At the TPM 2021 conference, Mary McNelly, Global Logistics Director at Crocs, delivered a thought-provoking message that challenged conventional wisdom in maritime contracting strategies. In an industry traditionally focused on cost optimization, Crocs demonstrated how prioritizing capacity redundancy ensures business continuity and growth during market turbulence.
The Pandemic Wake-Up Call: Capacity Assurance Matters
Early in the COVID-19 pandemic, Crocs made what seemed like a prudent cost-saving decision by terminating a contract with a smaller shipping partner due to anticipated failure to meet Minimum Quantity Commitments (MQC). However, when demand unexpectedly surged later in the year, the company found its actual volumes nearly matched the original MQC—just concentrated in the second half.
"Historically, businesses balanced capacity redundancy against cost optimization," McNelly explained. "Now, protecting operations takes precedence—ensuring adequate capacity supports growth." This paradigm shift requires cultivating relationships with multiple Non-Vessel Operating Common Carriers (NVOCCs) and ocean carriers to create layered protection.
The 2020 Shipping Crisis: Capacity Shortages and Disruptions
The latter half of 2020 presented shippers with unprecedented challenges: skyrocketing freight rates, container shortages, and widespread delays. McNelly acknowledged that when volumes exceed MQC, carriers can't be solely blamed for failing to meet additional demand—particularly during peak periods when all industries faced record transportation needs.
This capacity crunch underscored the critical importance of maintaining buffer capacity. When Crocs exceeded contractual commitments, the company aggressively pursued alternative partners and innovative solutions to secure vessel space.
Innovative Solutions: The Rise of NYSHEX
To address capacity challenges, McNelly highlighted several emerging tools including bidirectional commitment contracts, Maersk's spot market platform, and particularly the New York Shipping Exchange (NYSHEX). She emphasized NYSHEX's growing significance over the past eight months and recommended its integration into corporate transportation networks.
NYSHEX's legally binding contracts provide shippers guaranteed capacity while ensuring carriers receive committed volumes—reducing risk for both parties and improving reliability during market volatility.
Carrier Perspectives: Flexibility Through Partnership
During a separate TPM21 discussion, CMA CGM CEO Rodolphe Saadé expressed understanding of shippers' current difficulties. He emphasized his company's willingness to offer flexibility through multi-year contracts and spot market negotiations adjusted to market conditions.
While committed to accommodating client needs, Saadé noted carriers "can't work for free"—indicating that guaranteed capacity and flexibility come at appropriate price points.
Shipping's Fundamental Nature: Commodity Versus Service?
As contract negotiations intensify, container shipping reliability continues deteriorating. Sea-Intelligence CEO Alan Murphy reported global schedule reliability plunging to 34.9% in January 2021—the sixth consecutive month setting record lows since the firm began tracking this metric in 2011.
McNelly's pandemic experience reinforced her view that ocean shipping represents a commodity purchase rather than service procurement. "I'm paying for the opportunity to load my container," she stated. "Not for service quality—just for the chance to ship, because transit times have become completely unpredictable."
Strategic Imperative: Building Resilient Supply Chains
The Crocs case study demonstrates that traditional cost-first approaches become inadequate in highly uncertain markets. Companies must elevate capacity assurance and risk management in their supply chain strategies by:
• Diversifying carrier portfolios across multiple NVOCCs and ocean carriers
• Negotiating flexible contract terms accommodating volume fluctuations and destination changes
• Adopting innovative tools like NYSHEX to enhance reliability and efficiency
• Strengthening communication and collaboration with transportation partners
In this era of disruption, organizations embracing adaptability, innovation, and strong partnerships will gain competitive advantage.
Crocs' Resilience Playbook: Key Takeaways
Analyzing Crocs' strategic adjustments reveals several best practices:
1. Adaptive Decision-Making: Initial capacity reductions based on demand projections proved misguided, highlighting the need for conservative forecasting and contingency planning.
2. Proactive Problem-Solving: Rather than accepting capacity shortages, Crocs actively pursued alternative solutions when exceeding MQC.
3. Technology Adoption: Engagement with platforms like NYSHEX demonstrates willingness to leverage digital solutions improving transparency and reliability.
4. Partnership Development: Multiple carrier relationships created essential redundancy during disruptions.
Industry Implications: Resilience as Competitive Advantage
Crocs' experience delivers a crucial lesson: supply chain resilience now represents a core competitive differentiator. Businesses must prioritize:
• Developing diversified supplier networks
• Optimizing inventory management strategies
• Implementing robust risk assessment frameworks
• Investing in supply chain visibility technologies
• Cultivating specialized logistics talent
Building resilient operations requires comprehensive upgrades across strategy, execution, and technology—essential for sustainable success in volatile markets.
The Future: Resilience as Standard Practice
Looking ahead, supply chain resilience will transition from optional safeguard to business imperative. As global markets grow increasingly complex and unpredictable, only organizations with robust supply networks will thrive.
The time for action is now—companies must reevaluate their supply chain foundations to secure future competitiveness.