2016 supply chains to admire - slide deck - 20 july 2016

Supply Chains to Admire 2016

WebinarJuly 20, 2016

Supply Chain Insights LLC Copyright © 2016, p. 2

Your Speaker Today

Lora Cecere, Founder and CEO, Supply Chain Insights


We wanted to have an objective measurement of supply chain excellence for our research.

Why Do We Do This?


• The methodology is in its third year.• Constantly learning and refining the

methodology based on feedback from supply chain leaders.

• Data sourced from YCharts. • Based on financial ratios.

History?


Comparison

Gartner Top 25 Supply Chains to Admire

Focus• Fortune Global 500 and

Forbes Global 2000 lists• $12B minimum revenue

• Companies by industry, regardless of size

Calculation

• 50% quantitative measures:• ROA (3 year weighted

average)• Inventory Turns (1 year

quarterly average)• Revenue Growth (3 year

weighted average)• Corporate Social

Responsibility 3rd party index• 50% peer and Gartner

analyst opinions

• Improvement greater than peer group average based on the Supply Chain Index rank:• Strength, Balance, and Resiliency

• Value relative to peer group average • Price to Tangible Book Value

• Performance better than peer group average on the Supply Chain Metrics That Matter:• Revenue Growth, Operating

Margin, Inventory Turns, Return on Invested Capital

Experience • 13th year • 3rd year


What We Expected


0.15 0.16 0.17 0.18 0.19 0.20 0.215

6

7

8

2006

2015

Procter & GambleOperating Margin

Inve

ntor

y Tu

rns

Best Scenario

PG0.19, 5.75

Average (Operating Margin, Inventory Turns)

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts

Procter & Gamble(2006-2015)


Colgate-Palmolive (2006-2015)


0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.215.50

6.50

7.50

8.50

2006

2015

Operating Margin

Inve

ntor

y Tu

rns

Best Scenario

K0.14, 7.22



Kellogg(2006-2015)


Dow Chemical Company and DuPont(2006-2015)


Honda and Toyota(2006-2014)


Bristol-Myers Squibb and Merck(2006-2015)


Laggards LeadersFocus on Functional Metrics Focus on Horizontal Processes

Driving Singular Metric Strategies Building of Balanced Scorecards

Changing Leadership Consistency of Leadership and Culture

Focus Solely on Transactional Processes

Strong Planning and Network Design

Changing Focus. Adoption of Fads. Clarity of Supply Chain Excellence.

Why?


Process

Evaluate Supply Chain Improvement Using the Supply Chain Index

Determine Relative Position Against Peers for Price to Tangible Book

Select Higher Performing Companies Against Performance Factors


Measuring Supply Chain Improvement

Overall Ranking per Company• Balance: Return on Invested Capital & Revenue Growth Vector Trajectory (30%)• Strength: Inventory Turns & Operating Margin Vector Trajectory (30%)• Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)

𝑺𝒖𝒑𝒑𝒍𝒚 𝑪𝒉𝒂𝒊𝒏 𝑰𝒏𝒅𝒆𝒙=𝟏𝟑𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑 𝑺𝒕𝒓𝒆𝒏𝒈𝒕𝒉 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑 𝑹𝒆𝒔𝒊𝒍𝒊𝒆𝒏𝒄𝒚 𝑭𝒂𝒄𝒕𝒐𝒓


Process





Value

Price to Tangible Book = Market Price/Tangible Book Value


Process





Performance Factors:

A Balanced Portfolio Drives the Highest Level of Value:

The Supply Chain Effective Frontier

Year-over-Year Growth

Operating Margin

Inventory Turns

Return on Invested Capital


Inventory Turns = Cost of Goods Sold/Inventory

Cycle Measurement


Asset Utilization/Complexity


Determining Winners

PTBV

IMPROVEMENT VALUE PERFORMANCE


• Divided 293 public companies into 26 industry peer groups based on NAICS codes.

• Evaluated the companies within industry peer groups for improvement, value, and performance across two periods: 2006-2015 and 2009-2015.

Methodology

Supply Chains to Admire 2016: Winners and Finalists2006-2015 2009-2015

Winners Finalists Winners Finalists

17 17 16 21

2009-2015


0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.165

6

7

2006

2015

CumminsOperating Margin

Inve

ntor

y Tu

rns

Best Scenario

CMI0.11, 5.82



Cummins Engine(2006-2015)


Cisco Systems(2006-2015)


0.03 0.04 0.05 0.06 0.07 0.0814

15

16

17

18

19

20

21

2006

2015

Whole Foods MarketOperating Margin

Inve

ntor

y Tu

rns

Best Scenario

WFM0.05, 18.44



Whole Foods(2006-2015)


0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 0.32 0.34 0.3637

42

47

52

57

62

67

72

77

82

87

92

97

102

107

112

2006

2015

AppleOperating Margin

Inve

ntor

y Tu

rns

Best Scenario

AAPL0.26, 60.74



Apple(2006-2015)


Conclusion

• A focus on balanced metrics

• Strong culture/leadership. Avoidance of fads

• Strong horizontal processes and focus on supply chain talent.

Engage with Us Visit Us Online www.supplychaininsights.comwww.supplychainshaman.comwww.beetfusion.comwww.linkedin.com/company/supply-chain-insightswww.slideshare.com/loracecere

Follow Us on Twitter @scinsightsllc @lcecere

Attend a Live Eventwww.supplychaininsightsglobalsummit.comwww.supplychaininsights.com/the-shamans-circle


About Lora Cecere

• Founder of Supply Chain Insights• “LinkedIn Influencer”

• Guest blog for Forbes

• Author of 5 books: Bricks Matter (2012), Shaman’s Journal (2014), Supply Chain Metrics That Matter (2014), Shaman’s Journal (2015), Shaman’s Journal (2016)

• Partner at Altimeter Group (leader in open research)• 7 years of Management Experience leading Analyst Teams at Gartner

and AMR Research• 8 years Experience in Marketing and Selling Supply Chain Software at

Descartes Systems Group and Manugistics (now JDA)• 15 Years Leading teams in Manufacturing and Distribution operations for

Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble.

Contact Information: • Email: [email protected]• Blog: www.supplychainshaman.com (15,000 pageviews/month)• Forbes: www.forbes.com/sites/loracecere• Twitter: twitter.com/lcecere (7,700 followers)• LinkedIn: www.linkedin.com/in/loracecere (110,000 followers)• LinkedIn Influencer: www.linkedin.com/today/author/446631

2016 supply chains to admire - slide deck - 20 july 2016

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