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Supply Chain Insights Webinar on Supply Chains to Admire presented on September 25th, 2014. Results of a two year study on supply chain excellence and the connection of financial ratios to balance sheet information.
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Supply Chains to AdmireSeptember 25, 2014
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Supply Chain Insights LLC Copyright © 2014, p. 2
Abby MayerResearch Associate
Lora CecereFounder and CEO
Dr. George RungerProfessor, CIDSE, ASU
The Research Team
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Supply Chain Insights LLC Copyright © 2014, p. 3
Today’s Supply Chain is Stuck
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Supply Chain Insights LLC Copyright © 2014, p. 4
Industry Overview
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Supply Chain Insights LLC Copyright © 2014, p. 5
Why? Demand Growing as a Risk
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Supply Chain Insights LLC Copyright © 2014, p. 6
Why? The Long Tail of the Supply Chain: Growing Complexity
Volume
Level of PredictabilityPredictability based on forecast accuracy vs Actual Order Profiles
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Supply Chain Insights LLC Copyright © 2014, p. 7
Demand Signal
Accurate Weekly
Forecasting is ...
Delay from Purchase to
Signal
Why? Data Latency and Distortion Across the Network
Red Represents Emerging Economies with Distributor Trade
Retailer DC
Easy
3-10 Days
7-20 Days
Manufacturer DC
Difficult
10-20 Days
20-45 Days
Suppliers
Almost Impossible
20-50 Days
45-80 Days
Store
Trivial
Instant
Variable
Store
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Supply Chain Insights LLC Copyright © 2014, p. 8
Fallacy #1: Functional Excellence
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Supply Chain Insights LLC Copyright © 2014, p. 9
Fallacy #2: A Project-based Focus
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Supply Chain Insights LLC Copyright © 2014, p. 10
Companies Get More Serious With A Recession: But Cannot Sustain It
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Supply Chain Insights LLC Copyright © 2014, p. 11
What We Expected
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Supply Chain Insights LLC Copyright © 2014, p. 12
A Supply Chain is a Complex System
with Complex Processes
with Increasing Complexity
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Supply Chain Insights LLC Copyright © 2014, p. 13
The Supply Chain Effective Frontier
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Supply Chain Insights LLC Copyright © 2014, p. 14
Orbit Chart: Wal-Mart(Inventory Turns and Operating Margin)
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Supply Chain Insights LLC Copyright © 2014, p. 15
Orbit Chart: Apple (Inventory Turns and Operating Margin)
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Supply Chain Insights LLC Copyright © 2014, p. 16
Orbit Charts: Dow Chemical Company
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Supply Chain Insights LLC Copyright © 2014, p. 17
Orbit Chart: Procter & Gamble(Inventory Turns and Operating Margin)
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Supply Chain Insights LLC Copyright © 2014, p. 18
Orbit Charts: Mattel, Inc.(Inventory Turns versus Operating Margin)
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Supply Chain Insights LLC Copyright © 2014, p. 19
Overall Network: Inventory Turns versus Operating Margin 2006-2012
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Supply Chain Insights LLC Copyright © 2014, p. 20
Preliminary Research: Correlations to Market Capitalization
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Supply Chain Insights LLC Copyright © 2014, p. 21
Deeper Study: Supply Chain Metrics That Matter Reports
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Supply Chain Insights LLC Copyright © 2014, p. 22
Overall Ranking per Company• Balance: Return on Invested Capital & Revenue Growth Vector Trajectory• Strength: Inventory Turns & Operating Margin Vector Trajectory• Resiliency: Inventory Turns & Operating Margin Mean Distance
The Supply Chain IndexA new way to measure relative supply chain performance by industry, based on the components of balance, strength and resiliency.
The Supply Chain Index (Improvement)
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Supply Chain Insights LLC Copyright © 2014, p. 23
Mining 20 Years of Financial Data
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Supply Chain Insights LLC Copyright © 2014, p. 24
Balance, Strength & Resiliency
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Supply Chain Insights LLC Copyright © 2014, p. 25
Calculating the Index
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Supply Chain Insights LLC Copyright © 2014, p. 26
Index Factors by Industry
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Supply Chain Insights LLC Copyright © 2014, p. 27
Chemical 2006-2013
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Supply Chain Insights LLC Copyright © 2014, p. 28
Chemical 2009-2013
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Supply Chain Insights LLC Copyright © 2014, p. 29
Our Answer
Performance Improvement
+
Beats the industry average for operating
margin, inventory turns and ROIC for
2006-2013
Ranks above peer group average on The Supply Chain
Index for 2006-2013 or 2009-2013
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Supply Chain Insights LLC Copyright © 2014, p. 30
• Companies were grouped by peer group (at least six in peer group)– Started with a database of all public companies (by definition this excludes
private companies)– Conglomerates were excluded– Recent M&A excluded
• Peer group averages for growth, operating margin, inventory turns and ROIC were calculated
• The first screen was defined by the test of “Were companies doing better than their peer group on this portfolio of metrics?”
• The second test was “Did the company do better than average within their peer group for either period on driving supply chain improvement as defined by the Supply Chain Index?”
Methodology
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Supply Chain Insights LLC Copyright © 2014, p. 31
Supply Chains To Admire
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Supply Chain Insights LLC Copyright © 2014, p. 32
Retail
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Supply Chain Insights LLC Copyright © 2014, p. 33
Consumer Goods
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Supply Chain Insights LLC Copyright © 2014, p. 34
Food
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Supply Chain Insights LLC Copyright © 2014, p. 35
Beverage
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Supply Chain Insights LLC Copyright © 2014, p. 36
Apparel
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Supply Chain Insights LLC Copyright © 2014, p. 37
Chemical
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Supply Chain Insights LLC Copyright © 2014, p. 38
Pharmaceutical
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Supply Chain Insights LLC Copyright © 2014, p. 39
Medical Device
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Supply Chain Insights LLC Copyright © 2014, p. 40
Paper and Packaging
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Supply Chain Insights LLC Copyright © 2014, p. 41
Semiconductor
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Supply Chain Insights LLC Copyright © 2014, p. 42
Automotive
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Supply Chain Insights LLC Copyright © 2014, p. 43
Consumer Electronics
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Supply Chain Insights LLC Copyright © 2014, p. 44
Automotive Suppliers
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Supply Chain Insights LLC Copyright © 2014, p. 45
Supply Chains To Admire
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Supply Chain Insights LLC Copyright © 2014, p. 46
• Leadership• Building of talent• Outside-in processes• Horizontal process focus• Active and intentional design• Supply chain planning
What Makes a Difference
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Supply Chain Insights LLC Copyright © 2014, p. 47
• A project-based focus• Vertical excellence without an end-to-end
focus• Unchecked complexity• Big bang projects• Pushing cost and waste backwards in the
value network
What Does Not Work
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Supply Chain Insights LLC Copyright © 2014, p. 48
Questions?
Supply Chain Insights LLC Copyright © 2014, p. 49
Countdown for Next Year’s Event
www.supplychaininsights.com
Global SummitSeptember 8th-10th, 2015
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Supply Chain Insights LLC Copyright © 2014, p. 50
About Lora Cecere
• Founder of Supply Chain Insights
• Invited to be a “LinkedIn Influencer”
• Invited to write a guest blog for Forbes
• Author of 2 books: Bricks Matter (2012) and Metrics That Matter (to publish Fall of 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 (6000 pageviews/month)• Forbes: http://www.forbes.com/search/?q=lora+cecere• Twitter: lcecere (4800 followers)• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (7000 in the network)
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