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If the products sell extremely well, we will build more in season, and will be back on the shelves in a few weeks. And we'll build even more, and even more, and even more, in that same season. We're not going to wait with a hot new product until next year, when hope- fully the same trend is alive.

-Ronald Snyder, CEO of Crocs, lnc. 1

On May 3, 2007, Crocs, Inc. released its results for the first quarter of the year. The footwear company, which had sold its first shoes in 2003, reported reve- nues of $142 million for the quarter, more than three times its sales for the first quarter of 2006. Net in- come, at $0.61 per share was more than 17 percent of sales, nearly four times higher than the previous year. 2 These results far exceeded market expecta- tions, which had been for earnings of $0.49 per share on $114 million of revenue. 3 As part of the earnings release, the company announced a two-for-one stock split. Immediately after the announcement, the stock price jumped 15 percent.

The growth and profitability of Crocs, which made funky, brightly colored shoes using an extremely com- fortable plastic material, had been astounding. Much of this growth had been made possible by a highly flexible supply chain which enabled the company to build additional product to fulfill new orders quickly within the selling season, allowing it to respond to un- expectedly high demand-a capability that was previ- ously unheard of in the footwear industry. This ability to fulfill the needs of retailers also made the company a very popular supplier to shoe sellers.

This success also raised questions about how the company should grow in the future. Should it vertically integrate or grow through product line

1 Quotations are from interviews w ith the authors, unless oth- erwise specified. 2 Press Release, "Crocs, Inc. Reports Fiscal 2007 First Quarter Financial Results," May 3, 2007. Online at http://www.crocs. com/consumer/press_details/688244 (accessed May 4, 2007). 3 Rick Munarriz, "Ugly Shoes, Pretty Profits," The Motley Fool, May 4, 2007. Online at http://www.fool.com/investing/high- g rowth/2007 /05/04/ug ly-shoes-pretty-profits.aspx (accessed May 7, 2007).

extension? Should it grow organically or through ac- quisition? Would potential growth paths exploit Crocs' core competencies or defocus them?

CROCS, INC. In 2002, three friends from Boulder, Colorado went sailing in the Caribbean. One brought a pair of foam clog shoes that he had bought from a company in Canada. The clogs were made from a special mate- rial that did not slip on wet boat decks, was easy to wash, prevented odor, and was extremely com- fortable. The three, Lyndon "Duke" Hanson, Scott Seamans, and George Boedecker, decided to start a business selling these Canadian shoes to sailing en- thusiasts out of a leased warehouse in Florida, as Hanson said, "so we could work when we went on sailing trips there." 4 The founders wanted to name the shoes something that captured the amphibious nature ofthe product. Since "Alligator" ha.d already been taken, they chose to name the shoes "Crocs."

The shoes were an immediate success, and word of mouth expanded the customer base to a wide range of people who spent much of their days stand- ing, such as doctors and gardeners. In October 2003, as the business began to grow, they contacted Ronald Snyder, a college friend, to become a consultant for the company. Snyder had been an executive with Flextronics, a leading electronics contract manufac- turer, heading up the company's design division. He had extensive experience in manufacturing opera- tions, mergers and acquisitions, and sales and mar- keting. When he first started consulting with Crocs, Snyder said, "I thought I would work a few hours a day. I thought it would be restful." 5 But seeing the rapid growth of the company based on word-of- mouth marketing, Snyder joined Crocs in June 2004 as its president, becoming CEO in January 2005.

When Snyder joined the company it was head- quartered in Colorado, but essentially distributing shoes made by the Canadian manufacturer Finpro- ject NA. One of Snyder's first moves was to purchase

4 Diane Anderson, "When Crocs Attack," Business 2.0, November 1, 2006. 5 1 bid.

David Hoyt and Amanda Silverman prepared this case under the supervision of Michae l Marks, Professors Chuck Holloway and Hau Lee as the basis for class discussion rather than to illustrate either effective or ineffective handling of an adminis- trative situation.

Copyright© 2007 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means-electronic, mechanical, photocopying, recording, or otherwise-without the permission of the Stanford Graduate School of Business. Reprinted with permission.

492

Crocs: Revolutionizing an Industry's Supply Chain Model for Competitive Advantage 493

Finproject, which was renamed "Foam Designs ." Crocs now owned the formula for the proprietary resin "croslite™" that gave the shoes their unique properties of extreme comfort and odor resistance. The company now also controlled manufacturing.

EXHIBIT 1 Crocs executives and directors.

Snyder encouraged the company to think big. He brought in a number of key executives from Flex- tronics, and built infrastructure in preparation for growth. (See Exhibit 1 for Crocs executives and direc- tors.) He also launched the product worldwide.

Executive Background

Ronald Snyder, President, CEO, Director

Peter Case, SVP, Finance, CFO, Treasure

John McCarvel, SVP, Global Operations

Michael Margol is, VP, Sales and Marketing .

Director

Raymond Croghan

Ronald Frasch

Michael Marks

Marie Holman-Rao

Richard Sharp, Chairman

Thomas Smach

Ronald Snyder

With Cross since June 2004 (consultant since October 2003). Senior executive with Flextronics. Founder of The Di i Group, w hich was acqu ired by Flextronics.

With Crocs since April 2006. Previously EVP, CFO, and treasurer of publicity held sports apparel and accessor ies company.

With Crocs since January 2005 (consultant beginning in 2004). Previously an executive w ith Flextronics and The Dii Group.

With Crocs since January 2005. Led Crocs sales group as a consultant beginning in October 2003. Previously, founder and executive with an apparel and merchandising compan y.

Background

Board member since August 2004. Prior to retirement in 1999, ran a healthcare information technology consulting firm. Also on the board of several privately- held compan ies.

Board member since 2006. Vice Chairman of Saks Fifth Avenue. Background in global retailing.

Board member since August 2004. Member of Kohlberg Kravis Roberts & Co., a private equity firm, as a member of the firm since January 1, 2006 . Chairman of Flectronics. Previously, he was wi th Flextronics from 1991-2005, serving as CEO and chairman. Also a director of SanDisk Corporation and Schlumberger Limited.

Board member since 2006. Background in the apparel business, including Limited Brands, Inc., Gap, Inc., Banana Republic, and Ann Taylor.

Board cha irman since April 2005. With Circuit City from 1982 to 2002, serving as president, CEO, and chairman. Also a board member of Flextron ics (formerly chair). And of Carmax, Inc., the nation's largest specialty retailer of used cars and light trucks.

Boa rd member since Apri l 2005. With Flextronics since 2000, as CFO, and SVP of finance. Previously SVP, CFO and treasure of The Dii Group, Inc., which was acquired by Flextronics. Also serves on the board of ADVA AG Optical Networking.

President of Crocs. See background above under Executives.

Sources: Crocs w ebsite, "Board and Management Profiles," http://www.crocs.com/ company/ ln vestor_Relations/Board_Management.jsp (April 23, 2007}, Crocs Proxy, October 2006.

494 Part Six Case Studies

Snyder explained the rationale behind launching worldwide at an early point in the company's life:

The plan was, we're going to launch the world in order to get a brand out that would be a sustain- able brand with th is funky looking, strange product. Other, larger shoe companies, or even larger apparel companies, could have knocked us off, and could have gone into Europe before we got there if they had infrastructure in Europe.

So, being Flextronics guys, and understanding that the world is flat, and you can get every- where fairly quickly, we said, "we need to launch the world pretty much at once." We delayed a bit in South America, but now we're there fairly strong, too. But we needed to launch every- where in order to have us be the brand that had sustainability. That's what we've been able to pull off at this point. We were in every country you can think of before anybody else had any real capability to ship product in other countries besides the U.S. Certainly, there are knock-offs in all those other places, but they are just known as knock-offs. They are not known as originals, which is what we were hoping to achieve.

Crocs started its sales efforts on a grass-roots basis in the U.S. The company participated in many trade shows in every industry that could benefit from the product, such as garden shows, boat shows, and pool supply shows . As stores began carrying the shoes, Crocs personnel worked closely with the stores. Snyder observed, "If you just put up a rack of funny-looking shoes, I don't think they would have done anything. But we got in there with some of our own people, or our reps, and stood around and got people excited." Crocs also went to a wide range of events, such as con- certs, festivals, and sports tournaments, to talk to cus- tomers about the shoes. The company took a similar approach in other countries, but the momentum gen- erated in the U.S. helped foreign adoption.

The company initially used representatives and distributors in the U.S., but brought this function in- house in order to control costs. In other countries, Crocs had its own sales staff wherever possible, but as of mid-2007 had some 3rd party distributors in some locations.

In addition to a popular product and a global strategy, Crocs developed a supply chain that pro- vided a competitive advantage. Traditional industry practice was for retail distributors to place bulk or- ders for each season's inventory many months in ad- vance, with little ability to adjust to changes during the selling season. The Crocs model did not impose these limitations on retailers-the company could

fill new orders within the season, quickly manufac- turing and shipping new product to retail stores. The traditional practice, and the Crocs supply chain will be described in detail below.

From 2003 through 2006 the company had phenomenal growth. Revenue in 2003 had been $1.2 million . By 2006, it was $355 million, with a net income· of $64 million (18 percent of revemk). Crocs went public in February 2006, with an initial market capitalization of over $1 billion. After the Q1 2007 earnings release, the market cap passed $2.7 billion. Sales outside of North America grew from 5 percent of total revenue in 2005 to 25 percent in 2006. In its Q1 2007 earnings release, the company said that it expected 2007 revenue to be between $670 and $680 million. (The company had historically reported results that comfortably exceeded expectations. 6 ) (See Exhibits 2 and 3 for company financial informa- tion .) Crocs' financial performance was far superior in many respects to others in the footwear industry (Exhibit 4).

The Crocs Shoe The original Crocs shoe was a clog design. Visually, its two most distinctive features were large ventila- tion holes and bold colors. The key to the shoe, how- ever, was the croslit~ material. This proprietary closed-cell foam material molded to the shape of the wearer's foot, providing an exceptionally com- fortable shoe. It was extremely light, did not skid, was odor resistant, and did not mark surfaces. It could also be washed with water. Croslite could be produced in any color, and the company chose bold colors (described by some as "crayon" colors) which further enhanced the distinctive, funky look. Crocs shoes generally sold for about $30-which was not marked down, as retailers found they did not need to unload excess inventory through clearance sales at the end of a selling season.

As Crocs grew, it added additional shoe designs. The two original models, Beach and Cayman, ac- counted for about 62 percent of footwear sales in 2006.7 These two models also formed the basis of some of the other Crocs models. By April 2007, the company had a wide range of shoes and other prod- ucts . Its website showed 31 basic footwear models, ranging from sandals to children's rain boots to shoes designed for professionals, such as nurses, who had to stand all day. Some of its shoes were made under a license agreement with Disney, and incorporated Disney characters. In addition, Crocs offered four models of shoes (CrocsRX) that were

6 Munarriz, loc. cit. 7 Crocs Form 1 OK for 2006, pp. 15-16.

Crocs: Revolutionizing an Industry's Supply Chain Model for Competitive Advantage 495

EXHIBIT 2 Crocs' financial performance through 2006.

All amounts in $ millions, except as noted.

2006 2005 2004 2003 2002

Revenue 354.7 108.6 13 .5 1.2 0.0 Cost of goods sold 154.2 47.8 7.2 0.9 0.0 Gross profit 200.6 60.8 6.4 0.3 0.0 Gross profit margin 56.5% 56.0% 47 0% 23.3% 33.3% SG&A expense 97.2 30.6 7.2 1.4 0.5 Depreciation &

amortization 8 .1 3.3 0.7 0.1 0.0 Operating income 95.3 26.9 (1 6) (1 .2) (0.4) Operating margin 26.9% 24.8% Net income after taxes 64.4 17.0 (1 .5) (1.2) (0.4) Net profit margin 18.2% 15.6%

Geographic distribution of revenue(% of total)

North America 265.5 (75%) 102.8 (95%) 135 (100%) Asia 54.4 (15%) 4.7 (4%) Europe 30.3 (9%) 1.0 (1%) All Other 4.6 (1%) 0.1

Shoes as percent of total revenue 96% 94% 81%

Selected Balance Sheet Items (Calendar year end, all values in $ millions)

2006 2005 2004 2003

Cash 71.2 37.8 6.9 0.5 Net receivables 69.3 20.0 3.3 0.2 Inventories 86.2 28.5 2.4 0.4 Net fixed assets 34.8 14.8 3.7 0.3 Accounts payable 71.2 37.8 6.9 0.5 Short-term debt 0.5 8.5 1.0 Long-term debt 0.1 3.2 1.4

Sources: Hoovers. Product and geographic distribution of revenue from Crocs Form 1 OK for 2006, pp. F-27, 28.

EXHIBIT 3 Financial results, Q1 2007.

The following results were released May 3, 2007, for the quarter ended March 31, 2007 (dollar values in millions, except as otherwise stated):

Q1 2007 Q1 2006 % Change

Revenues 142.0 44.8 317% Gross profit 84.4 23.7 356% Gross profit(% of sales) 59.4% 52.9% SG&A expenses 47.3 137 345% Net income, after tax 24.9 6.4 389% Net income(% of sales) 17.5% 14.3% Net income per share, diluted $0.61 $0.17 359%

Source: Crocs Press Release, May 3, 2007, loc. cit.

496 Part Six Case Studies

EXHIBIT 4 Industry comparisons.

Comparisons of Crocs with companies selected as "best of group" and industry median.

Deckers Industry Median Crocs Outdoor Nike Timberland

Annual sales ($ million) 355 304 14,9 55 1,568 Market capita lization ($ million) 2,102 897 10,06 5 1,306 Profitability

Gross profit margin 56.5% 46.4% Pre-tax profit margin 27.2% 17.8% Net profit margi n 18.2% 10.4% Return on equity 56.7% 16.1% Return on assets 34.1% 13.7% Return on invested capital 51.1% 15. 9%

Operations Inve ntory turnover 3.5 5.0 Receivables turn over 8.0 6.0

Valuation Price/Sales ratio 5.9 3.0 Price/Earnings ratio 30.4 28.3 Price/C ash fl ow ratio 170.3 18.5

Growth 12 month revenue growth 227% 15% 12 month net income growth 280% (1.0%) 12 month EPS growth 239% (2.3%)

43.7% . 13 .1% 8.7%

21.6% 14.4% 18.4%

4.3 6.5

1.3 20.0 14.1

8.8% 0.4% 2.9% <

47.3% 10.4% 6.8%

19.5 % 13 .0% 19.0 %

4.7 7.4

0.8 15.3 11.7

0.1% (35.3%) (3 1.5 %)

24.5% 3.2% 2.7 %

15.5 % 3.4% 4.7%

5.6 6.6

0.8 20.1 10.6

7.5% 53.2% 50 .0%

Source: Hoovers Online Competitive Landscape (April 27, 2007). Crocs growth numbers are for cale ndar years 2005 and 2006. Crocs in ventory turns from Crocs.

designed to meet the special needs of those with medical problems that affected the feet, such as dia- betes. The company offered 17 models of collegiate models that were made in school colors, with the school logos . Universities such as USC, UCLA, Notre Dame, Cal, and Ohio State participated in the pro- gram. (By the start of the 2007/8 academic year, Crocs expected to include many other institutions in its catalog of university logo shoes.) Crocs sponsored the AVO beach volleyball tour, and offered two models with the AVP logo .8 (See Exhibit 5 for photos of selected Crocs products.)

While shoes comprised 96 percent of company revenues in 2006. 9 Crocs also branched out into other accessory products, such as caps, shirts, shorts, hats, socks, and backpacks. It had products such as kneepads and kneelers that utilized croslite to pro- vide functionality. It also sold decorative inserts that could be put into the shoe ventilation holes, origi- nally made by a family-owned company (Jibbitz) that Crocs purchased in December 2006.

8 Product links from Crocs home page: http://www.crocs.com/ home .jsp (Accessed April 24, 2007) . 9 Crocs Form 10K for 2006, p. F-27 .

Crocs made other acquisitions in 2006 and earl y 2007 in the sports protection equipment and ap- parel market, and in action footwear. These acquisi - tions further broadened the company's product line, and introduced products that incorporated conven- tional materials such as leather. (See Exhibit 6 for a list of Crocs acquisitions.)

Producing a Crocs Shoe The ra w materials for the croslite in Crocs shoes are relatively inexpensive chemicals purchased in pellet form from suppliers such as Dow Chemical. These chemicals are then combined in a process called "compounding," in w hich they are converted into a slurry, mixed, and then reformed into new pellets . As part of the compounding process, color dyes are added. The compounded pellets are then ready to be molded into croslite products.

Croslite components for Crocs products are made by injection molding. This requires an injection molding machine, and molds for each style and size. After the parts are molded, they must be assembled. This might involve gluing croslite parts together, or stitching, in the case of components made of leather, canvas, or other materials which had been added to

Crocs : Revolutionizing an Industr y's Supply C hain Model for Compe ti tive Advantage 497

- BIT 5 Selected Crocs products.

~ ~ ~ beach cayman disney beach

Beach was the company's most Beach and Cayman were the first two Disney beach was a version of po pular model. Beach and Cayman Crocs products, and formed the basis the Beach model produced ac counted for 62 percent of 2006 for some other shoe models. under license from Disney. shoe sales.

~ ~TM ~ 1-professional jibbitz kneepads

Professional was intended for Jibbitz were used to customize Crocs Crocs produced items such as people such as nurses who spent shoes by filling the ventilation kneepads that took advantage all day working on their feet. holes in the shoes. of the properties of croslite.

~

~ ti ~ crocs 1" wristband cloud block letter t-shirt

Crocs offered branded accessories Cloud was designed to meet the Crocs offered a range of shirts such as wristbands, caps, and socks. special needs of diabetic patients. and shorts.

5ource: Crocs w ebsite (www. crocs.com, accessed Apr il 23, 2007). Images © Crocs, Inc. , reprinted w ith perm ission .

EXHI BIT 6 Crocs acquisitions, 2004-2006.

Acquisition, Date Acquired, Purshase Price2

Foam Des igns (fo rmerly Finproject NA) June 2004

Fury (formerly 55 Hockey Products) October 2006 1

EXO ltalia October 2006 1

Jibb itz December 2006 $13.5 mill ion

Ocean Minded, LLC January 2007

Notes

$1 .75 mill ion plus potential earn -out of up to $3.75 million.

1. The aggregate purchase price for Fury and EXO ltalia was $9.6 million . 2. Purcha se prices include acquisition-related costs.

Description

Original man ufacturer of Crocs products and owner of crosl ite intellectual property.

Manufacturer of hockey and lacrosse products. Crocs developing protection gear based on croslite , w hich offers low w eight, ene rgy absorption, and mi crob ial resistance.

Designer of ethylene vinyl acetate (EVA) products, primarily for the f ootw ear industry.

Family ow ned company specializing in colorful snap-on products designed as accessories for Crocs footw ear.

Designer and manufacturer of high quality leather and EVA ba sed sanda ls for the beach, adventure, and action sports markets. Uses recycled and recyclable material s w henever poss ible. Products target young men and w omen w ho w ant high qua lity fashion sandals w ith an emphasi s on style and comfort.

Source : Crocs Form 10K for the year ending December 31,2006, pp. F-11, F-1 2, F-30.

498 Part Six Case Studies

the Crocs product line in late 2006 and early 2007. The finished products are then tagged and placed in boxes containing 24 pairs of shoes for distribution to retailers. Standard industry practice -was for each pack of 24 to contain only one style and color. Crocs, however, would custom configure 24-packs to meet the needs of its smaller customers.

CROCS REVO LUTIONIZES THE FOOTWEAR SU PPLY CHAIN The footwear industry was oriented around two seasons-spring and fall. The standard practice was fo r footwear companies preparing for the upcoming fall season to take their products to shows around the world in January. Buyers would book orders for fall delivery following these shows ("pre-books").

The fall orders that were received at the begin- ning of the year would be planned for delivery in August, September, October, and November. These scheduled shipments would drive the production plan . The manufacturers would add some excess to the build, typ ically about 20 percent of the pre- booked orders, to take advantage of potential ad- ditional orders . A very aggressive compan y might add 50 percent to the build, but all the product would be manufactured before the season began . Most shoes were produced in Asia (primarily China and Vietnam), with some manufactu red in South America.

This production and supply model had obvious limitations. Retailers had to estimate what their cus- tomers would want well in advance of the selling season. If they underestimated, they w ould have empty shelves and forego potential sales. If they overestimated , they would be stuck w ith unsold stock at the end of the season and be f orced to have clearance sales in order to get rid of this excess stock at discounted prices . Making this even more difficult was the consideration that fashion was subject to trends that were difficult to predict-history was of only limited value, particula r ly w ith new product s that incorporated novel design elements that might either become wildly popular or fall flat.

The Cro cs Supply Chain Crocs looked at the supply chain from a ve ry differ- ent perspective than traditional shoe companies. Coming f rom their electronics contract manufactur- ing backgrounds, Snyde r and ot her key Crocs execu- tives were accustomed to producing what the customer needed, when it was needed, and respond- ing rapidly to changes in demand. They decided to develop a model focused on customer needs-when a custome r needed more product, they would get it.

Snyder described the new model as follows, "If th e products sell extremely well, we will build more in season, and will be back on the shelves in a fe w weeks. And we'll build even more, and even more, and even more, in that same season . We're not go- ing to w ait with a hot new product until next year, when hopeful ly the same trend is alive." · Under the Crocs model, retailers would not need to take a big risk in January by placing large orders for their fall season-they could place smaller pre-booked orders, and order more whe n they saw how w ell the products sold . Traditiona lly, customers had to guess which pr oducts would be hot, and could not get mo re of a product that was in higher demand than they had guessed (and take the risk of end-of-season sales to unload excess in - ventory at reduced prices) . Crocs wanted customers to be able to get more of a product during the sea- son in order to take advantage of unexpectedly high demand. To do that, Crocs would have to be able to make the products during the season, and ship them to customers quickly. One analyst re- marked, "They've surprised everybody. Their re- plenishment system is unheard-of in the retail footwear space." 10

The positive• relationship that Crocs developed with its retailers resulted in additional benefits. As Crocs became important to big retailers, they ap- proached Crocs to suggest increasing the Crocs pres- ence . Snyder described one large retailer who said: "Bring us new products, bring us apparel, accesso- ries, T shirts, socks, hats, Jibbitz, and we'll give you a whole area that will be dedicated to the current Crocs offerings and any new stuff you come out w ith." Snyde r observed, "Once you have retail space, it's pretty valuable."

Developi ng the Crocs Supply Chain

Phase One: Taking over Production As mentioned earlier, one of Snyder's first moves was buying the manufacturer of Crocs shoes (Foam Designs) in June 2004 so that it could own the propr ietary croslite resin and control manufactu r ing. At that point, Crocs purchased the raw material pellets from a variety of companies in Europe and the United States, and shipped them to a third-party compounding company in Italy. The Italian com- pany had been the parent of Foam Designs, and had previously done the compounding, so continu- ing to use them for this function avoided supply chain interruptions.

10 Jim Duffy of Thomas W eisel Partners, quoted in Anderson, loc. cit.

Crocs: Revo lutionizing an Industry's Supply Chain Model for Competitive Advantage 499

-e co mpounded, colorized pellets were then back to Foam Designs in Canada, where shoes

_ =mo lded and assembled. The finished products = : h en shipped to a third-party distribution

--::>any in Denver that warehoused the shoes, and - -~ged and shipped them to customers.

-;.:e Tw o: Global Production Using Contract .:- 'acturers Crocs started production in China in

2005, using a large contract manufacturer. The materials were still being sent to Italy for com-

=- di ng, but the compounded pellets were now =-=~a both Canada and China. The shoes that were .::::e in China were shipped to the Denver ware- =~e f or packaging orders and distribution .

o cs began to enter the Asian and European -=r ets in the spring of 2005. As described earlier,

'€ co mpany's strategy was to launch worldwide, so - ::rou ght on manufacturing capacity to support this =:::> oach. It added capacity through contract manu - :~urers in Florida, Mexico, and Italy (due to the lo- ...::. presence of the compounding company).

oming from the contract manufacturing business, ::-. d er and his team expected that the benefits of =-- r act manufacturing they had experienced in the

· ronics industry would also be present in this new = iness . Electronics contract manufacturers in all --rts of the world were highly responsive to customer :::=mands, and quick to increase or stop production as _ ui red. They soon found that this was not the case

· f ootwear manufacturing. Snyder explained:

W e realized very quickly that third party [manu- f acturers] with our new model weren't going to w ork [outside of Asia]. Third parties in Asia are absolutely great. They are very flexible. They can b e both flexible and high volume . They move very quickly. They [contract manufacturers] take ri sks with us, where they buy equipment. They invest in helping us grow the business. No [third party manufacturers in] other countries were w illing to even entertain that. We'd have to give t hem long term forecasts, long term contracts, w e'd have to sign away the next few kids . Noth- ing was good about using contractors in any other part of the world, to be honest ....

[Third party manufacturers outside of Asia] w ould want to know what we're shipping four months from now, not next week. We were tell- ing them, "no, we actually need you to change to morrow, and start shipping different stuff next week, if that's what's required, since that's o ur model." [And they said,] "Oh no, no, we can't do that!"

Phase Three: Bringing the Global Supply Chain In-House When Snyder realized that contractor manufacturers outside of Asia would not be able to adopt the com- pany's supply chain model, he developed company- owned manufacturing operations in Mexico, and Italy. Crocs set up a manufacturing operation in Brazil that was scheduled to open by the end of June 2007. It w as also exploring potential …