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  • 1. Supply Chain Index Part III Technology & Apparel June 27, 2013 #sciwebinar
  • 2. Supply Chain Insights LLC Copyright © 2013, p. 2 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 #sciwebinar
  • 3. Supply Chain Insights LLC Copyright © 2013, p. 3 Presenters Abby Mayer Research Associate Lora Cecere Founder and CEO #sciwebinar
  • 4. Supply Chain Insights LLC Copyright © 2013, p. 4 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: 16 Five-Star Reviews on Amazon #sciwebinar Available at http://www.amazon.com/Bricks-Matter-Building-Market-Driven- Differentiation/dp/1118218310/ref=sr_1_1?ie=UTF8&qid=1369245253&sr=8- 1&keywords=bricks+matter
  • 5. Supply Chain Insights LLC Copyright © 2013, p. 5 Publishing Two eBooks in 2013 on Supply Chain Metrics That Matter 2013 Publications #sciwebinar
  • 6. Supply Chain Insights LLC Copyright © 2013, p. 6 18 Reports in 2012 #sciwebinar
  • 7. Supply Chain Insights LLC Copyright © 2013, p. 7 Over 30 Reports Planned for 2013 #sciwebinar
  • 8. Supply Chain Insights LLC Copyright © 2013, p. 8 Supply Chain Metrics That Matter Readership Focus of Report Date of Publication Readership (as of 6-17-2013) Retail August 2012 1,726 Consumer Products September 2012 1,205 Chemical Industry November 2012 810 The Cash-to-Cash Cycle November 2012 1,971 Pharmaceutical Industry December 2012 1,695 Driving Reliability in Margins January 2013 1,365 Hospitals January 2013 991 Brick & Mortar Retail February 2013 629 Medical Device Manufacturers February 2013 760 Consumer Electronics April 2013 655 Apparel May 2013 557 Launch of the Supply Chain Index June 2013 422 Supply Chain Metrics That Matter Readership #sciwebinar
  • 9. Supply Chain Insights LLC Copyright © 2013, p. 9 • Report details year-long development of the Supply Chain Index • Presents Index performance of consumer and healthcare value chain (12 industries) • Available in the Supply Chain Insights Community: http://www.supplychaininsightscommunity.com/docs/DOC-1422 Launch of the Supply Chain Index Report #sciwebinar
  • 10. Supply Chain Insights LLC Copyright © 2013, p. 10  What Is Best in Class?  Understanding the Supply Chain as a Complex System  Which Companies Have Maximized Market Valuation Through Supply Chain Excellence?  Using the Insights Agenda #sciwebinar
  • 11. Supply Chain Insights LLC Copyright © 2013, p. 11  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. Leaders in managing trade-offs What Is Best in Class? #sciwebinar
  • 12. Supply Chain Insights LLC Copyright © 2013, p. 12  What Is Best in Class?  Understanding the Supply Chain as a Complex System  Which Companies Have Maximized Market Valuation Through Supply Chain Excellence?  Using the Insights Agenda #sciwebinar
  • 13. Supply Chain Insights LLC Copyright © 2013, p. 13 What Is A Supply Chain? A Supply Chain is a Complex System with Complex Processes with Increasing Complexity #sciwebinar
  • 14. Supply Chain Insights LLC Copyright © 2013, p. 14 The Supply Chain Effective Frontier: First Representation #sciwebinar
  • 15. Supply Chain Insights LLC Copyright © 2013, p. 15 Mining 20 Years of Financial Data Financial Metrics Growth Profitability Cycle Complexity Common Shares Cash Cash-to-Cash Cycle Altman Z Employee Growth Cash Change in Period Days of Finished Goods Capital Turnover Employees Cash on Hand Days of Inventory Current Ratio Market Capitalization Cash Ratio TTM Days of Payables Outstanding Quick Ratio R&D Margin Cash Ratio Quarter Days of Raw Materials Return on Assets R&D Ratio Cash Ratio Year Days of Sales Outstanding Return on Equity R&D to COGS Ratio Cost of Goods Sold Days of Work in Progress Return on Invested Capital Revenue EBITDA DPO/DSO Return on Net Assets Revenue Growth Free Cash Flow Ratio Finished Goods Inventory Revenue per Employee Revenue Growth TTM Gross Margin Inventory Working Capital Ratio Revenue TTM Gross Profit Inventory Turns SG&A Margin Net Profit Margin Receivables Turns SG&A Ratio Operating Cash Flow Ratio Raw Materials Inventory SG&A to COGS Ratio Operating Margin Work in Progress Inventory OPEX Ratio Pretax Margin #sciwebinar
  • 16. Supply Chain Insights LLC Copyright © 2013, p. 16 The Supply Chain Effective Frontier: Second Representation #sciwebinar
  • 17. Supply Chain Insights LLC Copyright © 2013, p. 17 • Supply Chain Index: A formulaic representation of supply chain financial ratios correlated to stock market capitalization valuation. • Supply Chain Effective Frontier: The balance of growth, profitability, cycle and complexity metrics to deliver the supply chain strategy. It may or may not maximize the company’s market valuation. • Supply Chain Excellence: The behavior of companies working to maximize value through the setting of targets for supply chain financial ratios and aligning metrics that matter (tied to value chain strategy). Definitions #sciwebinar
  • 18. Supply Chain Insights LLC Copyright © 2013, p. 18 A Look at History: Progress in Productivity #sciwebinar
  • 19. Supply Chain Insights LLC Copyright © 2013, p. 19 A Look at Retail #sciwebinar
  • 20. Supply Chain Insights LLC Copyright © 2013, p. 20 CPG: An Industry with Leaders #sciwebinar
  • 21. Supply Chain Insights LLC Copyright © 2013, p. 21 CPG: An Industry with Leaders #sciwebinar
  • 22. Supply Chain Insights LLC Copyright © 2013, p. 22 Apparel Manufacturing #sciwebinar
  • 23. Supply Chain Insights LLC Copyright © 2013, p. 23 Apparel Manufacturing #sciwebinar
  • 24. Supply Chain Insights LLC Copyright © 2013, p. 24 Apparel Manufacturing #sciwebinar
  • 25. Supply Chain Insights LLC Copyright © 2013, p. 25 Apparel Manufacturing #sciwebinar
  • 26. Supply Chain Insights LLC Copyright © 2013, p. 26 Apparel Stores #sciwebinar
  • 27. Supply Chain Insights LLC Copyright © 2013, p. 27 Apparel Stores #sciwebinar
  • 28. Supply Chain Insights LLC Copyright © 2013, p. 28 Communication Equipment #sciwebinar
  • 29. Supply Chain Insights LLC Copyright © 2013, p. 29 Communication Equipment #sciwebinar
  • 30. Supply Chain Insights LLC Copyright © 2013, p. 30  What Is Best in Class?  Understanding the Supply Chain as a Complex System  Which Companies Have Maximized Market Valuation Through Supply Chain Excellence?  Using the Insights Agenda #sciwebinar
  • 31. Supply Chain Insights LLC Copyright © 2013, p. 31 Introducing the Supply Chain Index A formulaic representation of how companies are trading off growth, profitability, cycle and complexity performance on selected supply chain financial metrics against market valuation. #sciwebinar
  • 32. Supply Chain Insights LLC Copyright © 2013, p. 32 1. To better understand which supply chain metrics matter to corporate balance sheet performance in public markets. We want to help leaders better align supply chain and financial performance. 2. To create an objective system for evaluating and ranking supply chains by industry peer group. 3. To connect financial performance with supply chain excellence as measured through quantitative surveys in an effort to better identify and define best practices across industry groups. Why Did We Do This? #sciwebinar
  • 33. Supply Chain Insights LLC Copyright © 2013, p. 33 • What it is: A way to understand the impact of companies’ supply chain (relative to peers within an industry sector) to market capitalization based a set of preselected supply chain ratio metrics. • What it is NOT: A way to evaluate overall company performance or compare the model results to actual market capitalization. What It Is. What It Is Not. #sciwebinar
  • 34. Supply Chain Insights LLC Copyright © 2013, p. 34 • July, August: release of results for additional industries and discussion in Supply Chain Insights Community • Monthly Webinars (August 29) • Monthly Reports (July 9, August 13) • September 11-12th: 1st annual Global Summit with speakers selected based on Index performance What to Look Forward to? #sciwebinar
  • 35. Supply Chain Insights LLC Copyright © 2013, p. 35 Selected 13 Core Supply Chain Ratios to Study Financial Metrics Growth Profitability Cycle Complexity Common Shares Cash Cash-to-Cash Cycle Altman Z Employee Growth Cash Change in Period Days of Finished Goods Capital Turnover Employees Cash on Hand Days of Inventory Current Ratio Market Capitalization Cash Ratio TTM Days of Payables Outstanding Quick Ratio R&D Margin Cash Ratio Quarter Days of Raw Materials Return on Assets R&D Ratio Cash Ratio Year Days of Sales Outstanding Return on Equity R&D to COGS Ratio Cost of Goods Sold Days of Work in Progress Return on Invested Capital Revenue EBITDA DPO/DSO Return on Net Assets Revenue Growth Free Cash Flow Ratio Finished Goods Inventory Revenue per Employee Revenue Growth TTM Gross Margin Inventory Working Capital Ratio Revenue TTM Gross Profit Inventory Turns SG&A Margin Net Profit Margin Receivables Turns SG&A Ratio Operating Cash Flow Ratio Raw Materials Inventory SG&A to COGS Ratio Operating Margin Work in Progress Inventory OPEX Ratio Pretax Margin Source: Supply Chain Insights LLC #sciwebinar Selected Ratios
  • 36. Supply Chain Insights LLC Copyright © 2013, p. 36 Summary of Progress #sciwebinar
  • 37. Supply Chain Insights LLC Copyright © 2013, p. 37 Luxury Goods Discount Stores Medical Distribution Medical Care Household & Personal Products Chemical Drug Manufacturers- Major Medical Instruments & Supplies Medical Devices Computer Systems Apparel Manufacturing Apparel Stores Packaged Food Drug Manufacturers- Specialty & Generic Communication Equipment 0 2 4 6 8 10 12 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Y-Intercept R^2 Value Source: Supply Chain Insights LLC #sciwebinar
  • 38. Supply Chain Insights LLC Copyright © 2013, p. 38 Apparel Manufacturing Equation Ln(market cap) = 6.15 + 30.65(OM) – 16.08(ROIC) + 7.01(WC) – 6.79(FCF) + 1.65(SGAC) – 0.45(CR) – 0.01(DSO) – 0.01(DOI) Apparel Manufacturing Equation #sciwebinar
  • 39. Supply Chain Insights LLC Copyright © 2013, p. 39 Apparel Manufacturing Ranking 2012 #sciwebinar
  • 40. Supply Chain Insights LLC Copyright © 2013, p. 40 Apparel Stores Equation Ln(market cap) = 6.98 + 11.49(OM) – 7.19(ROA) + 4.77(WC) + 3.96(RONA) – 2.87(FCF) – 0.44(CR) -0.04(DSO) – 0.04(DPODSO) + 0.02(DPO) – 0.01(DOI) Apparel Stores Equation #sciwebinar
  • 41. Supply Chain Insights LLC Copyright © 2013, p. 41 Apparel Stores Ranking 2012 #sciwebinar
  • 42. Supply Chain Insights LLC Copyright © 2013, p. 42 Computer Systems Equation Ln(market cap) = 6.59 – 4.54(ROA) + 3.82(OM) + 3.08(FCF) + 2.19(RONA) + 2.05(WC) + 1.67(DPODSO) – 0.45(CR) – 0.01(DOI) – 0.01(DPO) Computer Systems Equation #sciwebinar
  • 43. Supply Chain Insights LLC Copyright © 2013, p. 43 Computer Systems Ranking 2012 #sciwebinar
  • 44. Supply Chain Insights LLC Copyright © 2013, p. 44 Communication Equipment Equation Ln(market cap) = 9.32 – 0.38(CR) – 0.01(DOI) + 0.03(DPO) – 0.04(DSO) – 3.10(DPODSO) + 3.79(OM) – 1.04(SGAC) + 3.09(WC) Communication Equipment Equation #sciwebinar
  • 45. Supply Chain Insights LLC Copyright © 2013, p. 45 Communication Equipment Ranking 2012 #sciwebinar
  • 46. Supply Chain Insights LLC Copyright © 2013, p. 46  What Is Best in Class?  Understanding Supply Chain as a Complex System  Which Companies Have Maximized Market Valuation Through Supply Chain Excellence?  Using the Insights Agenda #sciwebinar
  • 47. Supply Chain Insights LLC Copyright © 2013, p. 47 Apparel Value Chain Apparel Stores Apparel Manufacturing Equations: Ln(market cap) = 6.98 + 11.49(OM) – 7.19(ROA) + 4.77(WC) + 3.96(RONA) – 2.87(FCF) – 0.44(CR) – 0.04(DSO) – .039(DPODSO) + 0.02(DPO) – 0.01(DOI) 6.15 + 30.65(OM) – 16.08(ROIC) + 7.01(WC) – 6.79(FCF) + 1.65(SGAC) – 0.45(CR) – 0.01(DSO) – 0.01(DOI) True collaboration only happens when there is a sustaining win-win value proposition. #sciwebinar
  • 48. Supply Chain Insights LLC Copyright © 2013, p. 48 Step 1: Located data sources Step 2: Selected core supply chain ratios from over 50 financial metrics Step 3: Identified meaningful metrics per industry using regression analysis among selected ratios Step 4: Constructed industry equation based on correlation of industry metrics to market capitalization values Step 5: Determined company rankings within industry by applying 2012 company results to industry equation Step 6: Analyze peer group companies over the last decade Step 7: Correlate Supply Chain Index findings to supply chain practices, technologies and organizational design Our Next Steps: Supply Chain Index Methodology #sciwebinar
  • 49. Supply Chain Insights LLC Copyright © 2013, p. 49 • What drives value in each industry is different. • Financial markets reward supply chain balance and alignment. • The supply chain is a complex system. Supply chain excellence must be carefully defined. • Relationships should be built upon cross-industry definitions of value to create win-win relationships. • There is no substitute for leadership. • Supply chain excellence matters. Summary #sciwebinar
  • 50. Supply Chain Insights LLC Copyright © 2013, p. 50 1. Join the Supply Chain Index Group in the Supply Chain Insights Community for Peer Review and Discussion: www.scicommunity.com 2. Gain Insights from Supply Chain Leaders at the Global Summit www.supplychaininsightsglobalsummit.com 3. Build the Next Generation of Supply Chain Research Using the Index 4. Leverage the Index to Connect Supply Chain Processes, People and Technology Decisions to Balance Sheet Results What You Can Do #sciwebinar
  • 51. Supply Chain Insights LLC Copyright © 2013, p. 51 Join Us! www.supplychaininsightsglobalsummit.com #sciwebinar
  • 52. Supply Chain Insights LLC Copyright © 2013, p. 52 PAST SUPPLY CHAIN INDEX WEBINARS: AVAILABLE ON DEMAND • From October 26, 2012: The Supply Chain Index, 20 Years in the Making: A Focus on Discrete Industries • From April 25, 2013: Launch of the Supply Chain Index • From May 23, 2013: Supply Chain Index Part II: How and Why? Webinars www.supplychaininsights.com/upcoming-webinars #sciwebinar UPCOMING WEBINARS • July 11th: Big Insights From Big Data Supply Chains • July 25th: What is the Role of the Store? And, Which Metrics Matter for Retail? • August 15, 2013: Supply Chain Talent : The Missing Link in the Supply Chain?
  • 53. Supply Chain Insights LLC Copyright © 2013, p. 53 Supply Chain Insights Community #sciwebinar
  • 54. Supply Chain Insights LLC Copyright © 2013, p. 54 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. #sciwebinar
  • 55. Supply Chain Insights LLC Copyright © 2013, p. 55 Where Do You Find Lora? Contact Information: lora.cecere@supplychaininsights.com Blog: www.supplychainshaman.com (4000 pageviews/month) Twitter: lcecere 3850 followers. Rated as a top rated supply chain social network user. LinkedIn: linkedin.com/pub/lora- cecere/0/196/573 (3750 in the network) #sciwebinar
  • 56. Supply Chain Insights LLC Copyright © 2013, p. 56 Where Do You Find Abby? #sciwebinar Contact Information: abby.mayer@supplychaininsights.com Blog: www.supplychainindex.com (2600 pageviews/month) Twitter: @indexgirl LinkedIn: www.linkedin.com/pub/abby- mayer/40/941/972