Crocs are declining in popularity. If you were their head of Supply Chain what would you be doing now?
There is an interesting article in the fnancial post about the decline in the style popularity of crocs footwear. I am very interested in feedback regarding the supply chain to support this product.
If you were the head supply chain officer for this product what would you be doing now? I see that one move already is moving production from Canada to Mexico.
http://www.financialpost.com/money/story.html?id=447881
Good Answers (5)
David S
Logistics & Supply Chain Consultant
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Excellent question Eric.
If you think about how the company evolved, and how quickly it grew, it make s a great case study on what NOT TO DO when you have an exploding growth company with a "one trick pony" product line.
In place of spending so much time and money protecting patents that were not well thought out, I would be looking for ways to put the distribution and logistics capacity that I own to use for other channels.
Crocs made the decision to exit a 3PL distribution relationship and open their own "owned and operated" distribution center (this is well documents in their 10K reports). They "sunk" capital into a distribution facility in the Denver area. Now that volume is down, there has to be big unused capacity in that facility. That facility has ongoing fixed expenses that have to be paid, and are now a millstone around Crocs' neck. Oh, and I don't think that there is a lot of demand for a distribution facility in Denver.
If they had stayed with the 3PL model the issue would become the partner 3PL's problem. I am sure if I had been the head of supply chain I would not have sunk capital into a distribution facility, I would have said go sink the cash into product development. Opps, too late.
But what to do with the capacity? Become a 3PL to some other company that needs to have some distribution help in the rockies, but does not have the need for a full blown center. It may not be a core business for a shoe company, but it is a core skill set for the distribution team (if they are any good). I would leverage the heck out of any of the fixed assets and staff to offset the lost revenue.
I would also work with the 3PL that I am using to bring the decreasing finished goods volume from Mexico and China into the US to find another importer that has a need for distribution support.
Another idea is to partner with my 3PL, and "lease" them the facility. Part of the deal is that they operate the facility for multiple clients, and our throughput moves as a debit to the rent "credit" until the "rent" is exhausted. I would take this path if the distribution crew is not good enough to run the facility as a "3 PL".
Finally, If I did not see any strong leadership out of the CEO / President in developing a new product line and strategy real fast, I would be looking for a new place to go work.
DKS
Richard P
sr vp, logistics & operations at right start
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From a retailer’s perspective, Croc's lost their edge when they decided on a branding program that made them ubiquitous. When they first arrived they were significantly different than anything else in the market, and mostly in specialty retail stores. As competition grew they seemed to decide that they best way to maintain market share was to be everywhere.
Unfortunately the result was overwhelming to the consumer and allowed competition to move in with the same look, although not as good quality. Instead of being special the product was now relegated to "where can I find it for the least amount" category, eroding sales and margin for both retailers and Crocs.
Holly S
I help people and businesses worldwide upgrade their skills to thrive in this economy.
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Since making the brand a commodity is what hurt it the most, it seems that doing the opposite might cure the problem. They are now expanding their product line for people who "won't wear the red ones," which is a smart move to leverage the comfort aspect of the shoe while downplaying the design, but even these new designs are found in lower priced stores in addition to Nordstrom and free standing kiosks in malls.
In Southern California, girls wear crocs almost every day to school. I would work with the marketing department to start a new craze where they wear one shoe of each color on their feet. Additionally, I would start working with specialty retailers such as university bookstores and alumni catalogs to have exclusive use of school emblems placed on the shoes and sold at a premium. Additionally, I would find the core audiences, such as gardeners, and create exclusive designs that come with organic seeds or gardening utensils.
Helena G
Supply Chain Professional - LION
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Hi Eric,
The life cycle of a product is inevitable. The success of a great product it is maintaining its growth cycle as the curve reaches its peak and starts declining, with innovation, additional marketing, new features or branching into new products. Logistics cannot save a product, it can only make it more profitable by providing solutions during its sales process.
Use the Havaianas flip flops success for example, it took them 20 years to reach the success and continuing growth they are enjoying now. Alpargatas took an old idea and brought innovation and global marketing to make them successful.
For Crocs to become hip again, it needs to rethink its entire strategy, not only the Supply Chain portion, and adapt to the new demands of the market. Personally, I don’t like their look, but if I knew they recycling old sandals, are being nice to the environment, and are working to target a new market, they might have a chance. You might need to get more than the head of Supply Chain involved here.
Best,
HG
Tom R
Director, Supply Chain STO P/L
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Hi Eric,
I'm not sure that this is actually a problem. This is a fashon item - it was never going to be a luxury brand - it was always going to become commoditised - look at the market - over here in Australia it is mostly a pre/early teen thing.
They're just growing up!
Moving production into a lower cost area may extend the life of the product but I suspect that it will just delay the inevitable.
The makers should be congratulating themselves on the sucess they had and be greatful fot it. Thier energies should now be focused on life after "Crocs".
Regards
Tom
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Subhas C B
Management Consultant
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Use the meat to earn the revenue and offer this exotic skin for some uses other than footwear.
My attention would be to find out "what's next", finding a way to build the to come whithin our own factory- supply-cain. Trying to make the right turn at the right time ( with marketing) for new footwear!
Shrinking production of the excisting shoe.
In my opinion, Crocs needs to act fast to pair down operations and rebuild it's brand image. I'd start by focusing on creating value for my distribution customers by dramatically reducing the number of retail outlets and selling only to those who will invest in my brand (e.g., Target's advertising campaign: who had ever heard of Choxie?!). This will drive the dwindling consumer demand to a smaller number of outlets and those retailers will realize volume and margin gains. At the same time this will reduce supply chain costs as more volume is fed through fewer distribution points.
I would then leverage the remaining distribution partnerships to jointly assess emerging fashion trends to identify new opportunities.
Crocs is too small to rebuild its brand and successfully extend its product lines on its own. It needs allies in the form of retail partners to work together to identify and exploit new market opportunities.
There's an interesting article in Fortune from June that covers the success that Uggs has had vs. Crocs. Check it out.
Links:
Dave H
Business Development Manager at Vanderlande Parcel and Postal
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Rising bulk latex prices will put pressure on margins. To the Head of Supply Chain should counter this a thorough examination of operations.
The study should determine cost of operations in a variety of centers and the methods whereby goods are moved through the supply chain. Through an understanding of total costs (including taxes, duties, inventory carrying costs) and cycle time consequences of each alternative good conclusions may be drawn.
First in Europe Crocs are still realy popular. I wouyld invest in lower the production cost to sell crocs at a lower price level. If that could be done than they become a real comodity and you would sell tremendous more quantities.
There has been some recent interesting developments in Asia and I think it is very safe to say that Crocs have a strategy in place and the market will be well aware of it very soon!
