Crocs Case Study
Thus, manufacturers could only produce the colors they had received from Italy. In response, In 2006, Cross took ever this piece, As they already established ownership of the creosote resin, they created compounding facilities in Canada, China, and Mexico, where they could ship the raw materials and hold off on compounding until product demand was determined (Marks et al, 2011, Para. 36).
Although the manufacturers in Asia were willing to work with the unknown levels of production, manufacturers in most other markets were unwilling to do so.
As a result, Cross went from contract warehousing to company owned warehousing In tense locations. I nee continual vertically integrating by owning manufacturers in Mexico and Italy with plans for a location in Brazil. “As Snyder noted, “We don’t lose interest in our own stuff’ (Marks et al, 2011, Para. 41). In Europe, they were able to locate a manufacturer in Bosnia that would meet the need for quick response to demand.
Cross would not own the company, but would instead own the equipment and molds and use Bosnian labor (Marks et al, 2011, Para. 3). By 2007, the Cross supply chain was fully developed in a manner that would allow Cross to switch between compounding facility, manufacturer facility, and distribution facility in order to fulfill customer’s orders with the quickest turnaround. Within these locations, Cross had extra molding equipment and molding so design capacity could be met at a moment’s notice. Cross used an innovative material with the creosote resin material, which made their product unique.
Cross had developed two aspects of a competitive supply chain.
There was built in responsiveness given this was the basis of Cross supply chain. Since Cross owned many pieces of the supply chain or had their employees or equipment in their partner’s locations, Cross established healthy legislations between their partners. Nonetheless, the Cross supply chain did have a major flaw. In its nature, the Cross supply chain is built to have continuous demand but is not durable enough to manage slumps in demand, leading to concerns about continuing to be profitable (Mum, 2009, Para. 3).
In order to become more sustainable during low demand, Cross has four options.
Cross built a majority of their supply chain by purchasing or implanting their equipment or staff into their partner’s locations. Cross chose to vertically integrate instead of attempting to collaborate with heir partners and allowing their partners to control the major activities. Cross can continue to vertically integrate. This can be completed by adding the sourcing of raw materials under their ownership, expanding their company owned manufacturer and distribution facilities, and centralizing operations in top markets by relocating company owned facilities.
The advantage of continuing to vertically integrate means that Cross core competency is maintained.
As responsive as Cross tries to be, the supply chain still exhibits signs of the bullwhip effect due to the remaining outside vendors. Especially with the expensiveness required from Cross, inventory is stored needlessly amongst partners. As per the Washington Post article Cross Shoe Company Stumbles During Recession (2009), as a result of the recession, “Now it’s [Cross’] stuck with a surplus of shoes.. (Mum, 2009, Para. 3).
If Cross eliminates or reduces the remaining partners, they can further decide on the production schedule.
The bullwhip effect will be reduced, if not eliminated, as they will have fewer partners to provide demand too. By building new facilities, Cross can bring activities closer together and centralize some activities, reducing distance barriers. At this time, sourcing can occur in one country, compounding in another, manufacturing in yet another, and distribution in another. Centralizing allows cross to lower ten production costs escalated Walt having their product go to various locations before becoming a completed product, especially during low demand.
The responsive production is still maintained, however, as these are still Cross facilities and operate in accordance with Cross principles.
Nevertheless, purchasing and relocating are expensive endeavors. To operate in other countries means to comply with those governments. By continuing o outsource instead of vertically integrate, the outsourcing companies are responsible for compliance with government laws/fees instead of Cross. There may be some advantages the outsourcing companies are receiving by not being owned by Cross, where vertical integration will eliminate those.
The second option available to Cross is to acquire outside companies that own intellectual property or have already developed superior methods of producing shoe or shoe-like products.
Between 2004 through 2006, Cross acquired 5 different companies, as seen in Exhibit A. These purchases allowed Cross to incorporate outside technology, as in the case of Foam Creations, into their products. By continuing to acquire outside companies, Cross continues to learn of new material and new methods on how to better incorporate current materials into the product.
These acquisitions can make the supply chain more efficient as new technologies become Cross’ property, which Cross can choose to share with their partners. As with vertical integration, there are high costs associated with purchasing outside companies. However, these costs may be offset by the access gained.
In the case of Foam Creations, with this acquisition, Cross gained ownership of the Creosote intellectual property, which is the key of their product’s core competency. When demand is low, Cross can make use of their acquisitions by putting those acquisitions to other uses, such as research and design.
Acquiring companies has to be decided upon with care, however, as not every company will add to the Cross product and supply chain. The process of evaluating these choices can be time consuming and lengthy. A third option available to Cross is growth by product extension.
When Cross began, they had two models, Beach and Cayman. These models were extremely popular and due to their popularity, the designs have been a platform for developing other shoe products and styles (Marks et al, 2011 Para. 14). By 2007, Cross showcased 31 shoes on their website, which included new items such as sandals and children’s boots.
Also in 2007, Cross obtained a licensing agreement with Disney and began incorporating Disney elements into their shoes, such as Mackey Mouse shaped holes. To reach a broader audience, Cross dove into the college student market by offering shoes for 17 universities in school colors and with school logos. These products can be seen in Exhibit B. (Marks et al, 2011 Para. 14). Innovation is key in the fashion world.
As per CEO John Mackerel quoted in the Times Magazine article Why are Cross Profitable Again? (2010), “If we make it a little more stylish, then we start to appeal to a larger audience” (Alfonse, 2010, Para. ). Expanding their product offerings keeps old customers interested and attracts new customers. Cross can expand into different markets, such as college students or children, with different product offerings. Cross can also stay ahead of their competitors by being the first to Innovate. I Nils will require allotment molding Ana manning equipment Ana clear communication amongst the supply chain to ensure new products can be developed as hoped.
However, by innovating and offering multiple products, Cross is then required to keep inventory to meet the demand.
Cross can maintain lower levels of inventory when declines in demand are identified. Yet, doing so will reduce the responsiveness that they have built into the supply chain and the commitment Cross has to their customers. New products also require an investment in production. If the new item flops, those costs are lost.
To ensure that Cross is investing and producing the most profitable products, Cross will need to ensure their marketing department is involved in further product expansion. This option allows Cross to become seen as more than Just boat shoes, but does not come without its risks.
Lastly, Cross can choose to expand their ERP system to their partners and incorporate a point of sale (POS) module within the system. In 2007, Cross implemented an ERP system that monitored their upstream suppliers. However, there was no handle on actual retail volume because their smaller retailers were not connected to this ERP system (Marks t al, 2011, Para.
62). By having all partners in the supply chain referencing the same levels of inventory and same projection for future orders, Cross can better control their inventory levels. In periods of high demand, Cross will know what is selling at each retailer.
In periods of low demand, Cross’ will be able to keep inventory low. Their retailers will see the available inventories of current stock and can make orders from these inventories.
Yet, Cross can still fulfill requests for products that are needed if not in inventory as the structure of the supply chain will not change. In eroded of high demand, Cross and their partners will be able to monitor where replenishment is required at a quicker rate improving the supply chain efficiency. Implementing this ERP system into the smaller retailers may not be easy.
Cross may experience resistance from the retailers as they may have to incur additional costs to implement this ERP. In addition, the retailers may not have the IT support to allow for their systems to become integrated with Cross’ ERP system.
Even if Cross is unable to have all aspects of their ERP system implemented into their retailers programs, by adding the oodles associated with inventory levels and product selection, Cross can improve their demand planning. Of the available options, Cross would be best advised to continue to vertically integrate, especially by centralizing their facilities.
They would also add to their sustainability by purchasing further developments in their ERP system and the ERP systems of their customers. As per Forbes article Cross Submerges (2008), “According to the March retail report from the U. S.
Department of Commerce, clothing and clothing accessories stores suffered a 1. 6% decline in sales from the level in March 007″ (Almost, 2008, Para. 12). Because it is known that there has been a decline in sales, Cross needs to adjust accordingly. When demand is low, sitting inventory is lost money. Centralizing will bring Cross’ production process closer together.
The bullwhip effect will be lessened and extra inventory levels reduced. The costs associated with relocating can be alleviated by the costs saved in the shorter production process and lower inventory levels. By implementing point of sale (POS) steward, cross wall nave more volatility to Know exactly now tenet products are responding in each region. This will allow Cross to make adjustments in production and have better grasp of how to forecast for future demand. Point of sale systems can be used to build customer profiles so Cross can fine-tune their product offerings.