supply chain metrics that matter in a market-driven world

72
Supply Chain Insights LLC Copyright © 2015, Supply Chain Metrics That Matter in the Market-Driven World #SCIWEBINAR

Upload: lora-cecere

Post on 15-Aug-2015

118 views

Category:

Business


1 download

TRANSCRIPT

Page 1: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 1

Supply Chain Metrics That Matter in the Market-Driven

World

#SCIWEBINAR

Page 2: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 2

Our Goal is to Help the Average Joe

#SCIWEBINAR

Page 3: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 3

Four Years of Work

WileyDecember 2012

Wiley December 2014

Self-publishedSeptember 2014

Self-publishingSeptember 2015

#SCIWEBINAR

Page 4: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 4

• Metrics That Matter: Metrics that can be improved by the supply chain leader and have high correlation to market capitalization.

• Market-Driven: The ability to sense and respond from market-to-market (from the customer’s customer to the supplier’s supplier)

• NAICS Codes: US census classification(s) of industry groupings.• Orbit Chart: A comparison of year-over-year improvement between

two supply chain metrics.• Supply Chain Index: A methodology developed by Supply Chain

Insights in 2014 to measure supply chain improvement based on orbit chart measurements.

• Supply Chains to Admire: An objective, and independent analysis of supply chains that are outperforming in the Supply Chain Metrics That Matter and are driving supply chain improvement as measured by the Supply Chain Index.

Let’s Start with Definitions

#SCIWEBINAR

Page 5: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 5

Methodology Comparison

Gartner Top 25 Supply Chains to Admire

Focus Fortune 1000 Companies

Companies by Industry Irrespective of Size

Calculation

-25% ROA (3 Year Weighted Average)-15% Inventory Turns (2014)10% Growth (2013 versus 2014) -50 % Opinion

Performance Better than Peer Group for the Period of 2009-2014 on the Metrics That Matter

Improvement Greater than the Average of the Peer Group for 2009-2014

Experience 10th Year 2nd Year

#SCIWEBINAR

Page 6: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 6

Progress: All Industries

Industry Snapshots (2006-2013)

IndustryYear –over-

Year Revenue Growth

Operating Margin

Inventory Turns

Cash-to-Cash Cycle

Revenue per Employee

(K$)

SG&A Ratio

Retail Apparel Industry

18%39%

0.3927%

0505%

6826%

32518%

27%05%

Apparel Manufacturing Industry

14%82%

0.1232%

0568%

15008%

400355%

27%63%

Mass Retail Industry

09%50%

0.0620%

0606%

03148%

35048%

23%6%

Beverage Industry

09%61%

0.1916%

0204%

5346%

512 NC

24% 16%

Pharmaceutical Industry

08%47%

0.2329%

0316%

15547%

57232%

27%08%

Chemical Industry

08%45%

0.1010%

0604%

8723%

55723%

14%27%

Medical Device Industry

06%38%

0.1432%

0213%

20616%

35112%

34%04%

Grocery Retail Industry

06%31%

0.0337%

1701%

1050%

40554%

14%06%

Consumer Packaged Goods

05%25%

0.1473%

08482%

7217%

33314%

26% 09%

Food Industry

05%55%

0.1019%

07 17%

4004%

53455%

20% 18%

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2013Industry Average comprised of public companies (combined food & beverage industry: NAICS 3112% where % is any number from 0-9, 311320, 311520, 311821, 311941 & 312111), (chemical: NAICS 325188 & 325998), (consumer packaged goods: NAICS 3256% where % is any number from 0-9), (medical device industry: NAICS 339112), (pharmaceutical industry: NAICS 325412) reporting in One Source with 20123annual sales greater than $1billionNC=no change

#SCIWEBINAR

Page 7: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 7

9 out of 10 Supply Chains are Stuck

#SCIWEBINAR

Page 8: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 8

Descriptors Used by Leaders

#SCIWEBINAR

Page 9: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 9

Functional Organizational

#SCIWEBINAR

Page 10: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 10

Fallacy: Functional Excellence

#SCIWEBINAR

Page 11: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 11

Growing Demand Volatility

#SCIWEBINAR

Page 12: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 12

Why? The Long Tail of the Supply Chain: Growing Complexity

#SCIWEBINAR

Page 13: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 13

Ability to Get to Total Supply Chain Costs

#SCIWEBINAR

Page 14: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 14

A Project-based Focus

#SCIWEBINAR

Page 15: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 15

Which Metrics Matter?

#SCIWEBINAR

Page 16: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 16

What We Expected

#SCIWEBINAR

Page 17: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 17

A Supply Chain is a Complex System

with Complex Processes

with Increasing Complexity

What We Learned….

#SCIWEBINAR

Page 18: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 18

The Supply Chain Effective Frontier

#SCIWEBINAR

Page 19: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 19

Correlations to Market Capitalization

#SCIWEBINAR

Page 20: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 20

Orbit Chart: Wal-Mart(Inventory Turns and Operating Margin)

#SCIWEBINAR

Page 21: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 21

Orbit Chart: Apple (Inventory Turns and Operating Margin)

#SCIWEBINAR

Page 22: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 22

Orbit Charts: Dow Chemical Company

#SCIWEBINAR

Page 23: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 23

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% of score)• Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)

𝑺𝒖𝒑𝒑𝒍𝒚 𝑪𝒉𝒂𝒊𝒏 𝑰𝒏𝒅𝒆𝒙=𝟏𝟑𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑𝑺𝒕𝒓𝒆𝒏𝒈𝒕𝒉 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑𝑹𝒆𝒔𝒊𝒍𝒊𝒆𝒏𝒄𝒚 𝑭𝒂𝒄𝒕𝒐𝒓

#SCIWEBINAR

Page 24: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 24

Supply Chains to Admire Methodology

PerformanceBeats the industry

average for operating margin, inventory turns

and ROIC for 2006-2014 and 2009-2014

ImprovementRanks above peer group average on The Supply Chain

Index for 2006-2014 or 2009-2014

+

#SCIWEBINAR

Page 25: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 25

Annual Study: Supply Chains To Admire

Supply Chains to Admire 2015 to be Announced at the Supply Chain Insights Global Summit on September 9th and 10th

#SCIWEBINAR

Page 26: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 26

Consumer Products

#SCIWEBINAR

Page 27: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 27

Consumer Packaged Goods

#SCIWEBINAR

Company2006-2014

2009-2014

2011-2014

2006-2014

2009-2014

2011-2014

2006-2014

2009-2014

2011-2014

2006-2014

2009-2014

Church & Dwight Co. Inc. 0.17 0.18 0.19 12.4 13.0 13.3 11% 13% 13% 4 2

Colgate-Palmolive 0.21 0.22 0.22 12.8 12.7 12.7 32% 33% 31% 7 8

The Clorox Company 0.17 0.17 0.16 14.9 14.5 14.4 21% 21% 22% 5 6

Kimberly Clark 0.13 0.13 0.13 8.7 8.9 9.0 16% 16% 16% 9 4

Newell Rubbermaid 0.09 0.10 0.09 7.7 8.0 8.2 7% 8% 9% 3 9

Procter & Gamble Co. 0.19 0.19 0.18 11.6 11.6 12.0 12% 12% 12% 6 5

Reckitt Benckiser Group 0.23 0.24 0.24 14.2 13.5 12.8 28% 26% 24% 8 7

Tupperware Brands Corp. 0.12 0.14 0.14 8.2 8.4 8.6 17% 20% 20% 1 1

Unilever plc 0.14 0.14 0.15 10.7 11.0 11.1 17% 17% 19% 2 3

Average 0.15 0.16 0.16 10.6 10.7 10.7 16% 17% 17%

Performance and Improvement

Operating Margin Inventory Turns Return on Invested CapitalSupply Chain Index

Rankings

Page 28: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 28

-0.07 -0.02 0.03 0.08 0.13 0.189%

14%

19%

Procter & Gamble

Return on Invested Capital (ROIC)

Re

ve

nu

e G

row

th

2000

2014

2001

2002

20032004

2005

2006

2007

2008

2009

2010

2011

20122013

P&G: Growth and ROIC

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

Best Scenario

PG0.06, 14%

Trace the line from 2000 point to 2014 point to follow the performance over time.

The diamond shows the company’s average over the period. Ex: The Procter & Gamble Co. (PG) has an average of .06 for ROIC and 14% for revenue growth.

Ideally, companies are increasing growth and Return on Invested Capital (ROIC) moving towards the upper right corner of the graph over time.

Here, we Growth (y-axis) vs. ROIC (x-axis).

Average (Return on Invested Capital, Revenue Growth)

#SCIWEBINAR

Page 29: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 29

0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.2110.00

11.00

12.00

13.00

Procter & Gamble

Operating Margin

Inv

en

tory

Tu

rns

2000

2014

2001 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

P&G: Inventory Turns and Operating Margins

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

Best Scenario

PG0.18, 11.75

Trace the line from 2000 point to 2014 point to follow the performance over time.

The diamond shows the company’s average over the period. Ex: The Procter & Gamble Co. (PG) has an average of .18 for operating margin and 11.75 for inventory turns.

Ideally, companies are increasing inventory turns and operating margins moving towards the upper right corner of the graph over time.

Here, we plot inventory turns (y-axis) vs. operating margins(x-axis).

Average (Operating Margin, Inventory Turns)

#SCIWEBINAR

Page 30: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 30

0.17 0.18 0.19 0.20 0.21 0.22 0.23 0.24 0.2510.00

11.00

12.00

13.00

14.00

15.00

Colgate-PalmoliveOperating Margin

Inv

en

tory

Tu

rns

2000 2014

2001

2002

2003

20042005

2006

20072008

20092010

2011

2012

2013

Colgate: Operating Margins and Inventory Turns

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

Best Scenario

CL0.21, 13.03

Trace the line from 2000 point to 2014 point to follow performance over time.

The diamond shows the company’s average over the period. Ex: The Colgate-Palmolive Co. (CL) has an average of .21 for operating margin and 13.03 for inventory turns.

Ideally, companies are increasing inventory turns and operating margin, moving towards the upper right corner of the graph over time.

Here, we plot inventory turns (y-axis) vs. operating margin (x-axis).

Average (Operating Margin, Inventory Turns)

#SCIWEBINAR

Page 31: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 31

0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.197.50

8.00

8.50

9.00

9.50

10.00

10.50

11.00

Kimberly ClarkOperating Margin

Inv

en

tory

Tu

rns

2000

2014

2001

2002

2003

2004

2005

2006

2007

2008

2009

20102011

2012

2013

Biggest Loser: Kimberly-Clark

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

Best Scenario

KMB0.15, 9.01

Trace the line from 2000 point to 2014 point to follow the performance over time.

The diamond shows the company’s average over the period. Ex: The Kimberly Clark Co. (KMB) has an average of .15 for operating margin and 9.01 for inventory turns.

Ideally, companies are increasing inventory turns and operating margin moving towards the upper right corner of the graph over time.

Average (Operating Margin, Inventory Turns)

Here, we plot inventory turns (y-axis) vs. operating margin (x-axis).

#SCIWEBINAR

Page 32: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 32

0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.184.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

Unilever

Operating Margin

Inv

en

tory

Tu

rns

2000

2014

20012002

20032004

2005

20062007 200820092010

20112012

2013

Unilever: Impressive Gains

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

Best Scenario

UN0.13, 8.66

Trace the line from 2000 point to 2014 point to follow the performance over time.

The diamond shows the company’s average over the period. Ex: The Unilever Co. (UN) has an average of .13 for operating margin and 8.66 for inventory turns. Ideally, companies are increasing

inventory turns and operating margin moving towards the upper right corner of the graph over time.

Here, we plot inventory turns (y-axis) vs. operating margin(x-axis).

Average (Operating Margin, Inventory Turns)

#SCIWEBINAR

Page 33: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 33

0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.219.00

10.00

11.00

12.00

13.00

Procter & Gamble UnileverOperating Margin

Inv

en

tory

Tu

rns

2014

2006

2014 2006

Procter & Gamble and UnileverInventory Turns vs. Operating Margin

(2006 – 2014)

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

Best Scenario

UN0.14, 10.74

Average (Operating Margin, Inventory Turns)

PG0.19, 11.59

#SCIWEBINAR

Page 34: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 34

0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.21 0.22 0.239.50

10.50

11.50

12.50

13.50

Colgate Palmolive UnileverOperating Margin

Inv

en

tory

Tu

rns

2014

2006

2014

2006

Colgate and UnileverInventory Turns vs. Operating Margin

(2006 – 2014)

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

Best Scenario

UN0.14, 10.74

Average (Operating Margin, Inventory Turns)

CL0.21, 12.77

#SCIWEBINAR

Page 35: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 35

Procter & Gamble and ColgateInventory Turns vs. Operating Margin

(2006 – 2014)

#SCIWEBINAR

Page 36: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 36

Clorox and Church& Dwight Rising Stars

#SCIWEBINAR

Page 37: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 37

Beauty

#SCIWEBINAR

Company2006-2014

2009-2014

2011-2014

2006-2014

2009-2014

2011-2014

2006-2014

2009-2014

2011-2014

2006-2014 2009-2014

Avon Products 0.08 0.07 0.05 9.92 9.73 9.65 10% 5% -1% 4 6

Estee Lauder 0.12 0.12 0.14 9.09 9.36 9.58 18% 19% 22% 1 3

Inter Parfums 0.15 0.17 0.20 4.45 4.38 4.41 10% 11% 13% 3 2

KAO Brands 0.09 0.09 0.09 10.35 10.18 9.98 8% 8% 9% 6 5

L'Oreal 0.16 0.15 0.16 11.10 10.92 10.77 14% 15% 16% 2 1

Elizabeth Arden 0.04 0.03 0.04 3.75 3.98 4.30 2% 1% 0% 5 4

Revlon 0.11 0.14 0.13 10.01 11.23 11.66 9% 25% 6% 6 7

Performance and Improvement

Operating Margin Inventory Turns Return on Invested CapitalSupply Chain Index

Rankings

Page 38: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 38

Estee Lauder and L’Oreal

#SCIWEBINAR

Page 39: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 39

Colgate Estee Lauder

Clorox

L’Oreal

2015 Supply Chains to Admire Additions

#SCIWEBINAR

Page 40: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 40

Food & BeverageWebinar

August 4, 2015

#SCIWEBINAR

Page 41: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 41

Beverage

Company 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014

Anheuser-Busch 0.31 0.34 0.36 14.57 15.52 15.94 8% 8% 10% 6 1Coca-Cola 0.24 0.23 0.22 14.80 14.63 15.02 18% 16% 13% 1 2Diageo 0.28 0.27 0.28 2.92 2.85 2.80 14% 13% 14% 2 3Molson Coors 0.17 0.21 0.21 19.56 18.30 17.20 6% 6% 5% 6 4SABMiller 0.19 0.20 0.22 16.61 14.94 15.20 8% 8% 8% 5 5Heineken 0.14 0.14 0.15 13.06 12.99 12.79 8% 7% 8% 6 6PepsiCo 0.16 0.15 0.14 18.64 18.61 18.88 20% 16% 13% 4 7Monster Beverage 0.26 0.28 0.27 10.76 10.95 11.39 22% 14% 0% 3 8Average 0.22 0.23 0.23 13.87 13.6 13.65 13% 11% 9%

Performance and Improvement

Operating Margin Inventory TurnsSupply Chain

Index RankingsReturn on Invested Capital

#SCIWEBINAR

Page 42: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 42

0.08 0.11 0.14 0.17 0.20 0.23 0.26 0.29 0.32 0.35 0.38 0.41 0.44 0.4710.00

12.00

14.00

16.00

18.00

20.00

22.00

Anheuser-Busch Inbev SABMiller

Operating Margin

Inv

en

tory

Tu

rns

2014

2006

2014

2006

Inventory Turns vs. Operating Margin(2006 – 2014)

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts

Best Scenario

SBMRF0.18, 17.14

Average (Operating Margin, Inventory Turns)

BUD0.31, 14.57

#SCIWEBINAR

Page 43: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 43

Coca-Cola and PepsiCo

#SCIWEBINAR

Page 44: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 44

Food Products

Operating Margin Inventory Turns Return on Invested Capital

Company 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014 2011-2014 2006-20142009-2014The J.M. Smucker Company 0.14 0.15 0.16 6.93 6.59 6.14 7% 7% 7% 4 1Hershey Co. 0.16 0.17 0.18 9.60 10.36 10.47 19% 22% 24% 1 2Mead Johnson Nutrition Co. 0.24 0.23 0.22 7.67 8.49 8.26 2% 4% 4% 3 3Mondelez 0.10 0.10 0.10 8.85 8.35 8.21 6% 6% 6% 9 4Conagra Foods Inc. 0.08 0.09 0.08 6.68 7.20 7.38 8% 7% 6% 8 5Nestle SA 0.14 0.14 0.14 11.13 10.65 10.13 17% 18% 13% 7 6General Mills, Inc. 0.17 0.17 0.17 11.00 10.98 11.04 11% 12% 12% 2 7Maple Leaf Foods 0.14 0.13 0.12 12.68 12.07 11.47 14% 13% 11% 6 8Campbell Soup Co. 0.16 0.16 0.15 9.58 9.45 9.40 19% 18% 16% 5 9Danone SA 0.13 0.13 0.12 18.81 18.56 18.42 6% 2% 1% 10 10Kellogg Company 0.10 0.20 0.22 16.61 14.94 15.20 8% 8% 8% 11 11Average 0.14 0.15 0.15 10.87 10.69 10.56 11% 11% 10%

Performance and ImprovementSupply Chain

Index Rankings

#SCIWEBINAR

Page 45: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 45

0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.21 0.22 0.23 0.24 0.259.00

10.00

11.00

12.00

General MillsOperating Margin

Inv

en

tory

Tu

rns

2000

2014

20012002

2003

2004

2005

20062007

2008

20092010

2011

2012

2013

General Mills: Visualizing the Patterns

Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2014 from YCharts

Best Scenario

GIS0.17, 10.77

Average (Revenue per Employee, Inventory Turns)

#SCIWEBINAR

Page 46: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 46

General Mills versus Kellogg: Inventory Turns vs. Operating Margin

(2006 – 2014)

0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.205.0

7.0

9.0

11.0

13.0

15.0

General Mills KelloggOperating Margin

K0.14, 12.68

2014

2006

20142006

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014

GIS0.17, 11.00

Average (Operating Margin, Inventory Turns)

Inve

nto

ry T

urn

s

Best Scenario

#SCIWEBINAR

Page 47: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 47

Hershey and Danone

#SCIWEBINAR

Page 48: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 48

General MillsInBev

2015 Supply Chains to Admire Additions

#SCIWEBINAR

Page 49: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 49

Chemical

#SCIWEBINAR

Page 50: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 50

Results of Chemical Leaders

#SCIWEBINAR

Page 51: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 51

-0.02 -0.01 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.126.00

7.00

8.00

9.00

10.00

Dow ChemicalOperating Margin

Inv

en

tory

Tu

rns

2000

2014

2001

2002

2003

2004 2005

20062007

2008

2009

2010

2011

20122013

Dow Chemical

Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2014 from YCharts

Best Scenario

DOW0.06, 7.66

Trace the line from 2000 point to 2014 point to follow the performance over time.

The diamond shows the company’s average over the period. Ex: The Dow Chemical Co. (DOW) has an average of .06 for operating margin and 7.66 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 (Operating Margin, Inventory Turns)

#SCIWEBINAR

Page 52: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 52

0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.136.00

7.00

8.00

9.00

10.00

BASF Dow ChemicalOperating Margin

Inv

en

tory

Tu

rns

2014

2006

2014

2006

Dow Versus BASF(2006 – 2014)

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts

Best Scenario

DOW0.06, 7.73

Average (Operating Margin, Inventory Turns)

BASFY0.11, 8.01

#SCIWEBINAR

Page 53: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 53

0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.206.00

7.00

8.00

9.00

10.00

11.00

12.00

Dow Chemical Eastman ChemicalOperating Margin

Inv

en

tory

Tu

rns

2014

2006

2014

2006

Dow versus Eastman Chemical(2006 – 2014)

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts

Best Scenario

DOW0.06, 7.73

Average (Operating Margin, Inventory Turns)

EMN0.11, 9.20

#SCIWEBINAR

Page 54: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 54

Ecolab Making Progress

#SCIWEBINAR

Page 55: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 55

Eastman Chemical

2015 Supply Chains to Admire Additions

#SCIWEBINAR

Page 56: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 56

PharmaceuticalsWebinar

August 4, 2015

#SCIWEBINAR

Page 57: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 57

Pharmaceuticals

#SCIWEBINAR

Company 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014Abbott Laboratories 0.11 0.11 0.12 8.98 8.79 8.11 12% 11% 10% 3 6AstraZeneca plc 0.27 0.27 0.22 14.96 15.79 14.28 22% 19% 15% 9 8Bristol-Myers Squibb Co. 0.08 0.08 0.08 7.77 7.76 7.48 7% 6% 7% 4 4Eli Lilly and Company 0.20 0.23 0.21 8.24 8.42 8.40 16% 21% 18% 7 7Merck and Company 0.15 0.13 0.16 9.12 7.35 7.22 15% 13% 11% 8 2Novo Nordisk A/S 0.36 0.35 0.37 6.47 7.31 8.16 42% 51% 60% 5 4Novartis AG 0.21 0.21 0.20 8.09 8.32 8.44 13% 11% 11% 1 1Pfizer, Inc. 0.50 0.23 0.26 8.13 7.83 8.10 12% 0.10 12% 7 5Teva Pharmaceutical Industries Limited 0.16 0.16 0.14 4.23 4.13 4.00 7% 8% 7% 2 3Average 0.19 0.20 0.20 8.44 8.41 8.95 16% 18% 17%

Operating Margin Inventory Turns Return on Invested Capital Supply Chain Index Performance and Improvement

Page 58: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 58

0.21 0.22 0.23 0.24 0.25 0.26 0.27 0.28 0.299.00

10.00

11.00

12.00

13.00

14.00

Johnson & JohnsonOperating Margin

Inv

en

tory

Tu

rns

20002014

2001

2002

2003

20042005

20062007

2008 2009

2010

2011

20122013

Visualizing the Patterns

Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2014 from YCharts

Best Scenario

JNJ0.25,11.36

Trace the line from 2000 point to 2014 point to follow the performance over time.

The diamond shows the company’s average over the period. Ex: The Johnson & Johnson Co. (JNJ) has an average of .25 for operating margin and 11.36 for inventory turns.

Ideally, companies are increasing inventory turns and operating margin, moving towards the upper right corner of the graph over time.

Here, we plot inventory turns (y-axis) vs. operating margin (x-axis).

Average (Operating Margin, Inventory Turns)

#SCIWEBINAR

Page 59: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 59

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014

-0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.604.0

5.0

6.0

7.0

8.0

9.0

10.0

2006

Eli Lilly and Company Novo Nordisk

Operating Margin

2014 NVO0.31, 6.48

2014

2006

Best Scenario

LLY0.24, 8.30

Average (Operating Margin, Inventory Turns)

Inve

nto

ry T

urn

sNovo Nordisk Making Progress

#SCIWEBINAR

Page 60: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 60

0.17 0.18 0.19 0.20 0.21 0.22 0.23 0.24 0.25 0.26 0.27 0.28 0.297.00

8.00

9.00

10.00

11.00

12.00

13.00

Johnson & Johnson NovartisOperating Margin

Inv

en

tory

Tu

rns

2014

2006

20142006

Inventory Turns vs. Operating Margin(2006 – 2014)

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts

Best Scenario

JNJ0.25, 11.11

Average (Operating Margin, Inventory Turns)

NVS0.21, 8.30

#SCIWEBINAR

Page 61: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 61

0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.305.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

13.00

Johnson & Johnson PfizerOperating Margin

Inv

en

tory

Tu

rns

2014

2006

2014 2006

Inventory Turns vs. Operating Margin(2006 – 2014)

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts

Best Scenario

JNJ0.25, 11.11

Average (Operating Margin, Inventory Turns)

PFE0.21, 8.13

Page 62: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 62

Inventory Turns vs. Operating Margin(2006 – 2014)

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014

TEVA0.16, 4.28

Average (Operating Margin, Inventory Turns)

0.00 0.10 0.20 0.303.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2006

TEVA Pharmaceutical Industries Mylan N.V.

Operating Margin

2014

MYL0.16, 4.83

2014 2006

Best Scenario

Inve

nto

ry T

urn

s

#SCIWEBINAR#SCIWEBINAR

Page 63: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 63

The Journey

#SCIWEBINAR

Page 64: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 64

Metrics Maturity

#SCIWEBINAR

Page 65: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 65

• Which metrics matter?– Growth, operating margin, inventory turns, ROIC, customer

service (in the eyes of the customer)

• How do we get unstuck?– Focus cross-functionally on a balanced portfolio. Bonus

employees against the portfolio. – Augment with functional metrics focused on improving

RELIABILITY.

• What are the functional reliability metrics?– Examples include: Forecasting, first pass yield, OEE, on-time

delivery, orders shipped complete, hands-free orders, schedule attainment, safety metrics, employee turnover

Insights

#SCIWEBINAR

Page 66: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 66

• Continuity of leadership• Supply chain talent development• Focus on a multi-year supply chain strategy• Clear governance to guide cross-functional decision-making• Strength in horizontal processes• Excellence in supply chain planning, network design and inventory

management

What Drives Top Performance?

#SCIWEBINAR

Page 67: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 67

Clorox Colgate

Eastman Chemical Estee Lauder

General Mills Inbev

L’Oreal

Congratulations!2015 Supply Chains to Admire Winners

#SCIWEBINAR

Page 68: Supply Chain Metrics That Matter in a Market-Driven World

Questions?

#SCIWEBINAR

Page 69: Supply Chain Metrics That Matter in a Market-Driven World

#SCIWEBINAR

Page 70: Supply Chain Metrics That Matter in a Market-Driven World

#SCIWEBINAR

Page 71: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 71

Founder: Lora Cecere

• Founder of Supply Chain Insights

• “LinkedIn Influencer”

• Guest blog for Forbes

• Author of 3 books: Bricks Matter (2012), Shaman’s Journal (2014) and Supply Chain Metrics That Matter (December 2014)

• 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 (8,000 pageviews/month)• Forbes: http://www.forbes.com/search/?q=lora+cecere• Twitter: lcecere (6200 followers)• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (46,000 followers)

#SCIWEBINAR

Page 72: Supply Chain Metrics That Matter in a Market-Driven World

Supply Chain Insights LLC Copyright © 2015, p. 72

Definition: Metric Equations

Source: Supply Chain Insights LLC, Corporate Annual Reports (2000-2014)

Metric EquationsCash-to-Cash Cycles = (Avg. Inventory/COGS + Avg. Accounts Receivable/Sales - Avg. Accounts Payable/Purchases)*91.5

Days of Inventory = (Average Inventory/COGS)*91.5

Days of Payables = (Average Accounts Payables/Purchases)*91.5

Days of Receivables = (Average Accounts Receivable/Sales)*91.5

Inventory Turns = (Cost of Sales/Average Inventory)

Operating Margin = (Operating Income/Revenue)

Return on Invested Capital = (Net Income/Invested Capital)

Return on Net Assets = (Trailing 12 Month Net Income/Total Assets from the most recent quarter)

Revenue Growth = (Quarterly Revenuei/Quarterly Revenuei-4 -1)

Revenue per Employees = (Revenue/Average Annual Employee)

#SCIWEBINAR