Industry’s supply chain model at Crocs MBA6151 unit VI case study

In this article, I would like to mention the core competencies of this brand, and then thoroughly analyze their impact and how the company will exploit them in the future to improve prod

Industry’s supply chain model at Crocs

Le Viet Anh

Columbia Southern University

Crocs, Inc is one of the world's leading footwear manufacturers with innovative designs and materials This brand makes a difference thanks to Croslite, a well-developed system, a remarkable technological improvement that helps keep their products light, comfortable and prevent moldy odors The company has established distribution systems in more than 90

countries around the world with annual sales of about three hundred million pairs of shoes (About Us, 2017) In this article, I would like to mention the core competencies of this brand, and then thoroughly analyze their impact and how the company will exploit them in the future to improve product quality and increase profitability

Crocs, Inc.'s core competencies

Core competence is sustainable energies that are valuable, rare, costly to imitate and irreplaceable, which are used as a source of competitive advantage for Crocs over their rivals (Hitt, Ireland, & Hoskisson, 2016) It distinguishes this company from other competitors in the industry as a whole and creates its own personality

From the details mentioned in the explanation of this case we can easily recognize that Crocs core competencies are relevant and satisfy the criteria outlined in the concept of core competencies Firstly, they have a highly responsive supply chain By establishing relationships with suppliers in different places, different countries and different material areas, they have the coordination and rotation of production to ensure the safety of raw material sources Secondly, they also maintain flexibility for the unexpected needs of customers Crocs' top managers are also very good at quickly recognizing supply chain constraints after examining it The old supply chain accepts orders from retailers in January, and start producing orders to meet the market in

the spring and fall Product quantity is also produced excess to prepare for the unexpected needs

of customers However, this supply chain contains many shortcomings because retailers often have to place orders based on their market forecasts This will inevitably lead to either over-estimation resulting in unsold stock, inventory cost and loss, or over-over-estimation resulting in potential profit losses Instead, Crocs has developed a revolutionary lineage system that enhances relationships with customers and retailers This system will respond quickly to fluctuations in demand of customers Just like Crocs CEO Ronald Snyder, if a good-seller sells a product, they will produce it right away and will be back on the shelves after a few weeks The company will not wait until next year and expect the existence of that trend (Schroeder, Goldstein, &

Rungtusanatham, 2013) Finally, Crocs has developed an effective distribution model when its products are found everywhere, across countries and territories They have become the pioneers

of this product line in those countries They also participated in many events and exhibitions in various fields to promote the products to potential customers

Exploiting core competencies in the future

In order to achieve these core competencies, the company has invested heavily in

infrastructure and supply chain management with new management through three steps: (1) Further vertical integration in to materials, (2) Growth by Acquisition and (3) Growth by Product

Extension

First, let's discuss further vertical integration in to materials Basically, there are two

types of supply chain practices that are Efficient Supply Chain (LEAN) which provides forecasts based on inventory and Agile supply chains which provides forecasts based on information (Kotzab, Seuring, Müller, & Reiner, 2006) Crocs understands the dynamics of the

manufacturing industry they are pursuing and has established an agile network to connect

retailers Its main objective is to integrate its vertical activities in order to synthesize and provide

an option for input testing and distribution of output products This agile supply chain has many features that can be exploited such as market sensitive which is closely connected to end-user trends; virtually integrated which relies on shared information across all supply chain partners; network based which gains flexibility by using the strengths of specialist players; and process aligned which has a high degree of process interconnectivity between the network members

Next is the information about growth by acquisition Ronald Snyder realized that

acquisitions played an important role in supporting growth so that he conducted a series of acquisitions to integrate horizontally and implement the company's strategies Initially, Crocs acquired the Canadian manufacturer, Foam Designs also known as Finproject NA, in June 2004 This acquisition helped Crocs acquire intellectual property rights (IPR) of Croslite, an advanced technology of materials as mentioned in the introduction Soon after, Crocs continued to buy Fury, EXO Italia, and Jibbitz at the end of 2006 and then Ocean Minded, LLC in early 2007 to refine the product line and its accessories on a variety of materials Thanks to these acquisitions, Crocs' products are now diverse in design and types as well as can serve a wide variety of

consumers In other words, they have satisfied multiple target markets and boosted sales of the company

Finally, it is taking advantage of the capacity to grow by product extension The garment

industry is generally sensitive to product changes Crocs has done this well to keep its customers motivated Beach and Cayman are the traditional products of the company and are the basis for the development of other footwear products The company's website introduces more than 30 basic footwear models for all ages and occupations In addition, the company continues to

diversify its products in other forms such as cooperating with Disney, developing products for special audiences, and sponsoring professional sport events There are a lot of new accessories coming out such as hats, jackets, socks, pants and backpacks

How do these alternatives affect Crocs' core competencies?

In order to identify the suitability and impact of each alternative, it is best to analyze their strengths and weaknesses in the business context in which the company is operating

Vertical integration has the strengths in meeting the demand for products and large scale production It is also an effective barrier to prevent competitors from entering the market with the ability to control the value chain and negotiating well with suppliers and buyers At the same time, it also brings difficulties in balancing production capacity during periods of reduced sales resulting in surplus products and increasing production costs

Growth by acquisition plays an important role in accessing and owning development technologies, and it also reduces competition and replacement risk from new products to better meet customer expectations However, it also has weaknesses related to determining the net present value (NPV) of the acquired company and its concerns about integration, corporate culture or differences in organizational practices and structures

Growth by product extension will enable the company to meet the needs of a diverse range of customers, boosting re-purchase rates This also makes old products obsolete quickly and prevents competitors from catching up or copying designs However, it increases the cost of production and can cause a lack of coordination between suppliers and retailers in the future

Recommendations on production and inventory planning of Crocs

At present, most Crocs’ products are self-produced (in house production) by the

company, which helps to reduce ineffective outsourcing operations In the future, the company could focus more on the development of molded shoes and casting products in China due to low export tax rates in this market They also need to have an overall assessment of the different production regions in the world for proper structural shifts both for the short run and long run In addition, markets in Europe and the United States have become saturated with their products, so

it is necessary to shift the market to other countries to increase geographical and regional

diversity Meanwhile, Denver distribution network can be used to distribute other products of other companies to cover the minimum fixed costs Crocs has developed a global inventory planning system to help managers make faster decisions and better manage their inventory as point-of-sale electronic data is synchronized with the information system of the company These information systems can be developed much further in the era of cloud computing This is the right direction of technology for the company in the future

All of the strategic moves that the company's management has done are for the sole purpose of increasing profits for the company High profit margins over competitors also directly impact Crocs' order, production and inventory behaviors In general, more profitable companies are more likely to hold more inventories As shown in Exhibit 4, Crocs has the industry's highest gross margin of 56.5% and the lowest inventory turnover ratio of 3.5 so it helps the company to manage production and inventory better because they have more cash and can roll over capital quickly (Schroeder, Goldstein, & Rungtusanatham, 2013) Each step in the supply chain can be efficiently satisfied with good support from financial resources

In conclusion, by using a combination of different strategies to link the benefits to the organization, Crocs has become a prime example of efficient supply chain management Their success in management helps companies compete strategically and dominate the market Crocs' development is not only reflected in short-term strategies and goals, but they have established sustainable growth and developed steadily for long-term goals in the future

About Us (2017) Retrieved April 4, 2017, from Crocs:

http://www.crocs.com/company/about-crocs.html

Hitt, M A., Ireland, R D., & Hoskisson, R E (2016) Strategic Management: Concepts:

Competitiveness and Globalization Boston, MA: Cengage Learning.

Kotzab, H., Seuring, S., Müller, M., & Reiner, G (2006) Research Methodologies in Supply

Chain Management Berlin: Springer Science & Business Media.

Schroeder, R G., Goldstein, S M., & Rungtusanatham, M J (2013) Operations Management

in the Supply Chain: Decisions and Cases, 6th ed New York, NY: McGraw-Hill.