A steady stream of punches to the gut is how Crocs’ head of logistics and supply chain described much of the tumult that occurred the past two years in shipping the footwear company’s cheery slip-ons.
Mary McNelly, Crocs senior director of global logistics and supply chain design, offered her take on how she and her team managed through the supply chain constraints of the past two years to ultimately help the company come out on top with record revenue of $2.3 billion last year and the $2.5 billion acquisition of Italian slip-on shoemaker Heydude announced at the end of December.
While McNelly described the exhaustion that has set in from the past couple years, the flipside has been a greater understanding of logistics across the broader Crocs organization and public at large, alongside learnings that could position the shoe brand well in the future.
“I actually enjoy looking at this moment as career defining, not just for me but my team members,” McNelly said Tuesday during IHS Markit’s annual TPM22 Conference, the first held in person since Covid-19.
The executive steered her team with a key focus on remaining agile and resilient.
A good example of that is the company’s ocean carrier contracts. After Crocs awarded those contracts, the company was told only a percentage of its inventory could actually be supported due to carrier capacity constraints.
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“We immediately had to pivot and say, ‘Well, this has never happened before,’” McNellly said of having to go back to companies whose contracts they initially rejected to see if they had the space to move the rest of Crocs’ product.
The team shifted its approach last August, deciding they had to get creative and also think about the long term in gearing up for the carrier request for proposals process. They kept their big-picture strategy tied to the ultimate goal of creating long-term partnerships.
“We literally white-boarded and sat there and said, ‘how do we differentiate ourselves?’” McNelly said. “We’re growing as a brand because people are wanting this product when they’re stuck at home. So how do we continue to get more [carrier] capacity in a world where no [additional] capacity is coming back online?”
The current shipping environment has been marked by a lack of space for cargo on ships, creating an environment where shippers are focused on who can take on transport of their inventory and less so on the sky-high rates being charged.
McNelly said the team made the appeal to carriers to ask what would make the company a more attractive partner complementary to their existing network.
Diversification, like at many companies, has also been the steady drumbeat at Crocs as it relates to the factories it works with and also the length of the contracts it strikes with carriers.
While McNelly doesn’t oversee sourcing, working with that team so they understand the supply chain and what trade routes may be more challenged than others helps.
Diversity of contracts has also been important, with the Crocs team striking deals once again thinking about the long-term and not simply just seeking out space wherever they can given today’s volatile freight environment. Rather, she said, it was about making it clear to carriers that Crocs wants to continue working with them even after market conditions normalize.
Carriers vary in their strategies and how they prioritize customer containers, so that was the logic behind inking some three-year contracts, while also maintaining one-year deals in other cases for Crocs.
“For us, we want to be a customer of choice. It’s really, really important to us,” McNelly said, adding, “How do I make sure that they know I’ll keep giving them revenue three years from now when, in theory, things may start to stabilize out.”
Part of trying to be the ideal customer is also about staying firm on contract commitments, while carriers also adhere to their end of the deal.
“We raise our hands and say, ‘If we don’t show up, we pay. If you don’t show up, you pay,’” McNelly said.
That means Crocs ships what it forecasts to ship, while carriers are also fair in fulfilling the service they’re contracted to perform. She brought up a past incident where a company told Crocs if it was unable to load Crocs inventory that week, it would try to do so within 90 days—a clearly unacceptable length of time for the shoe company’s needs.
“I think we all need to have better standards for our industry, and that includes me being willing to show up with my team and do what I say I’m going to do,” McNelly said.