Metrics That Matter Webinar -October 10, 2013

Metrics That MatterLora Cecere

WebinarOctober 2013

Supply Chain Insights is focused on delivering independent, actionable and objective

advice for supply chain leaders. A company dedicated to research,

turn to us when you want the latest insights on supply chain trends, technologies to know

and metrics that 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: 17 Five-Star Reviews on Amazon

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

September 2014 Publication

Current State

A Supply Chain

is a Complex System

with Complex Processes

with Increasing Complexity

The Supply Chain Effective Frontier

Which Metrics Matter?

A Look at the Last Decade

Progress in Manufacturing Productivity

Productivity in Retail

Industry Progress

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

In a way that is:

Resilient and predictable

Balanced across the set of metrics to maximize value

Showing year-over-year improvement against peer group

To Drive Corporate Performance

Mining 20 Years of Financial Data

Most Interesting Patterns

• Revenue per Employee versus Inventory Turns

• Operating Margin versus Inventory Turns

• Cash-to-Cash Cycle versus Inventory Turns

Progress in Inventory Turns and Operating Margin

Impact of A Recession

What Have We Learned?

• 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 with a balanced portfolio of metrics.

• It is about MUCH more than Return on Assets (ROA), growth and inventory.

0 250 500 750 1,000 1,2500

2002 2012

The Dow Chemical Company

Revenue per Employee (K$)

Visualizing the Patterns

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

Best Scenario

DOW999, 6.7

Trace 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 999 K$ for revenue per employee and 6.7 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)

Corporate Summary

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

Corporate Summary

Operating Margin vs. Revenue per Employee (2002-2012)

Corporate Summary

Operating Margin vs. Revenue per Employee (2002-2012)

Corporate Summary

Inventory Turns vs. Operating Margin (2000-2012)

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

Corporate Summary

Cash-to-Cash Cycle (2000-2012)

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

Inventory Turns vs. Operating Margin(2000-2012)

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

Case Study

Inventory Turns vs.

Operating Margin (2000-2012)

A formulaic representation of how companies are trading off growth, profitability, cycle and

complexity performance on selected supply chain financial

metrics against market valuation.

Mean Absolute Percent Error & Value

• Supply chain is a complex system with increasing complexity.

• Different industries have different patterns, but the cash-to-cash metrics have the highest correlation to market capitalization with some of the poorest performance.

Wrap-up

1. Finish the work on the Supply Chain Index

2. Place the rankings on balance, strength and resilience into the Supply Chain Insights Community for Shaman Circle members to vote on supply chain excellence

3. Final analysis of companies to be revealed at the 2014 Supply Chain Insights Global Summit

Next Steps

PAST WEBINARS: ON DEMAND

• From August 29, 2013: Supply Chain Index, Overview

• From August 15, 2013: Supply Chain Talent: The Missing Link

• From July 25, 2013: What is the Role of the Store

Webinars

www.supplychaininsights.com/upcoming-webinars

UPCOMING WEBINARS

• November 13, 2013: Shaman’s Circle

• November 14, 2013: Healthcare Value Chain

• December 12, 2013: Digital Manufacturing & 3D Printing

• January 23, 2014: Voice of the Supply Chain

Global Summit 2014 Registration is Now Open

Supply Chain Insights Global Summit 2014September 10-11, 2014

The Phoenician – Scottsdale, AZ USAwww.supplychaininsightsglobalsummit.com

Upcoming Corporate TrainingChicago, IL and Atlanta, GA

November 11-12, 2013Chicago, IL USA

January 16-17, 2014Atlanta, GA USA

www.supplychaininsights.com/training

Questions?

Who is Lora?

• Founder of Supply Chain Insights

• 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.

Where Do You Find Lora?

Contact Information: lora.cecere@supplychaininsights.com

Blog: www.supplychainshaman.com (5000 pageviews/month)

Twitter: lcecere 5200 followers.

LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (5200 in the network)

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