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Case Study

 

Crocs Climbs New Business Heights

Footwear Company Simplifies with the “Sunlight” Project

by Ken Murphy, Senior Features Editor | insiderPROFILES, Volume 6, Issue 3

July 6, 2015

Crocs climbs new business heights

Crocs revenue surged between 2005 to 2007, and the footwear retailer and manufacturer's highly customized legacy IT systems were not ideal to keep up with the company's growth. To sustain the expected success, Crocs realized it needed a systems landscape that could mature with the company, and it embarked on Project Sunlight, which included an implementation of SAP Apparel and Footwear. Hear how the company gained newfound visibility into the business and streamlined cumbersome processes to save time and money. Learn the many benefits Crocs reaped as a result of the project, such as reduced days sales outstanding, improved fill rater, and lower SG&A costs.

 

The first pair of Crocs™ shoes was initially designed with boaters in mind. But if it were only boaters who wore Crocs shoes, the company wouldn’t enjoy the widespread global appeal it has earned just 13 years after the release of the now iconic Classic clog. Today, roughly 300 million pairs of Crocs shoes have been sold in more than 90 countries, and the $1.2 billion brand has a strong foothold in the casual footwear market for men, women, and children.
 
From an IT systems standpoint, rapid growth — from 2005 to 2007, revenue at Crocs surged from $109 million to $847 million — resulted in a host of disparate legacy systems. The company tried to keep up with a flurry of transactions with a patchwork of best-in-breed solutions to handle order management, warehouse management, retail merchandising and reporting, electronic data interchange (EDI) functions, and other activity central to a footwear retailer and manufacturer.
 
While this approach allowed for short-term growth, Crocs soon discovered it was unsustainable, as it resulted in highly customized systems that were difficult to upgrade to support business growth. In addition, because each region aligned its business processes based on the systems at hand, it became difficult to duplicate processes across regional offices. Something as fundamental as closing the books entailed compiling information from a multitude of spreadsheets that originated in different countries or regions. Corporate finance devoted significant resources to manual reconciliations, and it was understood that frequent phone calls and emails to hunt down missing or improperly formatted data was part and parcel of a successful close.
 
“A lot of processes were cumbersome and needed to be streamlined,” Crocs’ Senior Program Manager Liv Landblom, says. “Order entry could start in a number of places, but it had to travel through three different systems before the order was finally placed. If there was ever a process failure, it took a long time to determine where that point of failure originated.”
 
For growth to continue, Crocs realized it needed a systems landscape that could mature with the company. Shortly before the business entered its second decade, it embarked on a project called Sunlight, named after the 14,065-foot peak in Southwest Colorado located roughly 400 miles from the company’s headquarters in Niwot, Colorado.

Crocs climbs new business heights

A New Dawn

Before honing in on a product, Crocs set some guiding principles for the project, the primary one being that henceforth information technology would serve the company, not the other way around. The company’s vision was for the solution to fit with newly designed business processes at the enterprise level. In essence, Project Sunlight wasn’t about an ERP implementation — rather, it was about a business transformation, with Crocs leading the way in organizing the business and the systems following suit.
 
“That was the mission,” says Crocs Senior Vice President of Global Distribution and Logistics, Dennis Sheldon, who was the executive sponsor of the project. “Our primary premise was that we were going to change the business before changing the system,” he says. “And we were going to be very diligent about having no customizations. We would arrive at standard global processes that an implementation would help us stay in line with.”
 
In the search for a solution that would support this business transformation, Crocs quickly landed on SAP Apparel and Footwear, an SAP for Consumer Products industry solution that was developed as an SAP ERP service enhancement tailored for clothing and shoe manufacturers. More than any other solution Crocs considered, SAP Apparel and Footwear — and the many features it offers in footwear, such as three-way size grid functionality — provided the business with the clearest path toward standardization without having to resort to customizations.
 
For all intents and purposes, the footwear industry “runs” on size requirements; size is the demand variable that other activities depend on. With SAP Apparel and Footwear, Crocs is able to store size, color, and style information in the same materials master data. By significantly lessening data requirements and streamlining processes, Crocs was able to retire roughly 24 legacy systems after going live with SAP Apparel and Footwear.
 
“Under the old system, you could have 1,000 various stock-keeping units (SKUs) because of how the data was set up. With SAP Apparel and Footwear, you can turn that into 100 because of the grid process,” says Sheldon. “This was what had been driving customizations.”

Crocs climbs new business heights

Crocs, Inc.

Headquarters: Niwot, Colorado

Industry: Consumer goods (footwear)

Employees: 4,000+

Revenue: $1.2 billion (2014)

Company details:

  • Offers 300 four-season footwear styles
  • More than 300 million pairs of shoes sold in over 90 countries since 2002 inception
  • Iconic Crocs clog accounts for approximately 45% of footwear sales
  • More than 500 global retail outlets
  • Launched #FindYourFun global marketing campaign in March 2015
  • Gregg Ribatt named CEO in December 2014
  • NASDAQ: CROX; www.crocs.com; @Crocs

SAP solutions:

  • SAP Apparel and Footwear — specifically for the order-to-cash, procure-to-pay, finance, and controlling functionality
  • SAP BusinessObjects BI solutions
  • SAP BW
  • Internet sales application for B2B
  • SAP solutions for GRC
  • SAP Business Planning and Consolidation
One Step at a Time

Crocs started a blueprint phase in November 2012 to focus on validating best practices across the enterprise. Because the intention was to implement SAP Apparel and Footwear with as little development as possible, Crocs decided that a phased global rollout was the best approach; the fragmented state of its systems would make a piecemeal rollout by function or line of business too difficult.
 
During the blueprint phase, Crocs opted to work with an implementation partner for assistance with development and data conversion. Due in large part to strict adherence to an out-of-the-box deployment, Crocs went live with a pilot program about 12 months after completing the blueprint phase when it took its $20 million Australia business live on SAP Apparel and Footwear in April 2014.
 
Because the Australia business had a full suite of the various systems that would be interfacing with SAP Apparel and Footwear, it represented an opportunity for Crocs to iron out any issues prior to the global launch. With only some minor hiccups, Crocs took Japan — a $120 million business — live two months later. Here, the company ran into a few change management challenges.
 
“There were language and cultural barriers,” says Sheldon, who acknowledges that change management had never been a chief concern over the years. But, knowing that a global rollout and consolidation would be different, the company had planned ahead by partnering with a change management consulting firm. Says Sheldon, “That really educated us as to how we should be looking at this outside of the transactional activity and helped us understand what the change and cultural impacts were going to be across the organization and how that all circled back into the training aspect.”
 
Aside from the cultural barriers, which training helped to mitigate, Crocs had even fewer data migration issues than it experienced during the Australia rollout. With this success, the company set a date for a global rollout of January 7, 2015 — giving it six months. When the date arrived, Crocs successfully went live on SAP Apparel and Footwear across 32 countries, 1,400 users, 15 languages, and 23 currencies. Through it all, there were fewer than 25 enhancements or system customizations, all for legal and regulatory requirements.
 
“There were a lot of long days and sleepless nights and travel all over the world, but everyone who was involved from all different parts of the organization came together as one team,” says Landblom. “And that shared goal is really what made this a success.”
 
To drive adoption, Crocs built business readiness teams at each location consisting of leaders from various functions. By including these teams in training, development, and testing, Crocs helped to develop regional subject matter experts (SMEs) familiar with their own location’s culture and idiosyncrasies. 
 
“This made adoption a lot easier than parachuting someone in from Colorado saying, ‘This is the way it’s going to be,’” Sheldon explains. “As we approached the global go-live, we leveraged the readiness team leads and those core SMEs, so we had more than 100 people ready to cover any situation arising during the actual go-live.”

Crocs Dennis Sheldon

Dennis Sheldon
Senior Vice President, Global Distribution and Logistics,
Crocs

From the board level on down, we were able to effectively communicate the project’s goals throughout the entire organization, and that’s something to be proud of.

— Dennis Sheldon, Senior Vice President, Global Distribution and Logistics, Crocs

Reaching the Peak

With almost everything to do with the design, manufacture, and distribution of Crocs now managed in SAP Apparel and Footwear — including the automation of purchasing, delivery tracking, inventory segmentation, and chargebacks, to name a few — Crocs has streamlined a number of formerly unwieldy processes.

The benefits of these streamlined processes include:

  • Fewer days sales outstanding
  • Improved fill rate
  • Reduced freight
  • Significantly reduced non-production selling, general, and administrative (SG&A) costs

“We have greater global visibility into the business,” Landblom says. “We no longer spend time questioning the data. Now, once we receive data, we can analyze it and take action on it a lot faster. We can immediately see where an order is, what the status is, what the inventory is, and take the proper action to get the right shoes to customers at the right retail stores.”
 
Moving forward, Sheldon says that Crocs will take steps to ascertain that users adhere to the process standardizations set forth at the outset of Project Sunlight, and that no one reverts back to maintaining region-based spreadsheets. Beyond that, Crocs has plans to deploy SAP Advanced Planning and Optimization. It also implemented SAP BusinessObjects business intelligence (BI) solutions and SAP Business Warehouse (SAP BW), ensuring robust analytics is in the future for Crocs, which is keeping in line with having visibility into the business at the enterprise level.
 
Crocs started with the simple idea to build a better boat shoe. Likewise, its business transformation all started with the simple idea to strip away complexity by moving to a single ERP system tailored to the footwear industry. With Project Sunlight in the books, Crocs likes the view from the summit.
 
“It was a long road, but we stayed the course. From the board level on down, we were able to effectively communicate the project’s goals throughout the entire organization, and that’s something to be proud of,” Sheldon says.

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