Supply Chain Insights Global Summit 2013 - Supply Chain Financial Benchmarking with Lora Cecere

Supply Chain Insights Global Summit #SCISummit September 2013, p.1TM

Lora CecereFounder and CEO

Supply Chain Insights

Supply Chain Financial Benchmarking

Answering the Question: What Is the Role of Supply Chain Effectiveness

in Driving Corporate Performance?

Our Point of View: Definition of Supply Chain Excellence?

• 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

Supply Chain Insights Global Summit #SCISummit September 2013, p.3TM September 2013, p.3TMSupply Chain Insights Global Summit #SCISummit

The Supply Chain Effective Frontier

Ratios Considered

Growth Profitability Cycle ComplexityR&D Margin Cash on Hand C2C Cycle Altman Z

R&D to COGS Ratio Free Cash Flow Ratio Days of Finished Goods Capital Turnover

SGA Margin Gross Margin Days of Inventory Current Ratio

SGA/COGS Net ProfitDays of Payables

OutstandingQuick Ratio

COGS as Percent of Net Sales

Operating Margin Days of Raw Materials Return on Assets

Pretax Margin (EBIT) Days of Sales Outstanding Return on Equity

YoY Sales Growth Days of Work in Progress Return on Invested Capital

Operating Margin DPO/DSO Return on Net Assets

Inventory Turns Revenue/Employee

Receivables Turns Cost of Sales

Supply Chain Insights Global Summit #SCISummit September 2013, p.5TMSupply Chain Insights Global Summit #SCISummit September 2013, p.5TM

Household Products Supply Chain

Financial Benchmarking

Answering the Question:What Is the Role of Supply Chain Effectiveness in

Driving Corporate Performance?

An Example of Benchmarking in Household Products

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

Our Interpretation:Household Products Summary

• P&G has delivered a more balanced results performance 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.

ChemicalSupply Chain

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

• Chemical companies are less resilient than household products.

• 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.

Our Interpretation:Chemical Summary

Pharmaceutical Supply Chain

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

Our Interpretation: Pharmaceutical Summary

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

• Pharmaceutical company performance is less resilient than chemical companies.

High-tech & Electronics Supply Chain

Financial BenchmarkingAnswering the Question:

What Is the Role of Supply Chain Effectiveness in Driving Corporate Performance?

An Example of Benchmarking for Two High-tech & Electronics Companies

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

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

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

High-tech & Electronics Comparison

Our Interpretation:High-tech & Electronics Summary

• 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 Retail Supply Chain

Note: Zara is a brand of Inditex

An Example of Benchmarking forTwo Apparel Retail Companies

Apparel Retail: Cash-to-Cash Versus Inventory Turns 2001-2012

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

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

Apparel Retail Comparison

Our Interpretation:Apparel Retail Summary

• Both companies have outperformed 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 Merchant Retail Supply Chain

Financial BenchmarkingAnswering the Question:

What Is the Role of Supply Chain Effectiveness in Driving Corporate Performance?

An Example of Benchmarking for Two Mass Merchant Retail Companies

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

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

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

Mass Merchant Retail Comparison

Our Interpretation:Mass Merchant Retail Summary

• Each industry has a different pattern.

• Industry leaders have very tight patterns showing year-over-year improvement on a balanced portfolio of metrics.

• Leaders improve the potential of the supply chain and make conscious trade-offs.

Supply Chain Insights Global Summit 2013 - Supply Chain Financial Benchmarking with Lora Cecere

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