Case Study: Supply Chain Revolution from Crocs
Case Study: Supply Chain Revolution from Crocs
Crocs’ supply chain revolution was the key to its success in the footwear industry. To discuss about it, let’s start with a review of the traditional model adopted by most of the companies in footwear industry.
In the traditional practice, footwear companies showing around the world their upcoming products for the fall season in January, and buyers would place their orders during the shows. Orders placed would then be manufactured during the next months and shipped out in August, September, October and November.
In this way, the manufacturers usually face great risks due to the difficulty in predictions. They have to conduct prediction in trends to design the new product; they also have to predict on the demand of the market. Usually, manufacturers would add 20% of the pre-booked orders to production, and ambitious manufacturers would add in 50%. Should there be anything wrong with their prediction, both the manufacturers and retailers would either face empty shelves in the store or run clearance for unsold stock at the end of the season.
Yet Crocs see the supply chain in a different way. They focus on customer’s needs and try to produce what was needed when it was needed. What does that mean? Think about the traditional model as a manufacturer, what can you do if the hot product runs out of stock? Due to underestimation of the demand, you could only sigh and regret for the profit in front of you but you are unable to grab, because you can’t make more shoes to catch up with the season this year. And this reason is what Crocs worked on – to respond rapidly to the changes of demand and make more shoes during the season when it is needed. This enabled Crocs to take full advantage of the current trend to maximize its sales while at the same time minimize safety stock for both its own inventory and those of the retailers’. Retailers are also less pressured when they place pre-orders.
Crocs experienced 3 phases to
Crocs’ supply chain revolution was the key to its success in the footwear industry. To discuss about it, let’s start with a review of the traditional model adopted by most of the companies in footwear industry.
In the traditional practice, footwear companies showing around the world their upcoming products for the fall season in January, and buyers would place their orders during the shows. Orders placed would then be manufactured during the next months and shipped out in August, September, October and November.
In this way, the manufacturers usually face great risks due to the difficulty in predictions. They have to conduct prediction in trends to design the new product; they also have to predict on the demand of the market. Usually, manufacturers would add 20% of the pre-booked orders to production, and ambitious manufacturers would add in 50%. Should there be anything wrong with their prediction, both the manufacturers and retailers would either face empty shelves in the store or run clearance for unsold stock at the end of the season.
Yet Crocs see the supply chain in a different way. They focus on customer’s needs and try to produce what was needed when it was needed. What does that mean? Think about the traditional model as a manufacturer, what can you do if the hot product runs out of stock? Due to underestimation of the demand, you could only sigh and regret for the profit in front of you but you are unable to grab, because you can’t make more shoes to catch up with the season this year. And this reason is what Crocs worked on – to respond rapidly to the changes of demand and make more shoes during the season when it is needed. This enabled Crocs to take full advantage of the current trend to maximize its sales while at the same time minimize safety stock for both its own inventory and those of the retailers’. Retailers are also less pressured when they place pre-orders.
Crocs experienced 3 phases to