OMIS 6560 Supply Chain Management – Case Assessment 1
Alligator, Inc. Case
Executive Summary
Alligator Inc. is a shoe manufacturer and distributor that was launched in 2012. It is
headquartered in Arteixo, Galicia, Spain. The best-selling brand of Alligator is Gators model,
which is a market leader in lightweight, funky shoe market. It has been in high demand in the
recent years. Apart from the fact that the shoe is made of highly resilient, space age plastic
material, the main factor for Gator success is that each pair includes “One size fits all” orthotics
(patented technology of Alligator Inc) to meet the demands of individual customers.
Alligator supply chain on the consumer side if fairly simple. The Gator shoes are available to
consumers across the world through a wide variety of department stores, airport kiosk, online
ecommerce websites and other select Alligator stores. The shoes, in addition to proprietary
manufacturing facilities in Spain, are also manufactured in Shenzhen areas of China and Brasilia,
Brazil, due to lower manufacturing in these two locations. However, the supply side of the
supply chain is a little complicated. Although, most of the inputs in the finished products are
available from range of suppliers in the regional markets but the custom orthotics are all
produced in University park, PA in the United States. This factor might create long lead times,
resulting in bottle necks in the supply chain management and can pose a big threat to the
continued operations of the of the Alligator Inc. Moreover, since this a patented technology and
is only available with one supplier, this could also create problems in coordination and exchange
of information.
Therefore, to address these issues in the supply chain of the Alligator Inc., it is recommended
that the company should focus on managing strategic sourcing process rather than just
concentrating on procurement and purchasing part. Strategic sourcing will help Alligator Inc. to
align their goals and objectives to of the supply chain and of the overall organization. Rather than
focusing on the manufacturing cost, the company should emphasis on the total landed cost and
the value provided to customer. They should the perform a spend analysis and compare the total
landed cost of the Gators Shoes manufactured in Spain and other two locations. After, the
comparison, they should make a decision on whether the “Quality Trade-off” (between shoes
manufactured in Spain and other locations) is worth it or not. It is also recommended to expand
their supplier base, especially for orthotics, because this distinctive item can pose high risk to
their supply chain and can increase the procurement cost. Further, they should standardize
process for smooth onboarding of new suppliers. In order to drive continuous improvement, and
to have better communication and exchange of information, the company should move to eprocurement and e-sourcing for processes such as industry analysis and new supplier
identification. It will also help them with automation of purchase orders and project
management.
CASE QUESTIONS
1. Based on your knowledge of the global business environment and the positioning of Alligator
with regard to its markets and supply sources, what do you think are some of the major global
issues that will be relevant to the area of strategic sourcing?
Gators model, of the Alligator Inc., is the market leader in the funky, brightly colored, lightweight
shoe market. There are certain global issues that can be relevant to the area of strategic sourcing:
a) Changes in Political and Economic environment of a country: Gators Shoe are produced
by the contract manufacturers in in the Shenzhen area of China, and in Brasilia, Brazil. So,
apart from the propriety manufacturing facilities in Spain, the Alligator Inc. company is
heavily dependent on the manufactures of China and Brazil. Now, if there are changes in
economic laws and political laws of the country, there might be an effect on the
transportation cost and cost of taxes in that country. Although, the manufacturing cost is
cheaper in China and Brazil, but the overall Total Landed Cost to Alligator, after taxes and
other logistics costs, will increase substantially.
b) Prices of Oil and Gas: The overall landed cost is directly proportional to the transportation
cost, which is very much affected by prices of crude oil. Irrespective of the transportation
medium, the cost of crude oil will define the major chunk of the logistics cost.
c) Natural and man-made Disasters: Natural Disaster such as tsunami, earthquakes, or fires
and man-made disaster such as wars, labour strikes, or civil unrest might have a major
impact on shipping and transportation, which can result in low productivity and high
operational cost.
d) Currency fluctuations: Alligator Inc. is dealing with manufactures in China and Brazil.
Therefore, currency changes in these foreign countries can lead to change in foreign
exchange charges, and thus can lead to fluctuating manufacturing cost and lower profit
margins for Alligator Inc.
e) Competition from Global Retailers: With rise in global supply chains, many global fashion
companies have opened retail outlets in various parts of the world. Alligator Inc. will face
tough competition from other global fashion / shoe retailers available such as Zara and
H&M. Because these retailer offers low/average priced fast fashion products, it is tough
for a company like Alligator to maintain its market leader position in the market.
2. What are the impacts of less-than-perfect demand forecasts for Alligator products, including
Gators, and of volatility in the length and cost the supply chain services needed to move
components from suppliers to manufacturing sites, and the subsequent movement of finished
products to market? What should be done to mitigate these problem areas?
It is important to accurately forecast the demand from the consumer. Otherwise, the the supply
chain of the company will fail due to mismatch of the demand-supply. Following are the impacts:
a) Due to inaccurate demand, the company may anticipate huge demands and the inventory
cost may increase.
b) In the same way, there can be a shortage of inventory due to inaccurate demand forecast,
which will drive the customer away to other brands.
c) Shortage of raw material: The company may communicate wrongly to the supplier and
there might be shortage from the supplier side.
Ways to mitigate the problem areas are listed below:
a) Move to e-procurement and e-sourcing for better supply demand forecast
b) E-commerce store to help forecast and predict the demand of the product
c) Better supplier relationship to manage shortage of supplies.
d) Ability to increase production facilities to be able to increase production when there is
huge demand from the market.
3. What elements of the strategic sourcing process do you feel are the top candidates for
improvement at Alligator, and why?
Following would be most important elements of the strategic sourcing process for Alligator Inc.:
a) Understand Spend: Alligator Inc. has to make the key evaluation of “Make vs Buy”
decision. This step will be critical to the strategic sourcing process. We know that the
general manufacturing cost per unit is cheaper in China and Brazil, but the overall quality
of the Gators manufacture in Spain is better than the other two locations. We know that
the Total landed cost includes all the costs associated with making and delivering products
to the point where they are needed. These other costs include life cycle costs, inventory
costs, transaction costs, technology costs and other logistics costs. So, Alligator Inc. has
to perform a spend analysis and compare the Total Landed costs of the Gators Shoes
manufactured in Spain and other two locations. After, the comparison, they should make
a decision on whether the “Quality Trade-off” is worth it or not.
b) Evaluate Supply Sources: Gator’s success is related to the fact that each pair includes
“One Size fits all” orthotics to meet the demands of individual consumers. This is the
biggest competitive advantage Alligator Inc. has. However, this very factor, is the problem
in the supply side of the Gator’s supply chain. The customs orthotics are all produced in
United States. If we apply the Quadrant technique, the orthotics technology can be a
categorized as distinctive, which are high risk, low value items/services available from
only a few suppliers. Because of the limited suppliers, this can be a threat to continued
operations and can be the reason for increasing procurement cost. A stockout in orthotics
production can completely halt the operational process. Therefore, Alligator should
conduct a thorough market analysis and try to find alternate suppliers who can product
the same quality orthotics, so that Alligator can have a smooth operation and
manufacturing process.
c) Onboarding and Transitioning: This element is linked with the previous element. After
finding alternate supply sources based on quality, reliability, capability and sustainability,
the company should create standard management processes for the new suppliers such
as finalizing of the contractual agreements, standardizing delivery of product and services
to conduct a smooth onboarding and transitioning process.
4. How would you respond to the assertion that some of your contract manufacturers are
involved in producing illegal merchandise (i.e., Gators “knock-offs”) that ends up competing with
the branded merchandise of Alligator?
The competitive advantage of the Gators Shoes is “One Size fits all” orthotics that meets the
demands of individual consumers. Apart from the fact that the shoe is lightweight and of high
quality, the orthotics is one of main reasons that Gators is the market leader in the funky, brightly
colored, lightweight shoe market.
Although, most of the inputs in the finished products are available from range of suppliers in the
regional markets but the custom orthotics are all produced in University park, PA in the United
States. Therefore, the custom orthotic technology is only available with one supplier, i.e.
professors at Penn State University, who are also the developers of the technology. It is also a
fact that Alligator Inc. has patented the process related to the manufacture of the orthotics. This
technology is therefore a secret at Alligator, and thus, I will put down the statement “that some
of the contract manufacturers are involved in producing the illegal merchandise” as baseless
rumor. Also, even if the manufacturers have created a Gator’s knock off (without the orthotics),
they will never be able to achieve the high quality, technology and competitive advantage of the
Gator.