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?
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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
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The Supply Chain Effective Frontier
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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
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Household Products Supply Chain
Financial Benchmarking
Answering the Question:What Is the Role of Supply Chain Effectiveness in
Driving Corporate Performance?
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An Example of Benchmarking in Household Products
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Household Products: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
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Household Products: Inventory Turns vs. Revenue per Employee (2002-2012)
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Household Products: Inventory Turns vs. Operating Margin (2000-2012)
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Household Products Comparison
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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.
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ChemicalSupply Chain
Financial Benchmarking
Answering the Question:What Is the Role of Supply Chain Effectiveness in
Driving Corporate Performance?
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An Example of Benchmarking for Two Chemical Companies
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Chemical: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
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Chemical: Inventory Turns vs. Revenue per Employee (2002-2012)
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Chemical: Inventory Turns vs. Operating Margin (2000-2012)
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Chemical Comparison
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• 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
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Pharmaceutical Supply Chain
Financial Benchmarking
Answering the Question:What Is the Role of Supply Chain Effectiveness in
Driving Corporate Performance?
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An Example of Benchmarking for Two Pharmaceutical Companies
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Pharmaceutical: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
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Pharmaceutical:Inventory Turns vs. Revenue per Employee: (2002-2012)
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Pharmaceutical: Inventory Turns vs. Operating Margin (2000-2012)
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Pharmaceutical Comparison
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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.
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High-tech & Electronics Supply Chain
Financial BenchmarkingAnswering the Question:
What Is the Role of Supply Chain Effectiveness in Driving Corporate Performance?
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An Example of Benchmarking for Two High-tech & Electronics Companies
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High-tech & Electronics: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
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High-tech & Electronics: Inventory Turns vs. Revenue per Employee (2002-2012)
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High-tech & Electronics: Inventory Turns vs. Operating Margin (2000-2012)
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High-tech & Electronics Comparison
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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.
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Apparel Retail Supply Chain
Financial Benchmarking
Answering the Question:What Is the Role of Supply Chain Effectiveness in
Driving Corporate Performance?
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Note: Zara is a brand of Inditex
An Example of Benchmarking forTwo Apparel Retail Companies
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Apparel Retail: Cash-to-Cash Versus Inventory Turns 2001-2012
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Apparel Retail: Inventory Turns vs. Revenue per Employee (2003-2012)
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Apparel Retail: Inventory Turns vs. Operating Margin (2001-2012)
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Apparel Retail Comparison
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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.
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Mass Merchant Retail Supply Chain
Financial BenchmarkingAnswering the Question:
What Is the Role of Supply Chain Effectiveness in Driving Corporate Performance?
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An Example of Benchmarking for Two Mass Merchant Retail Companies
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Mass Merchant Retail: Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
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Mass Merchant Retail: Inventory Turns vs. Revenue per Employee (2003-2012)
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Mass Merchant Retail: Inventory Turns vs. Operating Margin (2000-2012)
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Mass Merchant Retail Comparison
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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.
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