Federal Filings Paint Crocs IT Software As “Archaic,” “Primitive” and “Hopelessly Error-Prone”
Written by Evan SchumanBuried in the various legal filings of a shareholder fraud lawsuit against footwear maker Crocs is an intriguing look into how routine IT operations and discussions can quickly become very public and seem really bad.
The case, which US District Court Judge Philip Brimmer dismissed on Monday (Feb. 28), told tales of a new IT chief whose software recommendations were treated by senior management “dismissively.” Also mentioned were inventory and forecasting software that was “archaic,” “primitive” and “hopelessly error-prone” and financial reporting software that consisted of “obsolete, unsuitable tools.” And almost all of it involved the manufacturer’s interactions with retailers.
The IT issues—which Crocs apparently did not dispute—never played a crucial role in the arguments, with the judge throwing out the case because he said the shareholders couldn’t prove that senior management lied about these matters. That said, it’s educational how close a linkage the shareholders drew between routine IT issues and critical financial shortcomings. Excel spreadsheets, for example, were blamed for product shortages and surpluses.
“One root cause of the company’s failure to manage inventory was the fact that Crocs used archaic, error-prone Excel spreadsheets to track inventory and forecast sales. This approach ran directly contrary to the modern standard of using appropriate inventory control software which provides a real-time, up-to-the-minute picture of the company’s vast inventory,” said one filing from attorneys representing the shareholders. “The use of outdated technology led Crocs continually to both undershoot and overshoot the amount of inventory actually on hand, and to produce absurd quantities of unusable merchandise—such as size 13 shoes in colors such as fuchsia and butter, supposedly aimed at women customers.”
Crocs media relations did not return a voicemail and an E-mail seeking comment.
Lack of upgrades also prompted a mention.
-Marc
March 3rd, 2011 at 2:03 pm
The litigation floodgates would open if every mfg/retailer that used Excel as an inventory mgt. tool or that failed to upgrade to the latest version of each of its software application was found to be fraudulent to its shareholders. The lesson for retailers and manufacturers should be that an investment in modern forecasting and inventory management software should be looked at prior to reaching the point of shareholder revolt.