Supply Chain Insights' Financial Benchmarking Examples - 27 AUG 2013

Supply Chain Financial
Benchmarking
Answering the Question,
“What Is the Role of Supply Chain Effectiveness in
Driving Corporate Performance?”

Supply Chain Insights LLC Copyright © 2013, p. 2
Supply Chain Insights is focused on delivering
independent, actionable and objective advice
for supply chain leaders. If you need to know
which practices and technologies make the
biggest difference to corporate performance,
turn to us. We are a company dedicated to this
research. We help you understand supply chain
trends, evolving technologies and which metrics
matter.
About Us

This is the new bible for all supply chain
executives. It provides an insider’s
perspective that will prove incredibly valuable
to even the most grizzled supply chain
veteran. This is the next must-have business
book.
--Bruce Richardson, Chief Enterprise Strategist,
Salesforce.com
Today, the worlds of social business and
supply chain management have many
degrees of separation. I enjoyed working with
Lora to understand what the future
transformation of digital marketing to digital
business could look like.
--Jeremiah Owyang, Research Director, Altimeter
Second Printing of Bricks Matter:
16 Five-Star Reviews on Amazon
The book can be ordered from Amazon.com in hardcopy or digital format

A Review of Industries’
Progress on the Supply
Chain Effective Frontier and
the Supply Chain Index
2014 Publication

We find that many companies are starting to work on
2014 planning. They are trying to understand:
• How is their company doing on balancing the trade-offs
between growth, profitability, cycles and complexity?
• How are they performing against peers? What is their
potential?
The goal of this deck is to give you insights on how we
can help.
Time for a Check-up?

 Perform better than peer group
 Improve year-over-year results
 Align internally on metrics
 Deliver against the business strategy
 Demonstrate consistency in results
 Use innovation in supply chain processes
 Balance. Be leaders in managing trade-offs
Our Point of View:
Definition of Supply Chain Excellence

We Are Studying How Well Companies Have
Managed the Trade-offs in the Last Decade
The Supply Chain Effective Frontier
Managing Trade-offs

• Each industry has a different pattern of trade-
offs of balancing growth, profitability, cycles and
complexity.
• Companies that are supply chain leaders have
very small movement at these intersections with
a balanced portfolio of metrics.
• Leaders show year-over-year improvement
against a supply chain strategy.
What Have We Learned?

Ratios Available

A Closer Look at Performance:
How to Read the Slides

Ratios Used in This Analysis

One Company: Two Metrics
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source
2002 2012
0
3
6
9
12
15
0 250 500 750 1,000 1,250
InventoryTurns
Revenue per Employee (K$)
The Dow Chemical Company
Best Scenario
DOW
999, 6.7Trace the line from
2002 point to 2012
point to follow the
performance over
time.
The diamond shows the company’s average over the period.
Ex: The Dow Chemical Company (DOW) has an average of 461
K$ for revenue per employee and 4.0 for inventory turns.
Ideally, companies are increasing
inventory turns and revenue per
employee, moving towards the upper
right corner of the graph over time.
Here, we plot inventory turns (y-axis)
vs. revenue per employee (x-axis).
Average (Revenue per Employee, Inventory Turns)

Three Company Comparison
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source
2002
2012
2002 2012
2002 2012
0
3
6
9
12
15
0 250 500 750 1,000 1,250
InventoryTurns
Revenue per Employee (K$)
Ashland Inc. E. I. du Pont de Nemours and Co. The Dow Chemical Company
Best Scenario
DD
461, 4.0
Average (Revenue per Employee, Inventory Turns)
DOW
999, 6.7
ASH
457, 10.5
Adding in two
more companies
allows
comparison
across the peer
group.
Each company presents a unique pattern of how they
have balanced the two metrics over the decade while
striving towards the upper right corner.

Household Products
Financial Benchmarking

An Example of Benchmarking in
Household Products

Metrics Included for Comparison

Household Products: Cash-to-Cash Cycle
vs. Inventory Turns (2000-2012)

Household Products: Inventory Turns
vs. Revenue per Employee (2002-2012)

Household Products: Inventory Turns
vs. Operating Margin (2000-2012)

Household Products:
Comparison Summary

Household Products:
Our Interpretation
• P&G has delivered more balanced results
with better year-over-year performance than
Unilever.
• While P&G is 21% larger in revenue than
Unilever, the average productivity is 48%
higher.
• Sector operating margin has decreased in
the last three years.

Chemical

An Example of Benchmarking for
Two Chemical Companies

Chemical: Cash-to-Cash Cycle

Chemical: Inventory Turns

Chemical:
Comparison Summary

Chemical:
Our Interpretation
• Both companies struggled to maintain
balance in the Great Recession.
DuPont has been more resilient than
Ashland.
• Ashland historically pushed more
aggressive performance on supply
chain cycles, but was not able to
maintain these performance levels.

Pharmaceutical

An Example of Benchmarking for Two
Pharmaceutical Companies

Pharmaceutical: Cash-to-Cash Cycle

Pharmaceutical: Inventory Turns vs.
Revenue per Employee: (2002-2012)

Pharmaceutical: Inventory Turns

Pharmaceutical:
Comparison Summary

Pharmaceutical:
Our Interpretation
• Bristol-Myers Squibb has the most
balanced performance of supply chain
metrics in the pharmaceutical industry.
• Pharmaceutical company performance
is less resilient than household
products.

High-tech & Electronics

Two High-tech Companies

High-tech: Cash-to-Cash Cycle

High-tech: Inventory Turns

High-tech:
Comparison Summary

High-tech:
Our Interpretation
• The last decade for high-tech
companies have been rough and
turbulent. This has been to a greater
degree than other industries.
• Seagate has outperformed Western
Digital in their ability to balance supply
chain financial ratios in a tough market.

Apparel

Note: Zara is a brand of Inditex
Two Apparel Companies

Apparel: Cash-to-Cash
vs. Inventory Turns 2001-2012

Apparel: Inventory Turns

Apparel:
Comparison Summary

Apparel:
Our Interpretation
• Both companies have out-performed their
peer group in operating margin and
under-performed in growth.
• At 1/20th the size of the supply chain
leader Inditex (the parent company of
Zara), Lululemon has balanced supply
chain ratios, showing year-over-year
improvement.

Mass Merchandising Retail

Two Retail Companies

Retail: Cash-to-Cash Cycle

Retail: Inventory Turns

Retail:
Comparison Summary

Retail:
Our Interpretation
• Wal-Mart demonstrates greater
resiliency with better year-over-year
performance in their sector.

Can We Help You?
We are working with many companies to help
them benchmark their financial data to better
understand corporate performance on the
Supply Chain Effective Frontier. This is helpful
to understand:
– Supply chain potential
– Industry patterns
– Progress against peer group
– Overall performance
We would love to help you and your team.

Next Steps
Contact Regina Denman at Supply Chain
Insights to talk about your individual project.
Regina can be reached at:
Email: regina.denman@supplychaininsights.com
Phone: 617-410-8571

For More on This and Other Topics:
Join Us!
www.supplychaininsightsglobalsummit.com
It is not too late!

Supply Chain Insights' Financial Benchmarking Examples - 27 AUG 2013

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Supply Chain Insights' Financial Benchmarking Examples - 27 AUG 2013

Similar to Supply Chain Insights' Financial Benchmarking Examples - 27 AUG 2013 (20)

More from Lora Cecere

More from Lora Cecere (20)

Recently uploaded

Recently uploaded (20)

Supply Chain Insights' Financial Benchmarking Examples - 27 AUG 2013