Crocs shifts distribution center from Los Angeles to Ohio as demand spikes

Dive Brief:

Crocs shifted fulfillment for its Americas markets from a Los Angeles-based distribution center to a new facility in Dayton, Ohio. Crocs plans for this location to completely replace its LA facility by the fourth quarter of this year, according to company earnings calls.
The move is expected to lower freight costs, and automation at the new center will allow the company to increase throughput by 50%, Crocs CEO Andrew Rees said in February.
"Another critical benefit associated with this move is greater speed to market given Dayton's central location," Rees said.

Dive Insight

The company has taken on higher freight rates as it looks to speed up its delivery process and because of inflation, Crocs CFO Anne Mehlman said this week.

"By relocating the Americas DC to Ohio, we will mitigate some of these freight pressures and as we restore Classic clog inventory to appropriate level, we will eliminate the use of air-freight," Mehlman said. "Second, cost at our L.A. distribution center rose as we operated above maximum capacity."

Crocs expects its adjusted gross margin to improve by about 100 basis points as a result of the move, she said.

This move is coming at a time when, the company says, demand for Crocs clogs is increasing, with sales of the "classic icon" growing 12% in the first quarter.

"In fact, rapidly accelerating demand for Classic clogs outpaced supply, particularly certain core colors," Rees said this week. "Our supply chain teams have been working hard to increase capacity at existing factories and bring new factories online."

Crocs expects its supply of clogs to be back in line with demand by the end of the quarter, he said.

Crocs is not the only company looking to make moves into the Ohio operations and logistics market. The Dayton location provides easy access to multiple freight modes. The CSX rail line runs right through Dayton, and multiple interstates cut through the city and surrounding counties. This is a fact the area is working to promote.

"The Dayton area is absolutely a hub for global supply chain and logistics. … It makes business sense for logistics companies to be here," Chris Kershner, executive vice president of the Dayton Area Chamber of Commerce, told the Dayton Daily News. "We're seeing the proof in the pudding when you have companies like Amazon, P&G, Caterpillar, Spectrum, Payless Shoes that are sticking a flag in the ground and saying this is where we want to be."