Supply chain index webinar june 11 final

Consumer Value Networks:
How Do You Measure UP?
The Supply Chain Index
#sciwebinar

Supply Chain Insights LLC Copyright © 2014, p. 2
Supply Chain Insights is focused on delivering
independent, actionable and objective advice for
supply chain leaders.
A company dedicated to research,
turn to us when you want the latest insights
on supply chain trends, technologies to know and
metrics that matter.
About Us
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Presenters
Abby Mayer
Research Associate
Lora Cecere
Founder and CEO
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Dr. George Runger
Professor, CIDSE, ASU

Agenda
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To develop a methodology to help supply chain leaders define supply
chain improvement. To be effective, it had to:
• Evaluate progress over time by peer group.
• Be objective and data driven.
• Compare progress of companies across currencies.
• Enable the comparison of progress of companies regardless of size:
very large to mid-market companies.
• Connect supply chain performance to corporate performance.
• Use standardized, and available data.
Our Vision

Today’s Supply Chain
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Supply Chain Risk
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A Supply Chain
is a Complex System
with Complex
Processes
with Increasing
Complexity
Our Belief
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 Resilient and predictable
 Balanced across the set of metrics
to maximize value
 Showing year-over-year strength
against peer group
Desired Corporate Performance
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The Supply Chain Effective Frontier:
First Representation
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While we like this framework, there is no good
source of consistent and accurate data for:
– Forecast Accuracy
– Case Fill Rate
– Corporate Social Responsibility
Problem with this Framework
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The Supply Chain Effective Frontier:
Second Representation
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In most supply chains, complexity has risen throwing the
supply chain out of balance. We find that nine out of ten
companies are stuck at the intersection of inventory turns
and operating margin.

Industry Overview: 2006-2012
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Intersection of Operating Margin and
Inventory Turns
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Companies Get More Serious
With A Recession
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Agenda
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Mining 20 Years of Financial Data
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Correlations to Market Capitalization
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How to Read an Orbit Chart
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Supply Chain Metrics That Matter Reports
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Agenda
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Supply Chain Metrics That Matter Reports
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What is Resiliency?
Tightness of the Pattern
on the Orbit Chart for
Operating Margin and
Inventory Turns

Resiliency 2000-2012
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Agenda
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Overall Ranking per Company
• Balance: Return on Invested Capital & Revenue Growth Vector Trajectory (30%)
• Strength: Inventory Turns & Operating Margin Vector Trajectory (30%)
• Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)
• Peer: Peer Rankings by Industry (10%)
The Supply Chain Index
A new way to measure relative
supply chain performance by
industry, based on 4 components:
balance, strength, resiliency and
peer rankings.
Supply Chain Index: A Measure of Supply
Chain Improvement
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The Index Framework
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Supply Chain Index
30% 30% 30% 10%
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What is the right weighting?
What is the right time period?

An exclusive, invitation-only group
of senior supply chain leaders
(330 at present):
• Two private networking events/year
• One-on-one networking as needed
• Invitations to rank companies for the
Supply Chain Index (one per company)
• Monthly calls on specific topics
Shaman’s Circle

Supply Chain Index: Retail
2006-2012
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Wal-Mart and Target
(2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
2000
2012
2000
2012
5
6
7
8
9
10
0.05 0.06 0.07 0.08
InventoryTurns
Operating Margin
Target Corporation Wal-Mart Stores, Inc.
Best Scenario
TGT
0.06, 6.2
WMT
0.06, 7.8
Average (Operating Margin, Inventory Turns)

CVS and Walgreens
2000-2012

Retail Index:
2009-2012

• Drug channel rises.
• Kroger and Target make progress. Sainsbury and Costco fall.
Retail Summary

Supply Chain Index: Consumer Products
2006-2012
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Colgate and P&G
(2000-2012)
2000
2012
2000
2012
4
5
6
7
0.10 0.15 0.20 0.25
InventoryTurns
Operating Margin
Colgate-Palmolive Company Procter & Gamble Company
Best Scenario
CL
0.21, 5.7
PG
0.18, 5.7

P&G and Unilever
2000-2012

Supply Chain Index: Consumer Products
2009-2012
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• Beauty category gains ground. Heavier CPG products lose ground as
the cost of transportation increases.
• L’Oreal, Beiersdorf and Unilever improve. Colgate falls.
Consumer Products Comparison

Supply Chain Index: Food and Beverage
2006-2012
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Campbell Soup and Hershey
(2000-2013)

General Mills and Kellogg’s
2000-2012

Supply Chain Index: Food and Beverage
2009-2012
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• Nestle, Smuckers, PepsiCo, Inbev and Conagra make significant
gains.
• General Mills and Coca-Cola Enterprises fall.
Food and Beverage Comparison

Supply Chain Index: Chemical
2006-2012
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Inventory Turns vs. Operating Margin
(2000-2012)
2000
2012
2000
2012
3
4
5
6
7
8
0.00 0.10 0.20 0.30
InventoryTurns
Operating Margin
BASF SE E. I. du Pont de Nemours and Company
Best Scenario
BAS
0.10, 5.3
DD
0.10, 4.0

Supply Chain Index: Chemical
2009-2012
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• BASF and Dow Chemical move up the stack.
• Dow improves post Rohm and Haas acquisition.
• DuPont, FMC and Ecolab drop in the rankings.
Insights on Chemical

Supply Chain Index: Apparel
2006-2012
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VF and Hanes Brands

Supply Chain Index: Apparel
2009-2012

• Hanes, Nike and Columbia Sportswear rise in the ranking. VF falls
due to M&A and coalition rationalization strategies.
Insights on Apparel

• Retail: Dollar General and Kohl’s
• CPG: L’Oreal, Beiersdorf and Estee Lauder
• Food: Campbell’s, Hershey and Nestle
• Chemical: Lanxess, Monsanto, and BASF
• Apparel: Hanes, Columbia Sportswear and VF
Our Winners Circle

• Nine out of ten companies are stuck on the Effective Frontier. The
project approach versus a clear operating strategy is detrimental.
• Supply chain resiliency is improving. However, the lack of resiliency of
contract manufacturing and 3PLs should be a risk concern for
manufacturers.
• The Index favors companies with a high ROIC. Companies that have
increased complexity, lost margin and have not more fully utilized
assets are penalized in the rankings.
What Have We Learned?
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Agenda
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Next Steps
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• Supply Chain Index Webinars
• July 17- Healthcare Value Network
• August 12- Industrial Value Network
• Monthly Research Reports
• June 17- Consumer Value Network
• July 22- Healthcare Value Network
• August 19- Industrial Value Network
• Final analysis of companies to be revealed at the 2014
Supply Chain Insights Global Summit

Annual Event

Metrics That Matter
• Lora Cecere’s 2nd book:
Metrics That Matter
• To publish in Fall 2014
http://tinyurl.com/metricsthatmatter
Pre-orders available on Amazon:
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What’s Happening at
Supply Chain Insights?
www.supplychaininsights.com
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About Lora Cecere
• Founder of Supply Chain Insights
• Invited to be a “LinkedIn Influencer”
• Invited to write a guest blog for Forbes
• Author of 2 books: Bricks Matter (2012) and
Metrics That Matter (to publish Fall of 2014)
• Partner at Altimeter Group (leader in open research)
• 7 years of Management Experience leading Analyst Teams at Gartner and
AMR Research
• 8 years Experience in Marketing and Selling Supply Chain Software at
Descartes Systems Group and Manugistics (now JDA)
• 15 Years Leading teams in Manufacturing and Distribution operations for
Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and
Procter & Gamble.
Contact Information:
• Email: lora.cecere@supplychaininsights.com
• Blog: www.supplychainshaman.com (6000 pageviews/month)
• Forbes: http://www.forbes.com/search/?q=lora+cecere
• Twitter: lcecere (4800 followers)
• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (7000 in the network)
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Supply chain index webinar june 11 final

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