Is Mobile the New Answer to Propel Growth?
A new battle wages to redesign the shopping experience. All retailers are turning to mobility, and the use of digital technologies, to capture market share. While mobile strategies offer great opportunities for the extended supply chain, from the shopper through supplier’s supplier, the current focus is on demand generation. It is early. The efforts are in test mode, but excitement abounds.
What Drives Inventory Effectiveness in a Market-Driven World? Lora Cecere
Survey Details: The research for this report was conducted from February 12 - October 8, 2015. Surveys were conducted among Manufacturers, Retailers, and Wholesalers/Distributors/Co-operatives with $250M+ in revenue and who use (and are familiar with) inventory optimization software (n=64). Respondents were evenly split between those using basic (ERP or ERP+APS) and advanced (software in addition to ERP/APS) software. All surveys were conducted by Supply Chain Insights.
Objective: To understand the impact of inventory optimization software on supply chain excellence. NOTE: inventory optimization software was defined as "any form of ERP (Enterprise Resource Planning), APS (Advanced Planned Software), or sophisticated inventory planning tools."
Highlight: Companies who use advanced software are more likely to be satisfied with their software, to be effective at making inventory decisions and to drive a return on investment for their software.
Supply Chain Metrics That Matter-A Focus on the Automotive Industry-8 OCT 2013Lora Cecere
The automotive industry is a low margin and concentrated industry with few players. It is a complex business.
Unlike other industries with low margins, the automotive industry has not yet developed supply chain resiliency to weather fluctuations in demand. Over the last decade plus—while other low margin industries have refined processes and technologies to improve profitability and manage cycles and complexity—the automotive industry remains stuck in backwards thinking and old paradigms. This is especially true of the North American automotive companies.
Supply Chain Metrics That Matter: A Focus on RetailLora Cecere
■Survey Details: The basis of this report is publically available information from corporate annual reports from the period of 2000-2012. In this report, we use this data to understand the past trends and future projections of retail industry supply chains. To drive insights, we augment this financial data with information that we have obtained through interactions with retail clients and recent insights from our quantitative research studies.
■Objective: To use financial balance sheet data coupled with recent research to better understand the state of retail supply chains.
■Hypothesis: With the shifts in the channel, the role of the store has changed, and there is a need to redefine value in the value chain.
Supply Chain Metrics That Matter: Third Party Logistics Providers-10 DEC 2013Lora Cecere
Executive Overview
Third party logistics (3PL) providers fill a critical role in today’s global supply chains. With the rise in e-commerce, the growth of global markets, and the reshaping of the retail market, dependency on 3PLs is rising. It is an industry with fierce competition. Despite the promises of technology-driven differentiation, as of yet, no 3PL has successfully been able to differentiate and create significant brand loyalty. This is the market opportunity moving forward.
Today, companies on average send 30% of goods through third party logistics (3PL) providers. The 3PL market is now $148 billion in size with single-digit annual growth. Hit hard by the Great Recession, the industry is still in recovery. The 3PL industry has matured over the last 50 years; but it operates at a low margin, struggling to balance what we term The Effective Frontier.
The ongoing inability to drive resiliency on The Effective Frontier by managing tradeoffs of growth, profitability, cycle and complexity should be a concern for those working in, or working with, the 3PL industry. Comparable results from ten industries are shown in Table 1, ranked by average operating margin. 3PLs not only occupy the second lowest ranking, they have also seen the most significant drop in operating margin as a percentage since 2000. In this report, we look more closely at the current state of the industry.
Supply Chain Metrics That Matter - A Focus on Chemical Companies - 28 May 2015Lora Cecere
The basis of this report is publicly available information from corporate annual reports from the period of 2006-2014 for publicly-owned companies in the chemical industry. The methodology to understand supply chain performance and improvement is based on three years of data mining of supply chain financial ratios. In Table 1, we share the supply chain ratios we analyzed to understand the trends in the Supply Chain Metrics That Matter report series
Table 1. Financial Ratios Considered in the Development of the Supply Chain Index
While there are other measurements which we believe are important in the determination of supply chain excellence—forecast accuracy, case fill rate, carbon footprint, and inventory write-offs—we cannot find a reliable and consistent source of data for these metrics that covers all industries and the years studied. While these metrics are valuable, we find that the industry data sources are spotty and largely inaccurate due to the self-reporting of data. Without a consistent data source across the industries, we cannot include these factors even though we believe that they are important.
The Supply Chain Index methodology was built on the belief that the supply chain is a complex system with increasing complexity. We believe it is the supply chain leader’s role to build and manage supply chain performance to drive year-over-year improvements which are balanced, strong and resilient. We find that most companies throw the system out of balance and are able to drive progress only on a single metric, not a metrics portfolio. To illustrate this point, in the development of the Supply Chains to Admire Report, we studied public manufacturing and retail companies for the period of 2006-2013, and we found that only 21 of the companies in the study group performed better than their peer group on the portfolio of metrics of operating margin, inventory turns and Return on Invested Capital (ROIC).
In our review of the data in this report with supply chain leaders, we found that most companies are not aware of how they rate relative to their peer group, and many have driven a singular metric as opposed to a balanced portfolio.
In the management of the supply chain, there are many metrics. In fact, we find that most supply chain leaders measure too many, which drives confusion. Our first goal in the research was to determine which metrics should be tracked in the portfolio analysis. To understand the relationship between supply chain performance and market capitalization, we calculated the correlation of seven years of financial ratios (based on quarterly reporting) to market capitalization (the number of outstanding shares multiplied by the share price) on a quarterly basis. The results of this study on the correlation to market capitalization are presented in Table 2. Our goal was to select a portfolio of metrics that could be meaningful to all industries.
Supply Chain Metrics That Matter - A Focus on Contract Manufacturing - 13 AUG...Lora Cecere
Executive Overview
Growth is stalled. Margin pressure is high. Shorter life cycles, as well as increasing compliance and regulatory pressure, provide additional challenges to the contract manufacturing industry. Finally, excess capacity is a significant problem. Is this a recipe for opportunity or a disaster for the brand owner using outsourced manufacturing partners? We think the latter.
Over the last decade, brand owners from consumer electronics to medical devices have grown more dependent on outsourced contract manufacturing. In fact, the contract manufacturing industry grew up out of a desire to mitigate risk and improve costs for brand owners. However, the market has shifted significantly in recent years and the contract manufacturing industry is struggling. As a result, they pose a risk to brand owners. In this report, we illustrate how the lack of resiliency affecting contract manufacturers represents a serious risk to brand owners and offer advice on what can be done to mitigate the problem.
Over the last decade, many contract manufacturers have attempted to differentiate services and refine their business model to gain competitive advantage. However, in looking at the financial results, we find that most companies are struggling. As a result, it is time to redesign the business model and relationships of contract manufacturers and brand owners. While companies can outsource the role of manufacturing, they cannot outsource the responsibility of managing the extended supplier network. This is one of the many challenges the industry now faces.
Supply Chain Metrics That Matter: Driving Reliability in Margins - 6 JAN 2013Lora Cecere
Supply chain management practices are thirty years old. Over the last decade, companies have invested in technology projects to improve financial outcomes (Technology investments over this period have averaged 1.7% of revenue). The ultimate goal was to reduce costs and improve inventory management. While many supply chain leaders believe that they delivered on these metrics, we find a less persuasive story. Through analysis of publically available balance sheet and income statement data, we find that 75% of companies in process industries lost ground on margins and only 5% of companies improved their positions on the number of days of inventory. The goal of this report is to answer the question “Why?” (For more on inventory and the Cash-to-Cash Cycle, see Supply Chain Metrics That Matter: The Cash-to-Cash Cycle.)
To begin our analysis, we wanted to understand the general trends. In table 1, we share the differences in average values for the companies profiled in this report by industry for the period of 2000-2011. In general, we see a decline in operating margins (OM). There is an increase in selling, general & administrative Costs (SG&A) and revenue per employee performance. The industries have mixed results on return on assets (ROA).
Supply Chain Metrics That Matter: A Focus on the Retail Industry - 16 FEB 2017Lora Cecere
Report Details: This report is based on analysis of financial balance sheet and income statement data within the Retail industry, for the period of 2006-2015. The data is collected from YCharts.
Objective: To use financial balance sheet and income statement data to better understand the state of Grocery Retailers' and Mass Merchants' supply chains and to determine which companies’ supply chains did the best on the delivery of a portfolio of metrics over the last decade.
Highlight: During the Great Recession retailers faced strong declines in spending. It was a critical time, but for many it was an opportunity to emerge stronger. Those who redefined their stores for the dollar-conscious customer or built new and innovative formats while driving supply chain innovation, drove strong balance sheet results. Others learned that doing traditional retail more efficiently was not enough.
What Drives Inventory Effectiveness in a Market-Driven World? Lora Cecere
Survey Details: The research for this report was conducted from February 12 - October 8, 2015. Surveys were conducted among Manufacturers, Retailers, and Wholesalers/Distributors/Co-operatives with $250M+ in revenue and who use (and are familiar with) inventory optimization software (n=64). Respondents were evenly split between those using basic (ERP or ERP+APS) and advanced (software in addition to ERP/APS) software. All surveys were conducted by Supply Chain Insights.
Objective: To understand the impact of inventory optimization software on supply chain excellence. NOTE: inventory optimization software was defined as "any form of ERP (Enterprise Resource Planning), APS (Advanced Planned Software), or sophisticated inventory planning tools."
Highlight: Companies who use advanced software are more likely to be satisfied with their software, to be effective at making inventory decisions and to drive a return on investment for their software.
Supply Chain Metrics That Matter-A Focus on the Automotive Industry-8 OCT 2013Lora Cecere
The automotive industry is a low margin and concentrated industry with few players. It is a complex business.
Unlike other industries with low margins, the automotive industry has not yet developed supply chain resiliency to weather fluctuations in demand. Over the last decade plus—while other low margin industries have refined processes and technologies to improve profitability and manage cycles and complexity—the automotive industry remains stuck in backwards thinking and old paradigms. This is especially true of the North American automotive companies.
Supply Chain Metrics That Matter: A Focus on RetailLora Cecere
■Survey Details: The basis of this report is publically available information from corporate annual reports from the period of 2000-2012. In this report, we use this data to understand the past trends and future projections of retail industry supply chains. To drive insights, we augment this financial data with information that we have obtained through interactions with retail clients and recent insights from our quantitative research studies.
■Objective: To use financial balance sheet data coupled with recent research to better understand the state of retail supply chains.
■Hypothesis: With the shifts in the channel, the role of the store has changed, and there is a need to redefine value in the value chain.
Supply Chain Metrics That Matter: Third Party Logistics Providers-10 DEC 2013Lora Cecere
Executive Overview
Third party logistics (3PL) providers fill a critical role in today’s global supply chains. With the rise in e-commerce, the growth of global markets, and the reshaping of the retail market, dependency on 3PLs is rising. It is an industry with fierce competition. Despite the promises of technology-driven differentiation, as of yet, no 3PL has successfully been able to differentiate and create significant brand loyalty. This is the market opportunity moving forward.
Today, companies on average send 30% of goods through third party logistics (3PL) providers. The 3PL market is now $148 billion in size with single-digit annual growth. Hit hard by the Great Recession, the industry is still in recovery. The 3PL industry has matured over the last 50 years; but it operates at a low margin, struggling to balance what we term The Effective Frontier.
The ongoing inability to drive resiliency on The Effective Frontier by managing tradeoffs of growth, profitability, cycle and complexity should be a concern for those working in, or working with, the 3PL industry. Comparable results from ten industries are shown in Table 1, ranked by average operating margin. 3PLs not only occupy the second lowest ranking, they have also seen the most significant drop in operating margin as a percentage since 2000. In this report, we look more closely at the current state of the industry.
Supply Chain Metrics That Matter - A Focus on Chemical Companies - 28 May 2015Lora Cecere
The basis of this report is publicly available information from corporate annual reports from the period of 2006-2014 for publicly-owned companies in the chemical industry. The methodology to understand supply chain performance and improvement is based on three years of data mining of supply chain financial ratios. In Table 1, we share the supply chain ratios we analyzed to understand the trends in the Supply Chain Metrics That Matter report series
Table 1. Financial Ratios Considered in the Development of the Supply Chain Index
While there are other measurements which we believe are important in the determination of supply chain excellence—forecast accuracy, case fill rate, carbon footprint, and inventory write-offs—we cannot find a reliable and consistent source of data for these metrics that covers all industries and the years studied. While these metrics are valuable, we find that the industry data sources are spotty and largely inaccurate due to the self-reporting of data. Without a consistent data source across the industries, we cannot include these factors even though we believe that they are important.
The Supply Chain Index methodology was built on the belief that the supply chain is a complex system with increasing complexity. We believe it is the supply chain leader’s role to build and manage supply chain performance to drive year-over-year improvements which are balanced, strong and resilient. We find that most companies throw the system out of balance and are able to drive progress only on a single metric, not a metrics portfolio. To illustrate this point, in the development of the Supply Chains to Admire Report, we studied public manufacturing and retail companies for the period of 2006-2013, and we found that only 21 of the companies in the study group performed better than their peer group on the portfolio of metrics of operating margin, inventory turns and Return on Invested Capital (ROIC).
In our review of the data in this report with supply chain leaders, we found that most companies are not aware of how they rate relative to their peer group, and many have driven a singular metric as opposed to a balanced portfolio.
In the management of the supply chain, there are many metrics. In fact, we find that most supply chain leaders measure too many, which drives confusion. Our first goal in the research was to determine which metrics should be tracked in the portfolio analysis. To understand the relationship between supply chain performance and market capitalization, we calculated the correlation of seven years of financial ratios (based on quarterly reporting) to market capitalization (the number of outstanding shares multiplied by the share price) on a quarterly basis. The results of this study on the correlation to market capitalization are presented in Table 2. Our goal was to select a portfolio of metrics that could be meaningful to all industries.
Supply Chain Metrics That Matter - A Focus on Contract Manufacturing - 13 AUG...Lora Cecere
Executive Overview
Growth is stalled. Margin pressure is high. Shorter life cycles, as well as increasing compliance and regulatory pressure, provide additional challenges to the contract manufacturing industry. Finally, excess capacity is a significant problem. Is this a recipe for opportunity or a disaster for the brand owner using outsourced manufacturing partners? We think the latter.
Over the last decade, brand owners from consumer electronics to medical devices have grown more dependent on outsourced contract manufacturing. In fact, the contract manufacturing industry grew up out of a desire to mitigate risk and improve costs for brand owners. However, the market has shifted significantly in recent years and the contract manufacturing industry is struggling. As a result, they pose a risk to brand owners. In this report, we illustrate how the lack of resiliency affecting contract manufacturers represents a serious risk to brand owners and offer advice on what can be done to mitigate the problem.
Over the last decade, many contract manufacturers have attempted to differentiate services and refine their business model to gain competitive advantage. However, in looking at the financial results, we find that most companies are struggling. As a result, it is time to redesign the business model and relationships of contract manufacturers and brand owners. While companies can outsource the role of manufacturing, they cannot outsource the responsibility of managing the extended supplier network. This is one of the many challenges the industry now faces.
Supply Chain Metrics That Matter: Driving Reliability in Margins - 6 JAN 2013Lora Cecere
Supply chain management practices are thirty years old. Over the last decade, companies have invested in technology projects to improve financial outcomes (Technology investments over this period have averaged 1.7% of revenue). The ultimate goal was to reduce costs and improve inventory management. While many supply chain leaders believe that they delivered on these metrics, we find a less persuasive story. Through analysis of publically available balance sheet and income statement data, we find that 75% of companies in process industries lost ground on margins and only 5% of companies improved their positions on the number of days of inventory. The goal of this report is to answer the question “Why?” (For more on inventory and the Cash-to-Cash Cycle, see Supply Chain Metrics That Matter: The Cash-to-Cash Cycle.)
To begin our analysis, we wanted to understand the general trends. In table 1, we share the differences in average values for the companies profiled in this report by industry for the period of 2000-2011. In general, we see a decline in operating margins (OM). There is an increase in selling, general & administrative Costs (SG&A) and revenue per employee performance. The industries have mixed results on return on assets (ROA).
Supply Chain Metrics That Matter: A Focus on the Retail Industry - 16 FEB 2017Lora Cecere
Report Details: This report is based on analysis of financial balance sheet and income statement data within the Retail industry, for the period of 2006-2015. The data is collected from YCharts.
Objective: To use financial balance sheet and income statement data to better understand the state of Grocery Retailers' and Mass Merchants' supply chains and to determine which companies’ supply chains did the best on the delivery of a portfolio of metrics over the last decade.
Highlight: During the Great Recession retailers faced strong declines in spending. It was a critical time, but for many it was an opportunity to emerge stronger. Those who redefined their stores for the dollar-conscious customer or built new and innovative formats while driving supply chain innovation, drove strong balance sheet results. Others learned that doing traditional retail more efficiently was not enough.
Supply Chain Metrics That Matter: The Cash-to-Cash Cycle 30 NOV 2012Lora Cecere
When it comes to supply chain, no two industries are the same; but, improving Cash-to-Cash cycle (C2C) metrics matters across all industries. With over a decade of investment in technology and process improvements, we can now assess progress. In this report, we examine the financial data in three time frames:
2000-2003 Dawn of Business-to-Business (B2B) commerce and Global Connectivity
2004-2007 Pre-recession
2008-2011 Post-recession
The health of the supply chain can be quickly assessed through the analysis of the C2C metric. It is a composite metric that combines decisions on receivables, payables and inventory management. Overall, while supply chain leaders have focused on the reduction of C2C cycles, little progress has been made. For most, despite a decade of investments in channel connectivity and supply chain optimization, there is limited progress on receivables and inventory. Instead, we find that the most mature companies have turned to increasing Days of Payables in an effort to reduce C2C. This can be detrimental to the overall health of the supply chain.
Over the last fifteen years, the only industry that has shown dramatic and continuous improvement in reducing C2C cycles is high-tech and electronics. While there are slight improvements in consumer packaged goods (CPG) and chemical supply chains, the results in pharmaceutical and automotive are much worse. While many supply chain professionals may claim that the changes in the supply chain—offshoring of manufacturing, cost of capital, increasing product complexity and decreasing product life cycle—are reasons that there was not more progress, the interesting fact is that the industry that had the greatest obstacles made the most progress. The reason? We believe it mattered more in the high-tech industry. With short life cycles and declining margins over the course of the product life cycle, it is just too expensive for a high-tech company to neglect inventory management. As a result, the high-tech and electronics industry has developed better and more comprehensive planning processes overall.
In this report, we share insights on the trends in five industries: automotive, high-tech and electronics, chemical, CPG and pharmaceutical. The data supports three facts:
The Supply Chain Index - Improving Strength, Balance and Resiliency - 13 MAY ...Lora Cecere
Supply Chain Metrics That Matter is a series of monthly reports published by Supply Chain Insights LLC. These reports are a deep focus on a specific industry. This was preparatory work to understand the patterns of supply chain ratios for supply chain leaders.
As shown in Figure 1, the Supply Chain Insights team analyzed 15 different industries with deep dives on their progress on the cash-to-cash cycle.
Figure 1. Supply Chain Metrics That Matter Reports Published in 2012-2014
Here we take a next step, and launch the Supply Chain Index. The Supply Chain Index is a mathematical formula that a supply chain leader can use to measure their relative performance to an industry peer group. It was built in cooperation with the Operations Research team at Arizona State University (ASU).
This methodology was designed to measure the balance, strength and resiliency of a company’s supply chain from an objective financial perspective. It is a measurement of supply chain improvement during the period of 2006-2012. In April 2014, we published an in-depth look at the resiliency metric: Supply Chain Metrics That Matter: Improving Supply Chain Resiliency. In this report, adding strength and balance, we examine the calculation of these three values in tandem.
The supply chain is a complex system with increasing complexity. Here we analyze how companies made trade-offs over a period of several years in balancing growth, profitability, cycles, and complexity. Many of the trade-offs were unconscious. As complexity rose, it became more difficult for companies to manage the intersection of growth and inventory turns. For leaders, as you will see in this report, the trade-offs were conscious.
Within the world of Supply Chain Management (SCM), each industry is unique. We believe that it is dangerous to list all industries in a spreadsheet and declare a supply chain leader. Instead, we believe that change needs to be measured over a number of years with a focus on an industry peer group. Here we define, and demonstrate, how the Supply Chain Index can be used to measure supply chain performance. To help the reader, we share insights on three industries—chemical, consumer packaged goods and pharmaceutical—using the methodology.
Supply Chain Metrics That Matter: A Focus on Consumer ElectronicsLora Cecere
Executive Overview
Supply chain management is thirty years old. The year 2012 marked the end of the third decade of the evolution of supply chain practices. In the journey for supply chain excellence, each industry has progressed at their own rate based on their own set of opportunities and limitations including market drivers, industry factors and product cycles. No industry has had greater obstacles to overcome than consumer electronics, and no industry has made more progress.
Consumer electronics has led the pack in managing complexity, improving growth and margin performance, reducing inventory, and accelerating productivity in the face of complexity (revenue per employee). Was it an accident? No, we don’t think so. Instead, we see it as an advanced case study of supply chain excellence in action.
Ask any executive of the consumer electronics industry if supply chain matters and you will get a resounding “YES!” While other industries are more likely to define supply chain efforts as a departmental effort focused within silos—procurement, transportation/distribution or manufacturing—the consumer electronics sector is more likely to model the supply chain as a value network focused on end-to-end improvement. They are also more likely to value the planning function and excel at it, as well as understand how to integrate new product launch efforts with value chain design.
For most companies, the consumer electronics industry offers a lot of lessons and insights for supply chain leaders. It is for this reason that we share this report.
Setting the Stage
Over the course of the last decade, the consumer electronics industry has outperformed most other industries in four significant areas: growth, profitability, cycle management, and complexity. Balancing these four categories of metrics is what we term the Supply Chain Effective Frontier, further profiled in our recent report: Conquering the Supply Chain Effective Frontier.
Supply Chain Metrics That Matter: A Focus on Hospitals - 6 JAN 2013Lora Cecere
Executive Overview
Growth is slowing. Profitability is tougher. Compliance mandates are growing. How do companies balance the goals for value-based outcomes for health and wellness with costs? In this environment, supply chain matters more than ever.
In this report, we share insights on healthcare supply chains. Grown out of the offices of procurement, the supply chain function of the hospital is still in its infancy; but based on increasing business requirements and complexity, it is only beginning to show its true potential.
Growth: Futures are Uncertain.
The hospital administrator is facing many challenges. Growth is slowing and pressures are growing. The question is how to balance patient outcomes with better cost management. How does a hospital move forward with an uncertain future? And, what will be the impact of healthcare reform?
In table 1, we list top line growth over the past decade for four companies operating within the hospital industry. While there are ups and downs, the general trend is downward.
Supply Chain Metrics That Matter: A Closer Look at the Cash-To-Cash Cycle (20...Lora Cecere
Executive Overview
When it comes to metrics that matter, the cash-to-cash cycle is one of the top metrics cited by supply chain professionals. It is among the best financial metrics to provide a comprehensive picture of a company’s supply chain and the management of working capital.
The supply chain is a complex system. Successful management requires both orchestration and balance. To drive supply chain excellence, companies are required to balance four competing priorities: growth, profitability, cycle management and complexity. Several popular metrics, including the cash-to-cash cycle, for a variety of industries are presented in table 1.
Conquering the Supply Chain Effective FrontierLora Cecere
Conquering the Supply Chain Effective Frontier - A Handbook for the Value Chain Leader to Manage Trade-offs in Defining Supply Chain Excellence
Supply chain practices are nearing their third decade of maturation. The term supply chain excellence is bandied about by leaders, consultants and technology providers, but there is no alignment on what it means.
Conventional systems of measurement for supply chain excellence are problematic. In this report, we share insights gained during interviews with 75 supply chain pioneers. Based on their feedback we created a new framework, that we define here as the Supply Chain Effective Frontier, for supply chain leaders to use to determine supply chain excellence. This methodology is based on publicly available financial balance sheet data grouped into four sets of supply chain ratios: growth, profitability, cycle, and complexity.
We believe that supply chain excellence is best defined as the alignment of the supply chain team to deliver results to meet and exceed the requirements of the business strategy. This requires a clear vision and cross-functional coordination and alignment over a multi-year road map. It needs to be holistic. A supply chain is a complex system with increasing business complexity. The analysis needs to facilitate a clear understanding of trade-offs embedded in day-to-day decision making. It is this clarity that we find missing in many teams that we work with, and it is for this reason we wrote this report.
Supply Chain Metrics That Matter: A Focus on Food and Beverage Companies - 2015Lora Cecere
Executive Summary: Current State of Food and Beverage Industries
Over the last decade, consumer confidence in the food and beverage industry supply chains has waned. Shopper distrust is high; and as a result, growth in many categories like carbonated beverages and cereals declined.
While these two industries have similarities, there are different underlying dynamics in business drivers. The potential of the food supply chain is different than that of beverage. As a result, in this report, we share information on the two industries separately.
For both industries, the last decade was a tough market. Despite attempts to stimulate demand through trade programs, new product launch, and product expansion into new continents, growth declined. In 2003-2006, growth in the food industry was 7% while in 2011-2014, year-over growth was 4%. In parallel, in 2003-2006, growth in the beverage industry was 22%; yet, in 2011-2014, it was 7%. As growth declined, supply chain maturity mattered more than ever. Most companies were not equal to the challenge.
Traditional marketing tactics are not as effective in these two industries as they were a decade ago. To try to stimulate growth, 33% new items were introduced into the retail chain from these two industries. This rise in complexity reduced the effectiveness of the supply chain at a time of declining volumes. In Table 4, we profile the results in the food industry, while in Table 5 we portray the trends in the beverage industry.
In both industries, operating margin declined despite improved productivity in revenue per employee. In parallel, despite multiple investments in technologies, inventory turns declined in the food industry. Companies were unable to balance metrics in times of declining volumes. The reason? Rising commodity costs and the slow development of supply chain skills.
Companies that did the best in driving improvement in key metrics in times of declining volumes have seven characteristics: core competency in network design; strong capabilities in transportation management; a focus on inventory management; use of more advanced forms of supply chain planning; balance and understanding of the trade-offs of volume, price and mix; use of channel data; and continuity of leadership.
Table 4. Progress on the Effective Frontier for Food Companies
Table 5. Progress on the Effective Frontier for Beverage Companies
When we compiled the Supply Chains to Admire Report in August 2014, two food and beverage companies—General Mills and ABInBev—made the list. To make the list, a company had to deliver performance (posting above-average results for the period of 2009-2013 when compared to their peer group on a portfolio of metrics including operating margin, inventory turns and Return on Invested Capital). They also had to drive supply chain improvement (based on the Supply Chain Index as defined in the Research Methodology section) faster than their peer group. We believe b
Inventory Optimization in a Market-Driven World - 27 APR 2015Lora Cecere
Executive Overview
Growth is slowing and the complexity in today’s supply chain is unprecedented. As a result, within a company, inventory management is often a hot issue. Shrinking inventory spins off a one-time, and highly desirable, cash windfall. In most industries there is a connection between market capitalization and inventory management. This drives pressure to reduce inventory and question existing practices. However, while companies are quick to ask questions, they often make the wrong judgements about inventory strategies. The goal of this report is to improve this dialogue.
Most companies have invested in many inventory optimization solutions over the last decade. Within the company, there is mounting frustration about the failure of these projects to actualize and maintain targets. What most companies fail to realize is that the technology strategy needs to be worked in concert with supply chain strategy. Often we find while companies improve inventory levels through the deployment of inventory technologies, operational decisions to widen the item master or lengthen the supply chain will undermine the project targets.
There are many drivers of inventory, and the management of inventory levels requires discipline and a cross-functional focus. It is a story of people, process, and technology. Let’s start with people. Today, fewer than 5% of companies have an end-to-end focus (as defined from the customer’s customer to the supplier’s supplier), and most companies lack alignment and balance. The largest gaps between are between operational and commercial groups. (Cecere L. , Three Techniques to Improve Organizational Alignment, 2013). As companies close the organizational gap, progress is made on inventory. Likewise, when it comes to balance, 68% of organizations surveyed lack balance in Sales and Operations Planning between the commercial groups (the “S”) and the operational groups (the “OP), When balance is achieved, the organization rates itself as more agile, and aligned, and there is an 11% improvement in inventory turns (Cecere L. , Research in Review, 2014).
Supply chain processes are now over 30-years old. While there is a generalized belief that maturity of supply chain processes has improved inventory turns, as can be seen in Figure 2, the improvements in cash-to-cash have primarily been driven by lengthening payables. In industries like beverage, pharmaceuticals, consumer packaged goods and medical device, the industry averages have gone backwards (inventory turns have decreased not increased). Only the food and apparel industries have posted double-digit improvements in inventory turns. Why? Food and apparel are largely regional supply chains which are maturing. They lag consumer packaged goods in supply chain maturity. While consumer packaged goods companies are more mature, they are more global. The rise of the global multinational has greatly impacted inventory requirements.
Supply Chain Metrics That Matter: A Focus on Brick & Mortar Retail-18 FEB 2013Lora Cecere
The bricks and mortar retailer is being squeezed. Growth is slowing and margin is under pressure. With the rise of e-commerce, the role of the store is being redefined. It is about service and the customer experience. As a result, it is time to rethink the metrics that matter and focus outside-in on the shopper experience.
In this report, we share insights on the current state of bricks and mortar retail and offer our suggestions.
Brick & mortar retailers have weathered an intense decade with the persistent rise of e-commerce. The shopper has changed and recovery from the Great Recession is ongoing, but slow. Our previous Supply Chain Metrics That Matter: A Focus on Retail report focused on the broader industry trends affecting five different divisions of retailers and the challenges of multi-channel retail. This report narrows the focus to three segments of brick & mortar retailers struggling to adapt to the new world.
A retailer is not a retailer. We believe that retailers should be compared by business model. We do not believe that one can throw all retailers together and identify the “most improved” or “best” supply chain. There are too many variables and circumstances affecting the retail landscape to make valid comparisons. In our research, we find that small and well-defined peer groups offer the best way forward for understanding both segment and industry specific trends.
The industry segments analyzed in this report are grocery, mass and specialty. Grocery retailers are involved in the sale of perishable and non-perishable food stuffs. Mass retailers are larger companies focused on providing a comprehensive retail experience to their customers. Finally, specialty retailers are dedicated to specific customers, activities and goods. The companies in this analysis represent both American and global retailers.
Our grocery peer group consists of Carrefour, Delhaize Group, Safeway and The Kroger Co. The mass retailer peer group includes Costco, Metro, Target and Walmart. The choice of specialty retailers was by far the most difficult because there are so many dedicated stores in this category. For this publication, our peer group includes Bed Bath & Beyond, Dick’s Sporting Goods, Foot Locker and Ross Stores. Additional information about all of these companies is presented in the Appendix.
Supply Chain Metrics That Matter: A Focus on the Consumer Products Industry 2...Lora Cecere
Supply Chain Metrics That Matter will be a series of reports published intermittently throughout the year by Supply Chain Insights LLC. Within the world of Supply Chain Management (SCM), each industry is unique. To help companies understand differences, each report is a deep dive on a different industry.
While we find it useful to understand the evolution of supply chain excellence by comparing industries, we feel that the true stories of supply chain excellence can only be really understood by comparing what happened within a period by peer group. The goal of this series is to share these insights. These reports are intended for you to read, share and use to improve your supply chain decisions.
The average Consumer Products (CP) company is stronger in the execution of supply chain management practices than their retail or pharmaceutical counterparts, but as companies will see in later reports, CP progress has not been equal to that of High-tech and Electronics manufacturers.
CP companies (including both consumer packaged goods (CPG) and food & beverage companies) tend to be marketing-driven. They are struggling to understand the differences between new market-driven, and their well-oiled marketing-driven, supply chains. With a strong legacy in building persuasive marketing programs, the companies have leveraged a global “one-size-fits-all” push-based supply chain strategy. These traditional supply chain management (SCM) definitions have produced supply chains that respond, but don’t sense. They are efficient, but not adaptive. They tend to be long (greater than twenty weeks) with waste pockets between nodes.
The landscape of the industry has been greatly affected by mergers and acquisitions. In the past decade, 57 companies were absorbed into ten. The industry is still digesting this change. While most companies have 150 unique systems, the manufacturers in this industry will often have five times the industry average. Getting to the right data to improve decision making continues to be a challenge.
The Supply Chain Index: Evaluating the Healthcare Value NetworkLora Cecere
Executive Overview
Supply chain performance matters. It can make or break corporate performance. Now 30-years old, the practice of supply chain management is still evolving. While companies speak of best practices, and boast about improvements in operating margin, inventory levels and asset management in conference after conference, we do not see it in our analysis of balance sheet information.
By their nature, supply chain leaders are competitive. They want to drive performance improvements and increase corporate value. Their goal is to outpace competitors. The rate of business change is intense and the personal stakes are high. Day after day, leaders must answer questions like, “Which path should I to take? What are the best technologies to use? What is an acceptable rate of performance? How am I doing against my peer group? And, what can I learn from others that I can use to improve the performance of my own operation?” Until the development of the Supply Chain Index by Supply Chain Insights, there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology, there now is.
While it is easy to say the term supply chain excellence, it is difficult to define. Many people think that they know the definition, but there is no agreed-upon standard. The lack of a clear definition, and a methodology to gauge improvement, makes progress hard to quantify and track. The Supply Chain Index is designed to help. It is an objective measurement of supply chain improvement. It enables the comparison of companies’ progress within a peer group for a given time period. The Index is based upon financial performance of companies on four metrics integral to supply chain operations: inventory turns, operating margin, Return on Invested Capital and year-over-year revenue growth. There were three goals.
1. Quantify Levels of Supply Chain Improvement. The Index is a composite metric based on the calculation of balance, strength and resiliency factors for a given time period. In the analysis, there is an underlying assumption that the companies that can sustain the best improvement in these three areas are driving the highest rates of supply chain improvement. The input metrics of inventory turns, operating margin, ROIC and year-over-year revenue growth were selected in part due to their high correlation to market capitalization.
2. Bridge the Gap between Finance and Supply Chain. Our second goal is to bridge the gap between the supply chain organization and the financial team. While the financial team is often backwards-looking at transactions, the supply chain team is forward-looking based on flows. There is often a temptation to focus on a single financial ratio in isolation, like inventory turns, not realizing that the supply chain is a complex system with tightly interrelated relationships amongst metrics based on supply chain potential.
Executive Summary
No two supply chains are alike, but supply chain leaders across all industries face common challenges. The supply chain is becoming more strategic—an engine of growth and the driver of new business models—to drive new opportunities. For supply chain leaders, it is no longer just a discussion of cost and inventory management.
However, frustration abounds. Companies struggle to improve balance sheet results in the face of rising complexity and slowing growth. While all companies have improved revenue per employee, this efficiency improvement has not translated into operating margin improvements; and while cash-to-cash cycles have improved, it is not due to improvements in inventory positions. Most companies feel stuck, as if they are being held hostage by traditional supply chain practices.
Table 1. Industry Progress Across the Last Decade
In this report, we highlight the current state of supply chains—the supply chain organization, technologies, and process evolution—to enable supply chain leaders to take the next step in their strategy development. This report reflects the current state of supply chains, and is designed as a foundational document for supply chain leaders to build their 2015 strategies.
Understanding the Supply Chain Organization
Improving corporate performance is the driver of today’s supply chain organization. Increasingly, supply chain leaders are adopting new business models—ecommerce, digital business, and growth in new economies—to drive the top line.
Today, for the leader, it is about more than cost management. Instead, it is about the management of a portfolio of metrics to drive corporate performance. The supply chain is a complex system, with increasing complexity, and an increasing importance of driving balance sheet results. It is not easy. Improvement is hard work, and many are stuck. When we analyze financial balance sheet performance for the period of 2000-2013, we find that nine out of ten companies are stuck at the intersection of the two critical metrics of operating margin and inventory turns. Cash flow has been improved through elongating payables, and most companies are struggling to improve inventory in the face of complexity. This is an area of frustration and disappointment for business leaders who want to leverage supply chain technologies and processes to deliver both growth opportunities along with cash and cost savings to the organization.
The reason why? Today, the supply chain organization is traditional, tactical and cautious (see Figure 2). Most leaders would like to have a supply chain that is more agile and proactive. This is not possible with the current state of technologies and processes. To make the shift, companies need to reinvent the supply chain. The processes need to be redesigned outside-in with open sharing through business networks. These new forms of business networks, with many-to-many data models supported by canonical infrastructure, a
Imagine the Supply Chain of the Future - 21 OCT 2014Lora Cecere
Executive Overview
When we ask companies to imagine the supply chain of the future, they have to start with what they have today. Most companies today are stuck, and find it hard to conceive the supply chain of the future. To free their thinking they have to learn from the past, to unlearn what they believe is a world of best practices, and establish methodologies to imagine the supply chain of the future. Changing traditional paradigms is a starting point.
For most, the journey is not easy. As shown in Figure 1, the terms most commonly used to describe the supply chain today are traditional, tactical, and cautious. Today there is significant room for improvement, with only one in three supply chain leaders feeling that what they have now is working well. Most of the supply chain processes are inside-out which is a barrier to sensing demand and building demand-driven or market-driven processes.
The incentive to change lies in balance sheet performance. When we analyze financial balance sheet performance for the period of 2006-2013, we find that nine out of ten companies are stuck at the intersection of the two critical metrics of operating margin and inventory turns. Publicly-held companies are unable to power improvements in both metrics for more than two consecutive years. For most, improvement has become an OR condition with companies making improvements in one of the two metrics, but not both together. This is an area of frustration and disappointment for business leaders that want to leverage supply chain technologies and processes to deliver both cash and cost savings to the organization. As growth slows, this shift is more important. In this report, we share highlights on the research gathered for our recent conference, Supply Chain Insights Global Summit.
Supply Chain Metrics That Matter: A Focus on the High-Tech Industry - 2015Lora Cecere
Executive Summary: Current State of the High-Tech Industry
Globalization. Commodity inflation. Margin squeeze. Economic uncertainty. Warranty issues. Shortening product life cycles. Recalls. Labor arbitrage and outsourcing. The list of market pressures could go on and on, but one thing is clear: the high-tech industry was redefined over the course of the last decade. In Table 4 we show the progress of discrete industries for the periods of 2006-2014 and 2011- 2014. Notice there is more red (lack of progress) than green (progress) in the industry trends.
Table 4. Supply Chain Performance by Industry within the Discrete Industries
High-tech companies have the most advanced practices for inventory management, planning and analytics. They are just treading water (keeping slightly ahead of the market dynamics). The rate of change drives innovation. Within this industry there are more supply chain innovators taking a hard look and driving the adoption of prescriptive analytics and canonical value network infrastructures.
Taking a closer view at the value chain of the sub-industries within high-tech, i.e. consumer electronics, B2B Electronics, and semiconductor industries, the impact of the industry drivers and the importance of supply chain performance becomes clearer.
Table 5. Supply Chain Performance by Industry within the High-Tech Sector
The entire value chain is struggling to maintain margins and improve inventory turns. For consumer electronics and B2B electronics, growth is down, operating margins are degrading and inventory turns worsening. Supply chain matters more than ever.
State of Business Networks in Process Industries 2014 - Summary ChartsLora Cecere
Executive Summary
Today, the performance of an organization hinges more than ever on the effectiveness of flows between, and amongst, trading partners. It is not easy. The supply chain is not linear, and the relationships extend across geographic borders and industry sectors.
Outsourcing relationships have grown in the last decade; however, the automation of these networks has not kept pace. In the words of one respondent interviewed for this report in a facilitated workshop to review the data, “Today, we connect trading partners through spreadsheets, email, phone and fax. It is antiquated. I liken it to baling wire, chewing gum and duct tape. I need solutions that can synchronize and harmonize data across trading partners in real-time. My operating committee does not think that it is sexy to invest in B2B solutions, but it is needed. Today, it is almost impossible for us to understand the manufacturing status of purchase orders, and have accurate information readily on supply chain visibility of in-transit shipments. As a result, we make the wrong decisions, and have unnecessary wait times to get information.”
These comments echo the findings in this study. Respondents operate value networks, but they struggle to get to the data they need. The outsourcing of logistics is greater than manufacturing. Eighty-one percent of companies outsource logistics. The volume of outsourced logistics is 48% on average. In contrast, 66% of companies outsource manufacturing. The outsourced volume manufacturing volume varies, but averages 15%.
While the networks are complex, and the goals are many, progress is hard to track. This leads many supply chain leaders to ask, “What is the current state? What is the opportunity?” Answering these questions is the goal of this report.
Let’s start with the current state. As seen in Figure 2, the average respondent in this report believes that the supply chain today is more controlled and global than compared to two years ago. While they have made improvements in agility and proactivity, there is much more left to do. The largest challenges are in the use of outside-in data to improve channel sensing and reduce risk. While the supply chain today has made progress in transactional efficiency, companies are less competent at sensing opportunities and mitigating risks.
What Drives Supply Chain Excellence? A Look Back and a Look ForwardLora Cecere
This report is based on analysis of financial balance sheet and income statement data for the period of 2000-2012, quantitative survey research results, and interactions with clients in various industries in supply chain strategy sessions. We examine the performance of companies in a cross-section of industries on various metrics. We find that most companies and most industries are stuck in an environment of low results, with the exception of the hi-tech & electronics industry. Finally, we offer our perspective and advice on advancing supply chain excellence and moving the needle for better supply chain performance across company and industry lines.
Highlights
• A project-based approach has failed. Our gains are much lower than we believed in inventory management and a long-term perspective is needed to drive permanent and sustainable improvements.
• The hi-tech industry is the only of the six industries profiled to drive sustained gains across most metrics considered during the time period.
• The definition of supply chain excellence is still evolving as companies move through different maturity stages. Industrial and pharmaceutical companies are mainly stuck at low levels of maturity and could benefit greatly from applying lessons learned in other industries to their own supply chains.
Research Results
Full report
At one time, the physical store defined the retailer. It was the brand. Today, this has changed. Now the store is a part of a cross-channel experience. It is a combination of goods and services. The impact of the change is different by retail sector, but it is pervasive.
While changes in other industries have happened incrementally through continuous improvement and process innovation, retail has been transformed by new business models. The pace is faster and the customer demands higher.
Redefining the role of the store is critical. It requires partnerships of both retailers and manufacturers. It is for this reason that we wrote this report.
For the supply chain leader, Big Data is a new concept. It is not one that is currently well understood. It will be overhyped and overpromised before the concepts reach mainstream adoption. However, it is here to stay. The goal of this report is to better educate and prepare the supply chain leader for this change. In this report, we define the concepts and share insights to help leaders better understand how Big Data concepts can help solve problems in today’s supply chain.
Launch of the Supply Chain Index - 11 JUNE 2013Lora Cecere
Launch of the Supply Chain Index
This research represents eighteen months of work to understand the relationship between supply chain financial ratios and a company’s performance in the financial markets. To complete this research, we constructed a database of specific supply chain financial ratios (from a database of over 50 total financial metrics) and began to run correlations to understand the relationship between financial supply chain ratios and market capitalization for the past seven years. (The market capitalization data and the supply chain financial data used in the analysis was quarterly data from 2006Q1 to 2012Q4.) We use this data to understand which metrics matter to financial markets for twelve Morningstar sectors.
Here we share insights on the Morningstar sectors that make up Consumer and Healthcare Value Networks. In August, we will publish a parallel report that will cover the Automotive, Electronics and Industrial Value Networks. The sectors evaluated in this report include: Apparel Manufacturing, Apparel Stores, Chemical, Drug Manufacturers for Branded and Generic Products, Household and Personal Products (Consumer Packaged Goods), Discount Stores, Medical Care, Medical Devices, Medical Distribution, Medical Instruments & Supplies, and Packaged Food.
Supply Chain Metrics That Matter: The Cash-to-Cash Cycle 30 NOV 2012Lora Cecere
When it comes to supply chain, no two industries are the same; but, improving Cash-to-Cash cycle (C2C) metrics matters across all industries. With over a decade of investment in technology and process improvements, we can now assess progress. In this report, we examine the financial data in three time frames:
2000-2003 Dawn of Business-to-Business (B2B) commerce and Global Connectivity
2004-2007 Pre-recession
2008-2011 Post-recession
The health of the supply chain can be quickly assessed through the analysis of the C2C metric. It is a composite metric that combines decisions on receivables, payables and inventory management. Overall, while supply chain leaders have focused on the reduction of C2C cycles, little progress has been made. For most, despite a decade of investments in channel connectivity and supply chain optimization, there is limited progress on receivables and inventory. Instead, we find that the most mature companies have turned to increasing Days of Payables in an effort to reduce C2C. This can be detrimental to the overall health of the supply chain.
Over the last fifteen years, the only industry that has shown dramatic and continuous improvement in reducing C2C cycles is high-tech and electronics. While there are slight improvements in consumer packaged goods (CPG) and chemical supply chains, the results in pharmaceutical and automotive are much worse. While many supply chain professionals may claim that the changes in the supply chain—offshoring of manufacturing, cost of capital, increasing product complexity and decreasing product life cycle—are reasons that there was not more progress, the interesting fact is that the industry that had the greatest obstacles made the most progress. The reason? We believe it mattered more in the high-tech industry. With short life cycles and declining margins over the course of the product life cycle, it is just too expensive for a high-tech company to neglect inventory management. As a result, the high-tech and electronics industry has developed better and more comprehensive planning processes overall.
In this report, we share insights on the trends in five industries: automotive, high-tech and electronics, chemical, CPG and pharmaceutical. The data supports three facts:
The Supply Chain Index - Improving Strength, Balance and Resiliency - 13 MAY ...Lora Cecere
Supply Chain Metrics That Matter is a series of monthly reports published by Supply Chain Insights LLC. These reports are a deep focus on a specific industry. This was preparatory work to understand the patterns of supply chain ratios for supply chain leaders.
As shown in Figure 1, the Supply Chain Insights team analyzed 15 different industries with deep dives on their progress on the cash-to-cash cycle.
Figure 1. Supply Chain Metrics That Matter Reports Published in 2012-2014
Here we take a next step, and launch the Supply Chain Index. The Supply Chain Index is a mathematical formula that a supply chain leader can use to measure their relative performance to an industry peer group. It was built in cooperation with the Operations Research team at Arizona State University (ASU).
This methodology was designed to measure the balance, strength and resiliency of a company’s supply chain from an objective financial perspective. It is a measurement of supply chain improvement during the period of 2006-2012. In April 2014, we published an in-depth look at the resiliency metric: Supply Chain Metrics That Matter: Improving Supply Chain Resiliency. In this report, adding strength and balance, we examine the calculation of these three values in tandem.
The supply chain is a complex system with increasing complexity. Here we analyze how companies made trade-offs over a period of several years in balancing growth, profitability, cycles, and complexity. Many of the trade-offs were unconscious. As complexity rose, it became more difficult for companies to manage the intersection of growth and inventory turns. For leaders, as you will see in this report, the trade-offs were conscious.
Within the world of Supply Chain Management (SCM), each industry is unique. We believe that it is dangerous to list all industries in a spreadsheet and declare a supply chain leader. Instead, we believe that change needs to be measured over a number of years with a focus on an industry peer group. Here we define, and demonstrate, how the Supply Chain Index can be used to measure supply chain performance. To help the reader, we share insights on three industries—chemical, consumer packaged goods and pharmaceutical—using the methodology.
Supply Chain Metrics That Matter: A Focus on Consumer ElectronicsLora Cecere
Executive Overview
Supply chain management is thirty years old. The year 2012 marked the end of the third decade of the evolution of supply chain practices. In the journey for supply chain excellence, each industry has progressed at their own rate based on their own set of opportunities and limitations including market drivers, industry factors and product cycles. No industry has had greater obstacles to overcome than consumer electronics, and no industry has made more progress.
Consumer electronics has led the pack in managing complexity, improving growth and margin performance, reducing inventory, and accelerating productivity in the face of complexity (revenue per employee). Was it an accident? No, we don’t think so. Instead, we see it as an advanced case study of supply chain excellence in action.
Ask any executive of the consumer electronics industry if supply chain matters and you will get a resounding “YES!” While other industries are more likely to define supply chain efforts as a departmental effort focused within silos—procurement, transportation/distribution or manufacturing—the consumer electronics sector is more likely to model the supply chain as a value network focused on end-to-end improvement. They are also more likely to value the planning function and excel at it, as well as understand how to integrate new product launch efforts with value chain design.
For most companies, the consumer electronics industry offers a lot of lessons and insights for supply chain leaders. It is for this reason that we share this report.
Setting the Stage
Over the course of the last decade, the consumer electronics industry has outperformed most other industries in four significant areas: growth, profitability, cycle management, and complexity. Balancing these four categories of metrics is what we term the Supply Chain Effective Frontier, further profiled in our recent report: Conquering the Supply Chain Effective Frontier.
Supply Chain Metrics That Matter: A Focus on Hospitals - 6 JAN 2013Lora Cecere
Executive Overview
Growth is slowing. Profitability is tougher. Compliance mandates are growing. How do companies balance the goals for value-based outcomes for health and wellness with costs? In this environment, supply chain matters more than ever.
In this report, we share insights on healthcare supply chains. Grown out of the offices of procurement, the supply chain function of the hospital is still in its infancy; but based on increasing business requirements and complexity, it is only beginning to show its true potential.
Growth: Futures are Uncertain.
The hospital administrator is facing many challenges. Growth is slowing and pressures are growing. The question is how to balance patient outcomes with better cost management. How does a hospital move forward with an uncertain future? And, what will be the impact of healthcare reform?
In table 1, we list top line growth over the past decade for four companies operating within the hospital industry. While there are ups and downs, the general trend is downward.
Supply Chain Metrics That Matter: A Closer Look at the Cash-To-Cash Cycle (20...Lora Cecere
Executive Overview
When it comes to metrics that matter, the cash-to-cash cycle is one of the top metrics cited by supply chain professionals. It is among the best financial metrics to provide a comprehensive picture of a company’s supply chain and the management of working capital.
The supply chain is a complex system. Successful management requires both orchestration and balance. To drive supply chain excellence, companies are required to balance four competing priorities: growth, profitability, cycle management and complexity. Several popular metrics, including the cash-to-cash cycle, for a variety of industries are presented in table 1.
Conquering the Supply Chain Effective FrontierLora Cecere
Conquering the Supply Chain Effective Frontier - A Handbook for the Value Chain Leader to Manage Trade-offs in Defining Supply Chain Excellence
Supply chain practices are nearing their third decade of maturation. The term supply chain excellence is bandied about by leaders, consultants and technology providers, but there is no alignment on what it means.
Conventional systems of measurement for supply chain excellence are problematic. In this report, we share insights gained during interviews with 75 supply chain pioneers. Based on their feedback we created a new framework, that we define here as the Supply Chain Effective Frontier, for supply chain leaders to use to determine supply chain excellence. This methodology is based on publicly available financial balance sheet data grouped into four sets of supply chain ratios: growth, profitability, cycle, and complexity.
We believe that supply chain excellence is best defined as the alignment of the supply chain team to deliver results to meet and exceed the requirements of the business strategy. This requires a clear vision and cross-functional coordination and alignment over a multi-year road map. It needs to be holistic. A supply chain is a complex system with increasing business complexity. The analysis needs to facilitate a clear understanding of trade-offs embedded in day-to-day decision making. It is this clarity that we find missing in many teams that we work with, and it is for this reason we wrote this report.
Supply Chain Metrics That Matter: A Focus on Food and Beverage Companies - 2015Lora Cecere
Executive Summary: Current State of Food and Beverage Industries
Over the last decade, consumer confidence in the food and beverage industry supply chains has waned. Shopper distrust is high; and as a result, growth in many categories like carbonated beverages and cereals declined.
While these two industries have similarities, there are different underlying dynamics in business drivers. The potential of the food supply chain is different than that of beverage. As a result, in this report, we share information on the two industries separately.
For both industries, the last decade was a tough market. Despite attempts to stimulate demand through trade programs, new product launch, and product expansion into new continents, growth declined. In 2003-2006, growth in the food industry was 7% while in 2011-2014, year-over growth was 4%. In parallel, in 2003-2006, growth in the beverage industry was 22%; yet, in 2011-2014, it was 7%. As growth declined, supply chain maturity mattered more than ever. Most companies were not equal to the challenge.
Traditional marketing tactics are not as effective in these two industries as they were a decade ago. To try to stimulate growth, 33% new items were introduced into the retail chain from these two industries. This rise in complexity reduced the effectiveness of the supply chain at a time of declining volumes. In Table 4, we profile the results in the food industry, while in Table 5 we portray the trends in the beverage industry.
In both industries, operating margin declined despite improved productivity in revenue per employee. In parallel, despite multiple investments in technologies, inventory turns declined in the food industry. Companies were unable to balance metrics in times of declining volumes. The reason? Rising commodity costs and the slow development of supply chain skills.
Companies that did the best in driving improvement in key metrics in times of declining volumes have seven characteristics: core competency in network design; strong capabilities in transportation management; a focus on inventory management; use of more advanced forms of supply chain planning; balance and understanding of the trade-offs of volume, price and mix; use of channel data; and continuity of leadership.
Table 4. Progress on the Effective Frontier for Food Companies
Table 5. Progress on the Effective Frontier for Beverage Companies
When we compiled the Supply Chains to Admire Report in August 2014, two food and beverage companies—General Mills and ABInBev—made the list. To make the list, a company had to deliver performance (posting above-average results for the period of 2009-2013 when compared to their peer group on a portfolio of metrics including operating margin, inventory turns and Return on Invested Capital). They also had to drive supply chain improvement (based on the Supply Chain Index as defined in the Research Methodology section) faster than their peer group. We believe b
Inventory Optimization in a Market-Driven World - 27 APR 2015Lora Cecere
Executive Overview
Growth is slowing and the complexity in today’s supply chain is unprecedented. As a result, within a company, inventory management is often a hot issue. Shrinking inventory spins off a one-time, and highly desirable, cash windfall. In most industries there is a connection between market capitalization and inventory management. This drives pressure to reduce inventory and question existing practices. However, while companies are quick to ask questions, they often make the wrong judgements about inventory strategies. The goal of this report is to improve this dialogue.
Most companies have invested in many inventory optimization solutions over the last decade. Within the company, there is mounting frustration about the failure of these projects to actualize and maintain targets. What most companies fail to realize is that the technology strategy needs to be worked in concert with supply chain strategy. Often we find while companies improve inventory levels through the deployment of inventory technologies, operational decisions to widen the item master or lengthen the supply chain will undermine the project targets.
There are many drivers of inventory, and the management of inventory levels requires discipline and a cross-functional focus. It is a story of people, process, and technology. Let’s start with people. Today, fewer than 5% of companies have an end-to-end focus (as defined from the customer’s customer to the supplier’s supplier), and most companies lack alignment and balance. The largest gaps between are between operational and commercial groups. (Cecere L. , Three Techniques to Improve Organizational Alignment, 2013). As companies close the organizational gap, progress is made on inventory. Likewise, when it comes to balance, 68% of organizations surveyed lack balance in Sales and Operations Planning between the commercial groups (the “S”) and the operational groups (the “OP), When balance is achieved, the organization rates itself as more agile, and aligned, and there is an 11% improvement in inventory turns (Cecere L. , Research in Review, 2014).
Supply chain processes are now over 30-years old. While there is a generalized belief that maturity of supply chain processes has improved inventory turns, as can be seen in Figure 2, the improvements in cash-to-cash have primarily been driven by lengthening payables. In industries like beverage, pharmaceuticals, consumer packaged goods and medical device, the industry averages have gone backwards (inventory turns have decreased not increased). Only the food and apparel industries have posted double-digit improvements in inventory turns. Why? Food and apparel are largely regional supply chains which are maturing. They lag consumer packaged goods in supply chain maturity. While consumer packaged goods companies are more mature, they are more global. The rise of the global multinational has greatly impacted inventory requirements.
Supply Chain Metrics That Matter: A Focus on Brick & Mortar Retail-18 FEB 2013Lora Cecere
The bricks and mortar retailer is being squeezed. Growth is slowing and margin is under pressure. With the rise of e-commerce, the role of the store is being redefined. It is about service and the customer experience. As a result, it is time to rethink the metrics that matter and focus outside-in on the shopper experience.
In this report, we share insights on the current state of bricks and mortar retail and offer our suggestions.
Brick & mortar retailers have weathered an intense decade with the persistent rise of e-commerce. The shopper has changed and recovery from the Great Recession is ongoing, but slow. Our previous Supply Chain Metrics That Matter: A Focus on Retail report focused on the broader industry trends affecting five different divisions of retailers and the challenges of multi-channel retail. This report narrows the focus to three segments of brick & mortar retailers struggling to adapt to the new world.
A retailer is not a retailer. We believe that retailers should be compared by business model. We do not believe that one can throw all retailers together and identify the “most improved” or “best” supply chain. There are too many variables and circumstances affecting the retail landscape to make valid comparisons. In our research, we find that small and well-defined peer groups offer the best way forward for understanding both segment and industry specific trends.
The industry segments analyzed in this report are grocery, mass and specialty. Grocery retailers are involved in the sale of perishable and non-perishable food stuffs. Mass retailers are larger companies focused on providing a comprehensive retail experience to their customers. Finally, specialty retailers are dedicated to specific customers, activities and goods. The companies in this analysis represent both American and global retailers.
Our grocery peer group consists of Carrefour, Delhaize Group, Safeway and The Kroger Co. The mass retailer peer group includes Costco, Metro, Target and Walmart. The choice of specialty retailers was by far the most difficult because there are so many dedicated stores in this category. For this publication, our peer group includes Bed Bath & Beyond, Dick’s Sporting Goods, Foot Locker and Ross Stores. Additional information about all of these companies is presented in the Appendix.
Supply Chain Metrics That Matter: A Focus on the Consumer Products Industry 2...Lora Cecere
Supply Chain Metrics That Matter will be a series of reports published intermittently throughout the year by Supply Chain Insights LLC. Within the world of Supply Chain Management (SCM), each industry is unique. To help companies understand differences, each report is a deep dive on a different industry.
While we find it useful to understand the evolution of supply chain excellence by comparing industries, we feel that the true stories of supply chain excellence can only be really understood by comparing what happened within a period by peer group. The goal of this series is to share these insights. These reports are intended for you to read, share and use to improve your supply chain decisions.
The average Consumer Products (CP) company is stronger in the execution of supply chain management practices than their retail or pharmaceutical counterparts, but as companies will see in later reports, CP progress has not been equal to that of High-tech and Electronics manufacturers.
CP companies (including both consumer packaged goods (CPG) and food & beverage companies) tend to be marketing-driven. They are struggling to understand the differences between new market-driven, and their well-oiled marketing-driven, supply chains. With a strong legacy in building persuasive marketing programs, the companies have leveraged a global “one-size-fits-all” push-based supply chain strategy. These traditional supply chain management (SCM) definitions have produced supply chains that respond, but don’t sense. They are efficient, but not adaptive. They tend to be long (greater than twenty weeks) with waste pockets between nodes.
The landscape of the industry has been greatly affected by mergers and acquisitions. In the past decade, 57 companies were absorbed into ten. The industry is still digesting this change. While most companies have 150 unique systems, the manufacturers in this industry will often have five times the industry average. Getting to the right data to improve decision making continues to be a challenge.
The Supply Chain Index: Evaluating the Healthcare Value NetworkLora Cecere
Executive Overview
Supply chain performance matters. It can make or break corporate performance. Now 30-years old, the practice of supply chain management is still evolving. While companies speak of best practices, and boast about improvements in operating margin, inventory levels and asset management in conference after conference, we do not see it in our analysis of balance sheet information.
By their nature, supply chain leaders are competitive. They want to drive performance improvements and increase corporate value. Their goal is to outpace competitors. The rate of business change is intense and the personal stakes are high. Day after day, leaders must answer questions like, “Which path should I to take? What are the best technologies to use? What is an acceptable rate of performance? How am I doing against my peer group? And, what can I learn from others that I can use to improve the performance of my own operation?” Until the development of the Supply Chain Index by Supply Chain Insights, there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology, there now is.
While it is easy to say the term supply chain excellence, it is difficult to define. Many people think that they know the definition, but there is no agreed-upon standard. The lack of a clear definition, and a methodology to gauge improvement, makes progress hard to quantify and track. The Supply Chain Index is designed to help. It is an objective measurement of supply chain improvement. It enables the comparison of companies’ progress within a peer group for a given time period. The Index is based upon financial performance of companies on four metrics integral to supply chain operations: inventory turns, operating margin, Return on Invested Capital and year-over-year revenue growth. There were three goals.
1. Quantify Levels of Supply Chain Improvement. The Index is a composite metric based on the calculation of balance, strength and resiliency factors for a given time period. In the analysis, there is an underlying assumption that the companies that can sustain the best improvement in these three areas are driving the highest rates of supply chain improvement. The input metrics of inventory turns, operating margin, ROIC and year-over-year revenue growth were selected in part due to their high correlation to market capitalization.
2. Bridge the Gap between Finance and Supply Chain. Our second goal is to bridge the gap between the supply chain organization and the financial team. While the financial team is often backwards-looking at transactions, the supply chain team is forward-looking based on flows. There is often a temptation to focus on a single financial ratio in isolation, like inventory turns, not realizing that the supply chain is a complex system with tightly interrelated relationships amongst metrics based on supply chain potential.
Executive Summary
No two supply chains are alike, but supply chain leaders across all industries face common challenges. The supply chain is becoming more strategic—an engine of growth and the driver of new business models—to drive new opportunities. For supply chain leaders, it is no longer just a discussion of cost and inventory management.
However, frustration abounds. Companies struggle to improve balance sheet results in the face of rising complexity and slowing growth. While all companies have improved revenue per employee, this efficiency improvement has not translated into operating margin improvements; and while cash-to-cash cycles have improved, it is not due to improvements in inventory positions. Most companies feel stuck, as if they are being held hostage by traditional supply chain practices.
Table 1. Industry Progress Across the Last Decade
In this report, we highlight the current state of supply chains—the supply chain organization, technologies, and process evolution—to enable supply chain leaders to take the next step in their strategy development. This report reflects the current state of supply chains, and is designed as a foundational document for supply chain leaders to build their 2015 strategies.
Understanding the Supply Chain Organization
Improving corporate performance is the driver of today’s supply chain organization. Increasingly, supply chain leaders are adopting new business models—ecommerce, digital business, and growth in new economies—to drive the top line.
Today, for the leader, it is about more than cost management. Instead, it is about the management of a portfolio of metrics to drive corporate performance. The supply chain is a complex system, with increasing complexity, and an increasing importance of driving balance sheet results. It is not easy. Improvement is hard work, and many are stuck. When we analyze financial balance sheet performance for the period of 2000-2013, we find that nine out of ten companies are stuck at the intersection of the two critical metrics of operating margin and inventory turns. Cash flow has been improved through elongating payables, and most companies are struggling to improve inventory in the face of complexity. This is an area of frustration and disappointment for business leaders who want to leverage supply chain technologies and processes to deliver both growth opportunities along with cash and cost savings to the organization.
The reason why? Today, the supply chain organization is traditional, tactical and cautious (see Figure 2). Most leaders would like to have a supply chain that is more agile and proactive. This is not possible with the current state of technologies and processes. To make the shift, companies need to reinvent the supply chain. The processes need to be redesigned outside-in with open sharing through business networks. These new forms of business networks, with many-to-many data models supported by canonical infrastructure, a
Imagine the Supply Chain of the Future - 21 OCT 2014Lora Cecere
Executive Overview
When we ask companies to imagine the supply chain of the future, they have to start with what they have today. Most companies today are stuck, and find it hard to conceive the supply chain of the future. To free their thinking they have to learn from the past, to unlearn what they believe is a world of best practices, and establish methodologies to imagine the supply chain of the future. Changing traditional paradigms is a starting point.
For most, the journey is not easy. As shown in Figure 1, the terms most commonly used to describe the supply chain today are traditional, tactical, and cautious. Today there is significant room for improvement, with only one in three supply chain leaders feeling that what they have now is working well. Most of the supply chain processes are inside-out which is a barrier to sensing demand and building demand-driven or market-driven processes.
The incentive to change lies in balance sheet performance. When we analyze financial balance sheet performance for the period of 2006-2013, we find that nine out of ten companies are stuck at the intersection of the two critical metrics of operating margin and inventory turns. Publicly-held companies are unable to power improvements in both metrics for more than two consecutive years. For most, improvement has become an OR condition with companies making improvements in one of the two metrics, but not both together. This is an area of frustration and disappointment for business leaders that want to leverage supply chain technologies and processes to deliver both cash and cost savings to the organization. As growth slows, this shift is more important. In this report, we share highlights on the research gathered for our recent conference, Supply Chain Insights Global Summit.
Supply Chain Metrics That Matter: A Focus on the High-Tech Industry - 2015Lora Cecere
Executive Summary: Current State of the High-Tech Industry
Globalization. Commodity inflation. Margin squeeze. Economic uncertainty. Warranty issues. Shortening product life cycles. Recalls. Labor arbitrage and outsourcing. The list of market pressures could go on and on, but one thing is clear: the high-tech industry was redefined over the course of the last decade. In Table 4 we show the progress of discrete industries for the periods of 2006-2014 and 2011- 2014. Notice there is more red (lack of progress) than green (progress) in the industry trends.
Table 4. Supply Chain Performance by Industry within the Discrete Industries
High-tech companies have the most advanced practices for inventory management, planning and analytics. They are just treading water (keeping slightly ahead of the market dynamics). The rate of change drives innovation. Within this industry there are more supply chain innovators taking a hard look and driving the adoption of prescriptive analytics and canonical value network infrastructures.
Taking a closer view at the value chain of the sub-industries within high-tech, i.e. consumer electronics, B2B Electronics, and semiconductor industries, the impact of the industry drivers and the importance of supply chain performance becomes clearer.
Table 5. Supply Chain Performance by Industry within the High-Tech Sector
The entire value chain is struggling to maintain margins and improve inventory turns. For consumer electronics and B2B electronics, growth is down, operating margins are degrading and inventory turns worsening. Supply chain matters more than ever.
State of Business Networks in Process Industries 2014 - Summary ChartsLora Cecere
Executive Summary
Today, the performance of an organization hinges more than ever on the effectiveness of flows between, and amongst, trading partners. It is not easy. The supply chain is not linear, and the relationships extend across geographic borders and industry sectors.
Outsourcing relationships have grown in the last decade; however, the automation of these networks has not kept pace. In the words of one respondent interviewed for this report in a facilitated workshop to review the data, “Today, we connect trading partners through spreadsheets, email, phone and fax. It is antiquated. I liken it to baling wire, chewing gum and duct tape. I need solutions that can synchronize and harmonize data across trading partners in real-time. My operating committee does not think that it is sexy to invest in B2B solutions, but it is needed. Today, it is almost impossible for us to understand the manufacturing status of purchase orders, and have accurate information readily on supply chain visibility of in-transit shipments. As a result, we make the wrong decisions, and have unnecessary wait times to get information.”
These comments echo the findings in this study. Respondents operate value networks, but they struggle to get to the data they need. The outsourcing of logistics is greater than manufacturing. Eighty-one percent of companies outsource logistics. The volume of outsourced logistics is 48% on average. In contrast, 66% of companies outsource manufacturing. The outsourced volume manufacturing volume varies, but averages 15%.
While the networks are complex, and the goals are many, progress is hard to track. This leads many supply chain leaders to ask, “What is the current state? What is the opportunity?” Answering these questions is the goal of this report.
Let’s start with the current state. As seen in Figure 2, the average respondent in this report believes that the supply chain today is more controlled and global than compared to two years ago. While they have made improvements in agility and proactivity, there is much more left to do. The largest challenges are in the use of outside-in data to improve channel sensing and reduce risk. While the supply chain today has made progress in transactional efficiency, companies are less competent at sensing opportunities and mitigating risks.
What Drives Supply Chain Excellence? A Look Back and a Look ForwardLora Cecere
This report is based on analysis of financial balance sheet and income statement data for the period of 2000-2012, quantitative survey research results, and interactions with clients in various industries in supply chain strategy sessions. We examine the performance of companies in a cross-section of industries on various metrics. We find that most companies and most industries are stuck in an environment of low results, with the exception of the hi-tech & electronics industry. Finally, we offer our perspective and advice on advancing supply chain excellence and moving the needle for better supply chain performance across company and industry lines.
Highlights
• A project-based approach has failed. Our gains are much lower than we believed in inventory management and a long-term perspective is needed to drive permanent and sustainable improvements.
• The hi-tech industry is the only of the six industries profiled to drive sustained gains across most metrics considered during the time period.
• The definition of supply chain excellence is still evolving as companies move through different maturity stages. Industrial and pharmaceutical companies are mainly stuck at low levels of maturity and could benefit greatly from applying lessons learned in other industries to their own supply chains.
Research Results
Full report
At one time, the physical store defined the retailer. It was the brand. Today, this has changed. Now the store is a part of a cross-channel experience. It is a combination of goods and services. The impact of the change is different by retail sector, but it is pervasive.
While changes in other industries have happened incrementally through continuous improvement and process innovation, retail has been transformed by new business models. The pace is faster and the customer demands higher.
Redefining the role of the store is critical. It requires partnerships of both retailers and manufacturers. It is for this reason that we wrote this report.
For the supply chain leader, Big Data is a new concept. It is not one that is currently well understood. It will be overhyped and overpromised before the concepts reach mainstream adoption. However, it is here to stay. The goal of this report is to better educate and prepare the supply chain leader for this change. In this report, we define the concepts and share insights to help leaders better understand how Big Data concepts can help solve problems in today’s supply chain.
Launch of the Supply Chain Index - 11 JUNE 2013Lora Cecere
Launch of the Supply Chain Index
This research represents eighteen months of work to understand the relationship between supply chain financial ratios and a company’s performance in the financial markets. To complete this research, we constructed a database of specific supply chain financial ratios (from a database of over 50 total financial metrics) and began to run correlations to understand the relationship between financial supply chain ratios and market capitalization for the past seven years. (The market capitalization data and the supply chain financial data used in the analysis was quarterly data from 2006Q1 to 2012Q4.) We use this data to understand which metrics matter to financial markets for twelve Morningstar sectors.
Here we share insights on the Morningstar sectors that make up Consumer and Healthcare Value Networks. In August, we will publish a parallel report that will cover the Automotive, Electronics and Industrial Value Networks. The sectors evaluated in this report include: Apparel Manufacturing, Apparel Stores, Chemical, Drug Manufacturers for Branded and Generic Products, Household and Personal Products (Consumer Packaged Goods), Discount Stores, Medical Care, Medical Devices, Medical Distribution, Medical Instruments & Supplies, and Packaged Food.
Big Data Survey/Handbook Summary Charts - 8 JULY 2013Lora Cecere
Big data is more of an opportunity than a problem -- 76% consider it an opportunity, 28% already have a big data initiative in place and another 37% plan to. The possibilities of big data are endless. It starts with thinking about how to use different data in a differentiated way.
The use of new forms of data is not an evolution. Instead, powering big data supply chains, and innovating through new forms of analytics, is a step change.
New forms of data do not fit traditional architectures. Traditional supply chains were architected to use structured data with software using relational databases. The big data era will make many of the investments from the last decade obsolete.
Big data offers the opportunity to redefine supply chain processes from the outside-in (from the channel back) and define the customer-centric supply chain. This is in stark contrast to the inflexible IT investments installed over the last decade to respond inside-out based on order shipments. These traditional investments in Enterprise Resource Planning (ERP), Advanced Planning Systems (APS) and traditional Business Intelligence (BI) for reporting, improved the supply chain response, but did not allow the organization to sense, shape or orchestrate outside-in. New forms of data (e.g., images, social data, sensor transmission, input from global positioning systems (GPS), the Internet of Things, and unstructured text from email, blogs and ratings and reviews) offer new opportunities. They also require new techniques and technologies.
Big data offers new opportunities for the corporation to listen, test and learn, and respond faster. In this study, companies see the greatest opportunity to use big data for “demand” (to better know the customer and improve the response); however, actual investments are in “supply” not “demand.” Respondents view supply-centric projects like product traceability (involving product serialization and traceability), supply chain visibility and temperature controlled handling as important.
Is big data a problem or a new market opportunity? Like the respondents of this survey, we believe that big data represents an opportunity for all. In the study, one-fourth of respondents currently have a big data initiative. However, interest is growing. Sixty-five percent have or plan to have a big data initiative in the future. Despite the hype, and the intensity of marketing rhetoric in the market, in our year-over-year studies on big data we see very little change in activity.
Despite the fact that the IT group is more likely to see big data as a problem, 49% of those with a big data initiative report that it is headed by an IT leader.
Big data represents a new opportunity, but seizing it requires a new form of leadership. It can ignite new business models and drive channel opportunities. However, it cannot be big data for big data itself. Instead, the initiatives need to be aligned to business objectives with a focus on small and iterative projects. It requires innovation. To move forward, companies need to embrace new technologies and redesign processes. It is not the case of stuffing new forms of data into old processes.
Why Is Supply Chain Planning So Hard? 16 FEB 2016Lora Cecere
RESEARCH OVERVIEW:
Details: The research for this report is based on five surveys fielded during the period of January 2014 – December 2015. The research was a progressive set of studies on supply chain planning. What are the barriers and what drives success. While the path to supply chain planning excellence is fraught with issues, the expected Return on Investment (ROI) for a successful supply chain planning project is nine months. In this report, we share insights on why supply chain planning is so difficult and how to maximize the ROI..
Objective of the report: To share insights with supply chain leaders on how to maximize the value from a supply chain planning implementation. The report shares insights on five barriers and then gives recommendations to overcome the barriers to maximize the ROI.
Highlights: While many approach supply chain planning as a technology project, successrequires companies to rethink how they make operational decisions and plan for future outcomes. The bigger issues in executing a supply chain planning project is how work is organized and how reward systems shape behavior.
Improving Supplier Reliability -15 June 2016 - ReportLora Cecere
Executive Summary
Trust, but verify. During the recession of 2007, trust in the extended supply chain was broken. As companies throttled-back production to adjust to falling demand, many suppliers who thought that they were strategic were left “holding the bag.” Risk was pushed backwards in the supply chain violating the tenants of many strategic relationships.
As a result, shipments were refused and orders canceled. Payments were delayed and trust was violated. Many supplier companies never recovered, tightening the supply of materials in discrete value chains like automotive and high-tech.
As growth slowed over last five years, the supply chain focused on an agenda to reduce costs. Commodity price volatility increased and procurement pressures to reduce costs resulted in transactional buying (a focus to minimize price variance). In many companies, strategic sourcing and commodity management through category buying programs took a “back seat.” Supplier programs become more reactive.
In this environment, as shown in Figure 2, supplier viability—an environment for a supplier to manage a successful business—became a pressing risk issue. Sitting four and five levels back in the value network, suppliers experienced a double-whammy—pressure to reduce price along with the lengthening of Days of Payables.
Ironically, while technology in supply chain finance progressively improved to enable a quick transfer of funds across industries, Days of Payables increased 30 and 60 days. The second irony is the cost of capital. While brand owners have a lower cost of capital than their suppliers, few companies extend their brand capabilities in supply chain finance to their suppliers. While companies talk supply chain finance, squeezing suppliers is the market reality.
In parallel, economic uncertainty and demand volatility increased, also putting pressure on the supplier base. While the adoption of demand-driven processes could improve supplier alignment, demand-driven process adoption is slow. Few companies are taking ownership of demand signals to their supply base.
Traditional processes dominate. Companies are strongly wedded to supply-centric processes based on traditional forecasting processes using order patterns. With the lengthening of order latency, and the lengthening of the long tail of the supply chain, the synchronization of suppliers into the value network is out-of-step, creating waste and obsolescence.
State of Transportation: Where Are We on the Vision of Automation? - 7 NOV 2012Lora Cecere
For the purpose of this report, transportation management is defined as technologies that automate and improve decision making in domestic and international logistics.
This report is based on a quantitative study conducted between August 16th, 2012 and October 9th, 2012. The summary reflects responses from 75 respondents from 55 companies active in transportation freight decisions. The goal of the study was to understand how business complexity and maturity have affected the deployment and development of supply chain technologies to improve transportation management. The study contrasts the views of line-of-business transportation solution users and providers of the technologies.
The quantitative study results are enriched with insights from Supply Chain Insights’ work on supply chain ratios and interviews with business leaders to validate and clarify the results.
The Power of Voice Study: The Value Proposition of Voice-directed Warehousing...Lora Cecere
A warehouse is not a warehouse and a supply chain is not a supply chain. They come in various sizes, varieties and with different requirements. They vary by industry and product requirements. It is hard to generalize. They need to be designed and fit for purpose, but there is no question that they are growing more complex. As complexity increases, manufacturers and distributors are seeking new ways to optimize customer service requirements with rising labor costs.
One of these options is voice-directed warehousing. Voice-directed warehousing—where a warehouse worker is directed to perform tasks based on voice automation using a headset—is now over twenty years old. It enables a worker to process orders “hands-free and eyes-free” improving safety, quality and productivity. The processes are maturing and the technologies are increasing in capability. We have moved from early adopter, or early experimentation with the technology, to main market adoption where mainstream manufacturers and distributors are trying to rationalize the value proposition. This report is designed to answer the question, “What is the value of voice?” for the supply chain leader. The top reason that supply chain leaders use the technology is to improve the quality of loads to the customer. Here we tell this story.
Today’s warehouses are more complex than ten years ago. Products and channels have proliferated, late-stage customization requirements have increased, the number of temperature environments has multiplied (e.g., cold chain, frozen etc.), and warehouse employee turnover is greater than ever before. Customer service requirements have increased and as a result, a greater percentage of products are picked by either the “each,” the “case,” or the “layer” in the modern warehouse.
Today, there are higher demands for customer service in the organization. The cadence of customer requests and new requirements increases each year. Accurate transmission of these requests into action is problematic. The environment has grown more dynamic. Order cycle time is shrinking. There is continuous pressure to reduce costs and improve customer service. Demand volatility reigns. Product variants and master data issues abound. Voice-directed warehousing offers promise, but how do companies rationalize the capital costs?
Additionally, compliance regulations loom. How will the warehouse adapt to product serialization in pharmaceutical companies? What will field to fork legislation mean for food and beverage manufacturers? How will product tracking and customization for REACH impact flows? There are more questions than answers. The only thing that is known is the warehouse will be rife with change.
Consultants' Voice on Supply Chain Excellence - 20 August 2012Lora Cecere
This report is the second report in a two-part series. The first report published in May 2012 and represents the Supply Chain Executives’ voice and perspectives on supply chain excellence. This report is a companion report reflecting the views of consulting partners working on supply chain across multiple industries. In this report, we contrast the two views while sharing insights from the Consultants’ Aggregate Voice on supply chain excellence.
Three Techniques to Improve Organizational Alignment-9 July 2013Lora Cecere
When organizations are aligned, things happen quicker. It takes less effort. People know what to do, and there is a greater bias for action. As a result, the organization can achieve higher levels of results and better withstand the pressures of demand and supply volatility.
Line of business leaders lack alignment. While many consultants claim that business results happen through better IT and business alignment, in this study, we find that the gaps in functional alignment within the business functions of sales, marketing, finance, and supply chain are far greater than the gaps between IT and line of business.
As shown in figure 2, within the organization, demand and supply volatility reigns. It is growing worse. This pain is felt across the line of business functions. To weather the storm, functions attempt to align, but doing this is easier said than done. It requires work and leadership.
This misalignment is not equal by business function. Of the three groups in this survey—supply chain, finance and information technology (IT)—the supply chain organization feels the alignment issue to a greater degree than the other two business functions. As shown in figure 2, it is one of their top three business pains.
So, what can an organizational leader do to improve alignment? In this study, we find that when companies do three things, and focus on doing them well, they can substantially improve organizational alignment:
• Have a Clear Definition of Supply Chain Strategy. While many companies state that they want to be “agile,” it requires definition. Companies need to design a supply chain with this goal in mind. When the organization has a carefully crafted definition of agility, it is able to improve organizational alignment. The definition of “shorter cycles” is not sufficient.
• Sales and Operations Planning. Organizations with a mature S&OP process are more aligned. In this study, 61% of supply chain respondents report having an S&OP process, but 48% of that group rate their process as effective. For a more detailed analysis of S&OP, please refer to our report Sales and Operations Planning: Current State of the Union.
• Supply Chain Center of Excellence. Organizations with a supply chain center of excellence are more aligned. The greatest impacts are between marketing and finance, as well as operations and Corporate Social Responsibility.
The study shows that there is significant opportunity for organizations to improve on all three of these critical factors. The good news for supply chain leaders is that this study provides three clear actions that can deliver improved alignment.
What Is the Value of a Retail Scorecard? - 21 OCT 2014Lora Cecere
Executive Overview
Retail scorecards are now more than a decade old. The companies in this study had an average of more than five years of experience using retail scorecards. Buyers and suppliers now manage multiple scorecards simultaneously (in the same relationship) in trading partner communications. The most common scorecards are focused in the areas of supply chain.
As with any relationship, there is always a carrot and a stick. A carrot, or an incentive to do better, is a positive reward system given to affirm good behavior; while a stick is a punitive action for an unwanted behavior. Today, in the administration of retail scorecards, they are more focused on deductions and the withholding of payment.
The primary value of the retail scorecard is the improvement of on-time and in-full shipments. Both parties have the opportunity to use the scorecard to improve assortment and reduce total costs. Today, these opportunities are aspirational. Here we share the insights from the study and end with recommendations for both trading partners.
2014 Talent Study - Summary Charts - 18 AUG 2014 Lora Cecere
Executive Overview
Ask any supply chain leader, “Is the management of supply chain talent important?” and you will get an overwhelming “Yes!” as a response. Yet, only 14% of companies rate themselves as doing better than their peer group when it comes to managing supply chain talent. Surprisingly, 43% of the survey respondents believe that they perform worse on the management of supply chain talent than their peers. The ratio is 3:1. Why the gap? There are many drivers, but the primary reasons are three: management support, recruitment, and staff development. The open-ended responses from the survey are shown in Figure 2.
Market-driven S&OP Report - 16 July 2012Lora Cecere
A Guidebook on How to Build a Market-driven S&OP Process
For manufacturers and retailers, supply chain is business. The Sales and Operations Planning (S&OP) process aligns the organization to the business strategy. As companies have become more global and face rising complexity, volatility and uncertainty, the importance of S&OP has increased. However, business complexity has created a gap between what companies have and what is needed. From our research, here we cite examples of these gaps:
The Supply Chain Index: Evaluating the Industrial Value Network - 18 AUG 2014Lora Cecere
Executive Overview
Supply chain performance matters. It can make or break corporate performance. Now 30-years old, the practice of supply chain management is still evolving. While companies speak of best practices, and boast about improvements in operating margin, inventory levels and asset management in conference after conference, we do not see it in our analysis of balance sheet information for any industry.
By their nature, supply chain leaders are competitive. They want to drive performance improvements and increase corporate value. Their goal is to outpace competitors. The rate of business change is intense and the personal stakes are high. Day after day, leaders must answer questions like, “Which path should I to take? What are the best technologies to use? What is an acceptable rate of performance? How am I doing against my peer group? And, what can I learn from others that I can use to improve the performance of my own operation?” Until the development of the Supply Chain Index by Supply Chain Insights, there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology, there now is a way to gauge improvement.
While it is easy to say the term supply chain excellence, it is difficult to define. Many people think that they know the definition, but there is no agreed-upon standard. The lack of a clear definition, and a methodology to measure improvement, makes progress hard to quantify and track.
The Supply Chain Index is designed to help. It is an objective measurement of supply chain improvement. It enables the comparison of companies’ progress within a peer group for a given time period. The Index is based upon financial performance of companies on four metrics integral to supply chain operations: Year-over-Year Revenue Growth, Return on Invested Capital, Inventory Turns, and Operating Margin. In building the Supply Chain Index, we had three goals:
1. Quantify Levels of Supply Chain Improvement. The Index is a composite metric based on the calculation of balance, strength and resiliency factors for a given time period. Each factor is measuring the pattern of performance over time. In the analysis, there is an underlying assumption that the companies that can sustain the best improvement in these three areas are driving the highest rates of supply chain improvement. The input metrics of Year-over-Year Revenue Growth, Return on Invested Capital, Inventory Turns, and Operating Margin were selected in part due to their high correlation to market capitalization.
2. Bridge the Gap between Finance and Supply Chain. Our second goal is to bridge the gap between the supply chain organization and the financial team...
How Do We Heal the Healthcare Value Chain? - 9 MAY 2013Lora Cecere
Over the last decade, as shown in figure 1, the hospital supply chain has been one of the few that has improved operating margin, reduced inventory and improved revenue/employee. In contrast, the manufacturing suppliers to the hospital organization have grown inventories and struggled to preserve margins. Across the value chain from the patient to the raw material suppliers, total inventories have grown and costs have escalated. With pending regulations, hospitals are being forced to rethink processes, redefine value and work more holistically to improve sourcing practices. The suppliers to the hospital systems are having to rethink their systems to rethink the customer (from selling to the physician to selling to a more formal buying organization based on patient outcomes) and adapt to the new processes within the hospital for value analysis.
Supply chain processes within the hospitals have matured. Hospitals have made more progress on improving cash-to-cash cycles than their upstream manufacturing trading partners. They have reduced inventories and attempted to work with suppliers. As shown in figure 2, it is notable to see that this industry is one of the few where downstream trading partners have actually improved payable terms for their suppliers.
The future lies before the healthcare provider. As the provider of patient care, they have the greatest potential to lead in the healthcare value chain’s redesign to improve value. They have come a long way, but the changes have been incremental. They have focused primarily on traditional sourcing techniques; not a redesign of the healthcare value chain from the outside in, and the redefinition of complex and antiquated processes.
Integrated Demand Management-When Will We Start Using Downstream Data-7 Nov 2012Lora Cecere
For the purposes of this report, downstream data is defined as data that originates downstream on the demand side of the value chain. It can include point-of-sale data, T-log data, distributor data, social and unstructured data sources, retail withdrawal data and retail forecasts. Integrated demand signal management is the use of this data in a more holistic and integrated demand management process.
The use of channel data is evolving and this report is designed to give the industry an update on progress. Data for this report is based on two inputs: quantitative survey data from twenty-nine respondents (manufacturers) that use downstream data for integrated demand signal management, and qualitative input from attendees at an Integrated Demand Signal Management event that was attended by eleven manufacturers and four retailers. Data was collected in the fall of 2012.
While the study demographic is a small number, the respondents represent an experienced panel group. In the study, 90% of the respondents were using downstream data. The average time of usage is four years.
Todays consumer behaviour demands a new data modelPaul Kennedy
The consumer society of 2013 enables commercial opportunities that were previously not possible but it also brings massive challenges. How should all of these digitally recorded actions, movements and behaviours be interpreted and used to help us engage with consumers and promote our offerings? What customer journeys are being enacted offline, online and on premise?
Marketing data should reflect the buyer decision process and therefore what people are doing, feeling and thinking. What needs are being satisfied? What preferences, interests and influences come into play? How relevant is context and place?
Cutting Through Chaos in the Age of "Mobile Me"Cognizant
Advancements in mobile technologies are impacting nearly every aspect of the retail industry. As our research confirms, retailers can no longer treat individuals and market segments as one homogenous entity. Winning in mobile commerce will depend on companies' ability to capture and analyze optimum, real-time data from digital, physical and personal sources, and deliver highly personalized, contextually relevant experiences to today's "markets of one."
The ROI of Empowering Associates Through In-Store MobilityG3 Communications
Today’s consumers have more choices and more control than ever before. They will not tolerate less-than-stellar customer service, because they can reach into their pockets and check product reviews, prices and even purchase nearly any product in real time from an online retailer.
So what can retailers do to up their game when it comes to customer experience? By equipping store associates with mobile devices used to build relationships, not simply process transactions, retailers can have a significant impact on transaction size, conversions and even overall traffic, leading to incremental increases in sales.
In this upcoming webinar, Scott Pearson from Retaligent and Danya Rielly from Raymark will discuss the ways retailers can use mobile technology to improve store operations, boost associate productivity and empower every store associate to provide outstanding levels of customer service. Topics will include: clienteling, mobile POS and a focus on the ROI and competitive advantage that specialty retailers can attain by employing mobile clienteling.
In this white paper, we’ll spread the light on such issues as:
- What big data is
- How data science creates a real value in retail
- 5 big data use-cases revealing how retail companies can turn their customers’ data in action
What is likely to outnumber the billions of human beings on planet earth over the next few years? The answer: mobile devices. While mobile devices have been around for several yea rs, there are two categories that have resulted in the explosive growth in this industry especially over the last two or three years – smartphones and tablets i .
Catch and Keep Digital Shoppers - How To Deliver Retail Their WayHiten Sethi
A new study by the Cisco Internet Business Solutions Group (IBSG) reveals that web-based digital content is now the most powerful influence on buying decisions for shoppers across all retail channels. The study surveyed 5,000 shoppers across five countries: the United States, United Kingdom, Brazil, Mexico, and China.
The Work Ahead: How Digital Thinking Separates Retail's Leaders from LaggardsCognizant
In this installment of our Work Ahead series, we focus on the impact of digital transformation on the retail industry and the surprisingly wide gap in how digital leaders and laggards perceive the digital future and are approaching the necessary changes to succeed.
[Report] Indian Marketers are Ready to Adopt and Integrate Digital Marketing ...Social Samosa
Adobe released the second annual Adobe APAC Digital Marketing Performance Dashboard, in partnership with Adobe. A six-month in-field program comprising quantitative and qualitative surveys, the study benchmarked the levels of adoption, traction and success of digital marketing
Similar to Retail Mobility Report -- 25 JUNE 2012 (20)
A critical look at three years of supply chain disruption. Using quantitative and qualitative research, Lora Cecere, Founder of Supply Chain Insights, looks critically at the factors within companies that drove resilience and the factors less successful. Companies that won were aligned, used market signals, decreased process latency, used scenario planning, and implemented descriptive analytics. Those that fared worse, had tight integration of supply chain planning to ERP, were not aligned, and were focused on a digital transformation strategy.
River of Demand - ALL RIVERS with QR.pdfLora Cecere
Drawings of demand as a river depicting the issues with flow with the voice overlay of the planner. To hear the voice, scan the QR code at the bottom of the drawing.
Presentation was given at the Longbow presentation on the future of supply chain management and the value of changing processes to make decisions a the speed of business decisions
At the Supply Chain Insights Global Summit, we challenged the audience to think about "social tokens" using this presentation from Luke Layden of Coin Desk.
Today's supply chain processes are inside-out. Outside-in processes, using channel and market data, improve the time to respond. This presentation reflects two years of testing using machine learning to understand the impact on the bullwhip effect and Forecast Value Added.
Now in its ninth year, the Supply Chains to Admire analysis is a study of the progress of each industry sector on the balanced scorecard of growth, operating margin, inventory turns, and Return on Invested Capital (ROIC). Twenty-two companies outperform their peer group, defining and exemplifying supply chain excellence.
Supply Chains to Admire Analysis 2022_2022 presentation.pptxLora Cecere
Supply Chains to Admire is a data-driven analysis based on public reporting of manufacturing and retail companies. The research evaluates which public companies drove improvement while outperforming their peer groups on performance metrics and value for the ten-year period of 2012-2021. The 25 winners are a testimonial to supply chain resilience.
The Role of Analytics In Defining The Art Of The PossibleLora Cecere
Analytics capabilities are evolving faster than organizations can adopt them into their processes. Here we share the research of 92 respondents in their journey to use new forms of analytics in their digital transformation journey.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
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Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Attending a job Interview for B1 and B2 Englsih learnersErika906060
It is a sample of an interview for a business english class for pre-intermediate and intermediate english students with emphasis on the speking ability.
Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
We will dig deeper into:
1. How to capture video testimonials that convert from your audience 🎥
2. How to leverage your testimonials to boost your sales 💲
3. How you can capture more CRM data to understand your audience better through video testimonials. 📊