supply chain insights' financial benchmarking examples - 27 aug 2013

Supply Chain Financial Benchmarking

Answering the Question, “What Is the Role of Supply Chain Effectiveness in

Driving Corporate Performance?”

Supply Chain Insights LLC Copyright © 2013, p. 2

Supply Chain Insights is focused on delivering independent, actionable and objective advice for supply chain leaders. If you need to know which practices and technologies make the biggest difference to corporate performance, turn to us. We are a company dedicated to this research. We help you understand supply chain trends, evolving technologies and which metrics matter.

About Us


This is the new bible for all supply chain executives. It provides an insider’s perspective that will prove incredibly valuable to even the most grizzled supply chain veteran. This is the next must-have business book.

--Bruce Richardson, Chief Enterprise Strategist, Salesforce.com

Today, the worlds of social business and supply chain management have many degrees of separation. I enjoyed working with Lora to understand what the future transformation of digital marketing to digital business could look like.

--Jeremiah Owyang, Research Director, Altimeter

Second Printing of Bricks Matter: 16 Five-Star Reviews on Amazon

The book can be ordered from Amazon.com in hardcopy or digital format


A Review of Industries’ Progress on the Supply Chain Effective Frontier and the Supply Chain Index

2014 Publication


We find that many companies are starting to work on 2014 planning. They are trying to understand:

• How is their company doing on balancing the trade-offs between growth, profitability, cycles and complexity?

• How are they performing against peers? What is their potential?

The goal of this deck is to give you insights on how we can help.

Time for a Check-up?


Perform better than peer group

Improve year-over-year results

Align internally on metrics

Deliver against the business strategy

Demonstrate consistency in results

Use innovation in supply chain processes

Balance. Be leaders in managing trade-offs

Our Point of View: Definition of Supply Chain Excellence


We Are Studying How Well Companies Have Managed the Trade-offs in the Last Decade

The Supply Chain Effective Frontier

Managing Trade-offs


• Each industry has a different pattern of trade-offs of balancing growth, profitability, cycles and complexity.

• Companies that are supply chain leaders have very small movement at these intersections with a balanced portfolio of metrics.

• Leaders show year-over-year improvement against a supply chain strategy.

What Have We Learned?


Ratios Available


A Closer Look at Performance: How to Read the Slides


Ratios Used in This Analysis


One Company: Two Metrics

Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source

0 250 500 750 1,000 1,2500

3

6

9

12

15

2002 2012

The Dow Chemical Company

Revenue per Employee (K$)

Inv

en

tory

Tu

rns

Best Scenario

DOW999, 6.7Trace the line from

2002 point to 2012 point to follow the performance over time.

The diamond shows the company’s average over the period. Ex: The Dow Chemical Company (DOW) has an average of 461 K$ for revenue per employee and 4.0 for inventory turns.

Ideally, companies are increasing inventory turns and revenue per employee, moving towards the upper right corner of the graph over time.

Here, we plot inventory turns (y-axis) vs. revenue per employee (x-axis).

Average (Revenue per Employee, Inventory Turns)


Three Company Comparison

Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source

0 250 500 750 1,000 1,2500

3

6

9

12

15

2002 2012

2002 2012

2002

2012

Ashland Inc. E. I. du Pont de Nemours and Co.The Dow Chemical Company

Revenue per Employee (K$)

Inv

en

tory

Tu

rns

Best Scenario

DD461, 4.0

Average (Revenue per Employee, Inventory Turns)

DOW999, 6.7

ASH457, 10.5

Adding in two more companies allows comparison across the peer group.

Each company presents a unique pattern of how they have balanced the two metrics over the decade while striving towards the upper right corner.


Household Products Financial Benchmarking




An Example of Benchmarking in Household Products


Metrics Included for Comparison


Household Products: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)


Household Products: Inventory Turns vs. Revenue per Employee (2002-2012)


Household Products: Inventory Turns vs. Operating Margin (2000-2012)


Household Products: Comparison Summary


Household Products:Our Interpretation

• P&G has delivered more balanced results with better year-over-year performance than Unilever.

• While P&G is 21% larger in revenue than Unilever, the average productivity is 48% higher.

• Sector operating margin has decreased in the last three years.


Chemical Financial Benchmarking




An Example of Benchmarking for Two Chemical Companies


Chemical: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)


Chemical: Inventory Turns vs. Revenue per Employee (2002-2012)


Chemical: Inventory Turns vs. Operating Margin (2000-2012)


Chemical: Comparison Summary


Chemical: Our Interpretation

• Both companies struggled to maintain balance in the Great Recession. DuPont has been more resilient than Ashland.

• Ashland historically pushed more aggressive performance on supply chain cycles, but was not able to maintain these performance levels.


Pharmaceutical Financial Benchmarking




An Example of Benchmarking for Two Pharmaceutical Companies


Pharmaceutical: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)


Pharmaceutical: Inventory Turns vs. Revenue per Employee: (2002-2012)


Pharmaceutical: Inventory Turns vs. Operating Margin (2000-2012)


Pharmaceutical:Comparison Summary


Pharmaceutical: Our Interpretation

• Bristol-Myers Squibb has the most balanced performance of supply chain metrics in the pharmaceutical industry.

• Pharmaceutical company performance is less resilient than household products.


High-tech & ElectronicsFinancial Benchmarking




An Example of Benchmarking for Two High-tech Companies


High-tech: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)


High-tech: Inventory Turns vs. Revenue per Employee (2002-2012)


High-tech: Inventory Turns vs. Operating Margin (2000-2012)


High-tech:Comparison Summary


High-tech: Our Interpretation

• The last decade for high-tech companies have been rough and turbulent. This has been to a greater degree than other industries.

• Seagate has outperformed Western Digital in their ability to balance supply chain financial ratios in a tough market.


Apparel Financial Benchmarking




Note: Zara is a brand of Inditex

An Example of Benchmarking for Two Apparel Companies


Apparel: Cash-to-Cash vs. Inventory Turns 2001-2012


Apparel: Inventory Turns vs. Revenue per Employee (2003-2012)


Apparel: Inventory Turns vs. Operating Margin (2001-2012)


Apparel:Comparison Summary


Apparel:Our Interpretation

• Both companies have out-performed their peer group in operating margin and under-performed in growth.

• At 1/20th the size of the supply chain leader Inditex (the parent company of Zara), Lululemon has balanced supply chain ratios, showing year-over-year improvement.


Mass Merchandising Retail Financial Benchmarking




An Example of Benchmarking for Two Retail Companies


Retail: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)


Retail: Inventory Turns vs. Revenue per Employee (2003-2012)


Retail: Inventory Turns vs. Operating Margin (2000-2012)


Retail: Comparison Summary


Retail:Our Interpretation

• Wal-Mart demonstrates greater resiliency with better year-over-year performance in their sector.


Can We Help You?

We are working with many companies to help them benchmark their financial data to better understand corporate performance on the Supply Chain Effective Frontier. This is helpful to understand:

– Supply chain potential– Industry patterns– Progress against peer group– Overall performance

We would love to help you and your team.


Next Steps

Contact Regina Denman at Supply Chain Insights to talk about your individual project.

Regina can be reached at:

Email: [email protected]

Phone: 617-410-8571


For More on This and Other Topics:Join Us!

www.supplychaininsightsglobalsummit.com

It is not too late!

supply chain insights' financial benchmarking examples - 27 aug 2013

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