessories to cater to the growing brand

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loyalty. The growth and demand in international markets also contributed to power to acquire
other companies such as Jibbitz and Bite Footwear.

Identification of the Problem


As explained Supply Chain Management: A global Perspective by Nada R. Sanders, there is
always a problem in every company which can be identified by the bottleneck. This bottleneck
will not disappear, it only moves to another position within the supply chain.
In the case of Crocs, the highly flexible supply chain management system developed was a great
success, especially since Crocs bought Croslite, giving them the IP rights and this comfortable
footwear took off. With the modification of the production and logistics at Crocs, competing was
not an issue, but success can be a disaster in the long run. Extensive vertical integration and
product extension may lead to an overwhelming workload for the company.
Causes of the Problem
As Crocs incorporated vertical integration, they are losing the profit margin gained by
comparative advantage, which makes them less competitive. One of the other problem Crocs will
encounter is the focus on the core product. The footwear will suffer should any of the extended
products fail and carry the Crocs Branding with them. If the companys branding fails, Crocs
Footwear, for which the name is known for, will face extinction very quickly.
With the use of the vertical integration model, however, Crocs must take into
consideration that the dynamic industry will face inevitable change which occurs with
globalization. In order for them to gain competitive advantage and remain sustainable they
should employ the Five Competitive Forces Model Porter to assess their position. The
Porters model is particularly strong in the thinking outside-in.
Capacity
For company to cater to consumer demand in a short period of time, Crocs generated
excess capacity of one million pair of shoes which had tied up finances of the company. The
anticipation of consumer demand based on research and development has thus far been accurate.

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The foundation of Crocs is based on the company's ability to chase consumer demand and
respond quickly to market needs. Crocs assumes the practice of carrying excess capacity and
maintaining the ability to manufacture stock as and when demanded. However, this strategy only
functions if the market continues to grow. Due to the fact that demand is variable, with the
company's current model, Crocs may get into the bullwhip effect of excess capacity, stock as
well as poor forecast accuracy and poor customer service. This will be a direct result of demand
fluctuation. Forecasting miscalculations and continual changing inventory control structures
create differences in lead time and restocking products. This causes delays which can lead to
panic ordering due to unsatisfied consumer demand.
Crocs drastically reduced the dependency on outsourcing in manufacturing of the
products. Therefore the company is not readily liquid. Should the firm experience a decrease in
demand, the company will incur higher operational costs. One of the main goals which the
company should include in the business model is maintaining consumer loyalty and demand.
This is the key to sustaining the company's efficient and effective performance.

Possible Solutions
Crocs can concentrate on buying their materials from third party suppliers, and let their
logistics department deal with the deliveries as needed, thereby saving on management costs,
while focusing on producing the best footwear and invest in research and development and stay
away from product extensions.
Another option for Crocs in, to extend their product line by being a virtual company and
monitor the products qualities and concentrate on management of the extended products, while
still focusing on the Footwear segment of Industry.

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