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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
Supply Chain Insights LLC Copyright © 2016, p. 3
We wanted to have an objective measurement of supply chain excellence for our research.
Why Do We Do This?
Supply Chain Insights LLC Copyright © 2016, p. 4
• 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?
Supply Chain Insights LLC Copyright © 2016, p. 5
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
Supply Chain Insights LLC Copyright © 2016, p. 6
What We Expected
Supply Chain Insights LLC Copyright © 2016, p. 7
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)
Supply Chain Insights LLC Copyright © 2016, p. 8
Colgate-Palmolive (2006-2015)
Supply Chain Insights LLC Copyright © 2016, p. 9
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
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts
Kellogg(2006-2015)
Supply Chain Insights LLC Copyright © 2016, p. 10
Dow Chemical Company and DuPont(2006-2015)
Supply Chain Insights LLC Copyright © 2016, p. 11
Honda and Toyota(2006-2014)
Supply Chain Insights LLC Copyright © 2016, p. 12
Bristol-Myers Squibb and Merck(2006-2015)
Supply Chain Insights LLC Copyright © 2016, p. 13
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?
Supply Chain Insights LLC Copyright © 2016, p. 14
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
Supply Chain Insights LLC Copyright © 2016, p. 15
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
Supply Chain Insights LLC Copyright © 2016, p. 16
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
Supply Chain Insights LLC Copyright © 2016, p. 17
Value
Price to Tangible Book = Market Price/Tangible Book Value
Supply Chain Insights LLC Copyright © 2016, p. 18
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
Supply Chain Insights LLC Copyright © 2016, p. 19
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
Supply Chain Insights LLC Copyright © 2016, p. 20
Inventory Turns = Cost of Goods Sold/Inventory
Cycle Measurement
Supply Chain Insights LLC Copyright © 2016, p. 21
Asset Utilization/Complexity
Supply Chain Insights LLC Copyright © 2016, p. 22
Determining Winners
PTBV
IMPROVEMENT VALUE PERFORMANCE
Supply Chain Insights LLC Copyright © 2016, p. 23
• 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
Supply Chain Insights LLC Copyright © 2016, p. 26
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
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts
Cummins Engine(2006-2015)
Supply Chain Insights LLC Copyright © 2016, p. 27
Cisco Systems(2006-2015)
Supply Chain Insights LLC Copyright © 2016, p. 28
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
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts
Whole Foods(2006-2015)
Supply Chain Insights LLC Copyright © 2016, p. 29
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
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts
Apple(2006-2015)
Supply Chain Insights LLC Copyright © 2016, p. 30
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
Supply Chain Insights LLC Copyright © 2016, p. 34
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