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.
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 Chains to Admire - An Analysis of Supply Chain Excellence for 2006-2013Lora Cecere
Executive Overview
Supply chain excellence matters. It can make or break corporate performance. To drive improvements, companies need a clear definition of supply chain competency. It is easier to state than to define, and the market is full of beliefs that are not grounded by hard, cold facts.
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. The reason? The supply chain is not well-understood by executive teams, and many companies have pursued a project-based approach (implementing multiple projects with ROI above a threshold) or a focus on vertical excellence (where functional charters create very strong functional excellence); however, this is misguided. We do not find that these two approaches make a difference. Instead, we find that it is supply chain leadership driving resilient, predictable, and forward-looking processes that drives sustained balance sheet improvement. We find that for top performers that it happens in a slow and steady pattern versus the big-bang approach.
Supply chain leaders want to drive excellence. By their nature, these leaders are competitive. They want to drive performance improvements, increase corporate value and outpace competitors. It is not easy. 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 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.
Collecting the data and doing the analysis in this report is the result of a 24-month effort. We were fearful at the end of the process that it would be difficult to pick the top performers, but we should not have worried. When we applied the methodology, the top companies hopped off the page. They were easy to spot. Listed by industry, the Companies to Admire are listed in Table 4. Within a peer group, we place them within alpha order. Due to the complexity of the analysis it is hard to rate them more granularly.
No companies made the list from the contract manufacturing, medical device, paper, pharmaceutical or retail peer groups. Likewise, there were more companies that made the list in the industrial than the consumer value networks.
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 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 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 Index: Evaluating the Consumer Value Network -24 JUN 2014Lora Cecere
Executive Overview
Supply chain management is a balancing act. It requires alignment. This is easier said than done. The terms lack definition. What is balance? How can companies judge alignment? What defines improvement? In this series of reports, we want to help.
Day by day leaders are forced to make decisions on priorities and trade-offs like growth, profitability, cycle, and complexity. The supply chain leader is charged with improving the potential of an organization at the intersection of operating margins, inventory turns and case-fill rate1. But are the choices that are made conscious or unconscious? This is a strong factor in determining supply chain excellence. It is our hope that through this series of reports the choices can be made consciously, based on an improved knowledge of what is possible.
In our research, we find that laggards are held hostage and struggle to balance disparate demands with the threat of throwing the supply chain out of alignment. Success requires a nuanced approach using a portfolio of carefully selected metrics to ensure success.
While supply chain excellence does not make a company, it is hard for a company to succeed without it. While the discrete industries are more focused on cycles, the consumer value network is more focused on the optimization of flows.
Progress on the Supply Chain Index
The Supply Chain Index is a new methodology to measure corporate performance on the Supply Chain Effective Frontier. It was defined by the Supply Chain Insights team based on 30 months of research.
We find that supply chain practitioners struggle to manage conflicting priorities. To visualize this, we built the Effective Frontier Model. As shown in Figure 2, the Effective Frontier visualizes the competing priorities of every supply chain leader. Growth and profitability should be maximized, cycle time should be reduced, and complexity should be managed. However, an overweighed focus on any one of the four categories can wreak havoc on the operations of a supply chain. A focus on a singular metric can throw the supply chain out of balance.
The Supply Chain Index is designed to measure progress on balance, and metrics alignment. To build the Index, we chose the metrics of year-over-year growth, return on invested capital (ROIC), operating margin and inventory turns.
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 Pharmaceutical Companies - 2016Lora Cecere
Supply Chain Metrics That Matter: A Focus on Pharmaceutical Companies – 2016
2006-2015
This report is based on analysis of financial balance sheet data and income statements for the pharmaceutical industry over the period of 2006-2015. (Data is sourced from YCharts). The report reflects insights from the pre- and post-recession periods and compares the progress of companies within the peer group(s).
RESEARCH OVERVIEW:
Report Details: This report is based on analysis of financial balance sheet and income statement data within the pharmaceutical 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 pharmaceutical supply chains and to determine which Pharmaceutical company’s supply chain did the best on the delivery of a portfolio of metrics over the last decade.
Hypothesis: The supply chain within the pharmaceutical industry is increasing in importance to deliver on the objectives of quality, drug efficacy and reliability. Risk mitigation, and counterfeiting are important cornerstones for the end-to-end supply chain vision.
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 Chains to Admire - An Analysis of Supply Chain Excellence for 2006-2013Lora Cecere
Executive Overview
Supply chain excellence matters. It can make or break corporate performance. To drive improvements, companies need a clear definition of supply chain competency. It is easier to state than to define, and the market is full of beliefs that are not grounded by hard, cold facts.
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. The reason? The supply chain is not well-understood by executive teams, and many companies have pursued a project-based approach (implementing multiple projects with ROI above a threshold) or a focus on vertical excellence (where functional charters create very strong functional excellence); however, this is misguided. We do not find that these two approaches make a difference. Instead, we find that it is supply chain leadership driving resilient, predictable, and forward-looking processes that drives sustained balance sheet improvement. We find that for top performers that it happens in a slow and steady pattern versus the big-bang approach.
Supply chain leaders want to drive excellence. By their nature, these leaders are competitive. They want to drive performance improvements, increase corporate value and outpace competitors. It is not easy. 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 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.
Collecting the data and doing the analysis in this report is the result of a 24-month effort. We were fearful at the end of the process that it would be difficult to pick the top performers, but we should not have worried. When we applied the methodology, the top companies hopped off the page. They were easy to spot. Listed by industry, the Companies to Admire are listed in Table 4. Within a peer group, we place them within alpha order. Due to the complexity of the analysis it is hard to rate them more granularly.
No companies made the list from the contract manufacturing, medical device, paper, pharmaceutical or retail peer groups. Likewise, there were more companies that made the list in the industrial than the consumer value networks.
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 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 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 Index: Evaluating the Consumer Value Network -24 JUN 2014Lora Cecere
Executive Overview
Supply chain management is a balancing act. It requires alignment. This is easier said than done. The terms lack definition. What is balance? How can companies judge alignment? What defines improvement? In this series of reports, we want to help.
Day by day leaders are forced to make decisions on priorities and trade-offs like growth, profitability, cycle, and complexity. The supply chain leader is charged with improving the potential of an organization at the intersection of operating margins, inventory turns and case-fill rate1. But are the choices that are made conscious or unconscious? This is a strong factor in determining supply chain excellence. It is our hope that through this series of reports the choices can be made consciously, based on an improved knowledge of what is possible.
In our research, we find that laggards are held hostage and struggle to balance disparate demands with the threat of throwing the supply chain out of alignment. Success requires a nuanced approach using a portfolio of carefully selected metrics to ensure success.
While supply chain excellence does not make a company, it is hard for a company to succeed without it. While the discrete industries are more focused on cycles, the consumer value network is more focused on the optimization of flows.
Progress on the Supply Chain Index
The Supply Chain Index is a new methodology to measure corporate performance on the Supply Chain Effective Frontier. It was defined by the Supply Chain Insights team based on 30 months of research.
We find that supply chain practitioners struggle to manage conflicting priorities. To visualize this, we built the Effective Frontier Model. As shown in Figure 2, the Effective Frontier visualizes the competing priorities of every supply chain leader. Growth and profitability should be maximized, cycle time should be reduced, and complexity should be managed. However, an overweighed focus on any one of the four categories can wreak havoc on the operations of a supply chain. A focus on a singular metric can throw the supply chain out of balance.
The Supply Chain Index is designed to measure progress on balance, and metrics alignment. To build the Index, we chose the metrics of year-over-year growth, return on invested capital (ROIC), operating margin and inventory turns.
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 Pharmaceutical Companies - 2016Lora Cecere
Supply Chain Metrics That Matter: A Focus on Pharmaceutical Companies – 2016
2006-2015
This report is based on analysis of financial balance sheet data and income statements for the pharmaceutical industry over the period of 2006-2015. (Data is sourced from YCharts). The report reflects insights from the pre- and post-recession periods and compares the progress of companies within the peer group(s).
RESEARCH OVERVIEW:
Report Details: This report is based on analysis of financial balance sheet and income statement data within the pharmaceutical 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 pharmaceutical supply chains and to determine which Pharmaceutical company’s supply chain did the best on the delivery of a portfolio of metrics over the last decade.
Hypothesis: The supply chain within the pharmaceutical industry is increasing in importance to deliver on the objectives of quality, drug efficacy and reliability. Risk mitigation, and counterfeiting are important cornerstones for the end-to-end supply chain vision.
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).
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.
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 Critical Look at Operating Margin -10 DEC...Lora Cecere
Executive Overview
If a supply chain leader cannot demonstrate improvement in operating margin, they are often fired. Consequences are severe. However, as complexity in global supply chains has increased, it has become increasingly difficult to improve profitability metrics. Among supply chain leaders, operating margin is one of the preferred measures of profitability.
Successful supply chain management is about balance and particularly the balancing of growth, profitability, cycle and complexity. This is what we call The Effective Frontier. Supply chain management is getting tougher as commodity markets get more volatile, wage prices increase, and product life cycles shorten. It is up to the supply chain leader to design the network and processes to protect margin and balance the supply chain. This is becoming an increasingly difficult task.
The challenges are many and they vary by industry. Commodity pressure is higher than at any previous point in time as shown in Figure 2. There is a limited toolkit for how to offset margin pressure. They include better planning, transportation optimization, rethinking network design, improved Sales & Operations (S&OP) execution, and Kanban events with suppliers and customers. None are easy or quick fixes.
Additionally, while many think that calculating cost and monitoring profitability should be easy, this is not true. In our research, we find that only 24% of companies surveyed can easily access total supply chain cost information. The ability to get to the data and connect the dots on cost to operating margin performance remains difficult for most. In fact, as shown in Figure 3, for 53% of survey respondents, getting to total supply chain cost is difficult.
Operating margin is a straightforward calculation with serious implications. Of the ten industries profiled in Table 1, only two have increased operating margin over the period: consumer electronics and consumer packaged goods. Furthermore, of the 18 companies profiled individually in this report, less than 40% (7/18 = 39%) have made progress on margin in 2012 compared to their result in 2000. As shown in Table 1, it is becoming more and more difficult for companies to maintain balance on their portfolio of supply chain metrics. This trend is true across all industry subgroups.
Companies with the highest operating margin tend to be the least mature in their understanding of supply chain principles. As a result, they demonstrate the worst performance in balancing competing priorities on the Supply Chain Effective Frontier and are stuck on the Supply Chain Plateau. The positions of companies, and their relative successes over the last decade, are shown in figure 4.
Table 1 is sorted by average operating margin with pharmaceutical companies returning the highest average value at 0.25 over the period. With the patent cliff, and significant changes in the healthcare environment including ongoing implementation of the Affordable Care Act, ...
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: A Focus on Food and Beverage Companies - 15...Lora Cecere
Executive Overview
Food and Beverage supply chains serve local markets. Regional taste buds drive localized assortment. While many are attempting to be global, they have strong regional governance drivers. As a result, growth agendas have driven an increase in items by 32% since 2010. Product complexity grew faster than growth. Average sales per item dropped 22% . This increase in complexity lengthened the long tail of the supply chain affecting both cost and inventory.
We hope this report can be a guide to help companies understand what is possible to determine more accurate set points, and understand the relationship between supply chain metric performance and value.
As will be seen, in the Food and Beverage industries we find most companies to be stuck on the critical metrics that drive value. They have either regressed in supply chain performance or they are at the same point they were a decade ago. For many supply chain leaders who attend conferences this may seem unfathomable. There is an industry belief that companies have implemented new technologies, and evolved processes, and driven improved balance sheet results. As will be shown in this report, this is not true.
The analysis also demonstrates the importance of outside-in supply chain excellence programs. Who does the best? Hershey outperforms within the Food group and makes the Supply Chains to Admire list for 2016; and while AB/InBev drives the strongest performance in the Beverage category, it is not sufficient to make the list. The goal of this report is to enable benchmarking and to spark a new conversation on value in the definition of supply chain excellence.
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 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: A Focus on Apparel - 9 May 2013Lora Cecere
Different industries are making progress on supply chain excellence at different rates. In the writing of the Supply Chain Metrics That Matter series of reports, we see that the consumer electronics industry is one of the only sectors making consistent and sustainable progress in balancing growth, profitability, cycles and complexity. We also see that many other industries—chemical, consumer products, pharmaceutical and medical device—are stuck on a horizontal plateau. They are treading water with no company able to move forward. In contrast, we see that the apparel industry is trending backwards.
When we analyze progress in the apparel industry over the last decade, we see a degradation of results on the Supply Chain Effective Frontier: days of inventory are flat or increasing and three of the six companies show flat or decreasing performance on operating margin. This is the sharpest reversal in progress on supply chain excellence that we have seen in the Supply Chain Metrics That Matter series (for a complete series listing see the Appendix).
Figure 1 illustrates the intersection of inventory turns and revenue per employee over the preceding decade. Ideally, companies would be moving consistently from the lower left to the upper right as they increased both inventory turns and revenue per employee performance. Instead, we see inconsistency, a lack of resiliency and stagnancy across the industry.
Supply Chain Metrics That Matter: A Focus on Chemical, and Oil & Gas Companie...Lora Cecere
Executive Overview
Chemical supply chains serve global markets and multiple industries at varying levels of maturity. Over the last decade, no company stands out as a leader. The industry is stuck unable to make significant improvement on margin, inventory and asset utilization. The facts run counter to traditional beliefs. In most companies, there is a pervasive belief that Chemical and Oil and Gas companies implemented new technologies, and evolved processes to drive improved balance sheet results. As will be shown in this report, this is not true.
Why did this happen? The focus of the chemical companies remains functional and inside-out. The industry is slow to build adaptive networks and even slower to adopt demand-driven processes. This is in sharp contrast to an industry like consumer electronics where the thrusts and changes were swift and direct. To survive, these companies adopted new processes and technologies at a quicker rate than those in the Chemical, and Oil and Gas industries.
BASF wins the Supply Chains to Admire award while Statoil becomes a finalist. To help the industry to understand the current state and benchmark current processes, here we share insights.
The Race for Growth
The chemical industry experienced a post-recessionary boom with growth rates of 11% in the period of 2010-2012. In the recent three years, the growth rate has slowed to -1%. These recent growth rates were greatly affected by the boon and slowing of the Chinese markets and by the ups and down in crude. Over the period, AgroSciences and Specialty chemicals experienced the highest growth rates of the sector.
With the dramatic impact of the economy of growth and industry sector performance, one would think that the supply chain leaders of this sector would be aggressively pursuing market-driven supply chain practices to forecast based on market indicators and translate channel demand to supply. This is not the case. These processes remain very supply-centered with no chemical company driving market-driven programs.
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: A Focus on Food & Beverage Companies 2017Lora Cecere
Executive Overview
The Food and Beverage industry is a crowded market with many players. While the competition is intense, demand for healthy and fresh food products is high, and the industry is poised to grow in a volatile economy. During tough economic times, consumers will cut spending on products they do not need; however, they will not cut spending on food and beverages to the same extent.
The key to a competitive advantage is aligning and synchronizing the supply chain to manage material spend in the face of ever-changing demand. Few do this well. Consumers want local and fresh. They want brands they can trust. Traditional food manufacturing supply chains are in conflict, offering packaged foods with long shelf lives.
To try to drive excitement, companies invested in line extensions, a variety of different flavors, sizes, and variety packs, all causing supply chain difficulties for them. This complexity added cost, increased demand volatility, and created uncertainty. As a result, companies struggle to anticipate which flavor, or size, consumers will demand at a given time.
Consumers are fickle about what they eat. As a result, the Food and Beverage Industry arguably sees more consumer shift in demand than any other industry. Thus it becomes crucial that food and beverage companies implement outside-In processes. Becoming market-driven allows companies to better sense shifts in demand.
The Food and Beverage industry is also heavily regulated, due to it being a potential risk to so many consumers. The Food Safety Modernization Act dictates that companies must use approved suppliers and perform due diligence in monitoring supplier activity. Product fraud in the Global Food and Beverage industry has been extremely prevalent and presents a high-level risk to the company. Olive oil containing motor oil or corn oil, and alcoholic drinks containing ethanol are examples of fraudulent food products.
Traceability from supplier to consumer becomes ever more important for this industry to ensure product authenticity, as well as establishing trust with the consumer. Smart labeling and track-and-trace visibility are industry imperatives.
Update on the progress of supply chain leaders on progress on the Supply Chain Effective Frontier (balancing growth, profitability, cycles and complexity). Philippe Lambotte, SVP of Merck, recommends a seat at the table, focus on supply chain strategy, eliminate the white noise, and stay the course.
Executive Summary
Supply chain management it is now three decades old. The processes are maturing. With the increase in complexity in markets and new product launch, supply chain excellence matters more than ever.
Manufacturing and distribution companies are looking for insights on how to parlay advances in supply chain management into balance sheet results. This is the goal of this report.
This report is a summary of research conducted during 2015. It provides a short summary of the major insights gathered from six quantitative and four qualitative studies. For more in-depth analysis reference the full reports outlined in the appendix.
The Global Supply Chain Ups the Ante for Risk ManagementLora Cecere
Executive Summary
Unfortunately, supply chain disruptions are a fact of life for today’s global multinational company. The reasons are many. A risk management event can be triggered by natural events, geopolitical shifts, economic uncertainty and demand/supply volatility.
Historically, the roots and genesis of risk management programs were based on attempts to reduce insurance costs. Today it is much, much more. The focus is on prevention, early sensing, and the execution of well-orchestrated plans to mitigate the impact of a disruption. Global supply chain leaders understand that designing and implementing a robust risk management practice is essential and fundamental to running a global business. The size of the bubble in Figure 2 indicates the relative level of risk today, and the colors correspond to the level of risk.
Figure 2. Comparison of Risk Drivers for the Past Five Years and Future Five Years
While product quality and supply chain visibility are declining but still important, the areas of operations complexity and the definition of globalization infrastructure is increasing. The areas of economic uncertainty, supplier reliability, along with demand volatility, are continued risk factors.
Over time, as supply chains morphed from regional to global multinational organizations, globalization and regulatory compliance increased. As a result, procurement has shifted from traditional programs focused solely on contract management, price and term negotiations, and supplier scorecards to include the evolution of supplier development, to manage product quality and multi-tier supplier relationships, in and across value chain relationships.
Today is a less certain world than a decade ago. Geopolitical shifts, economic uncertainty and demand/supply volatility are rising. In addition, to spur growth companies are quick to add products to the item master, but slow to rationalize the portfolio. The rising complexity of items sold decreases the organization’s ability to forecast, and the longer lead times across multiple tiers of sourcing and supply increases the Bullwhip Effect’s impact (distortion of the demand signal across multiple tiers of the value network). As a result, there is a greater need for supplier development and supplier sensing to reduce supply risk. Inventory management and supplier financial sensing grow in importance with the increase in uncertainty.
Risk management is no longer narrowly focused: a technology, a response to a natural disaster, or improving supply chain visibility. Instead, it is more holistic with a focus on managing demand and supply variability cross-functionally and improving outcomes in an uncertain world.
In this report, we share insights on the current state of risk management programs while providing recommendations on what defines excellence.
Supply Chain Metrics That Matter: A Focus on the High-Tech Industry - 2016Lora Cecere
Executive Overview
High-Tech supply chains serve global markets with regional preferences. They include some of the most advanced processes and strongest supply chain leadership across all industries. As a result, the value chain made more progress than others in the course of the last decade.
Unlike other value chains, all four segments of this value chain improved inventory turns. It was through hard work, network design, and a focus on planning. While other industries implemented supply chain planning and then turned to spreadsheets, this industry got good at managing inventories. The stakes were higher. As inventories sit in the channel for the High-Tech industry, prices fall. As a result, this industry has developed some of the best inventory practices across all industries.
On the flip-side, the lack of growth and the declining margins of the Contract Manufacturing industry is a risk for this value chain. Within the High-Tech value chain, Contract Manufacturing is the weak link.
The industry will drive the autonomous supply chain. These leaders will make the digital pivot first. With some of the earliest technology adopters, and with more to gain from the adoption of technology, look for companies like Apple, Cisco, Dell, EMC, Emerson, Intel, and Samsung to drive cloud-based computing, cognitive computing, the Internet of Things (IoT), sensor development, and prescriptive analytics. The industry is also driving a shift through wide adoption and use of Open Source code from the Apache Software Foundation. These manufacturing leaders will pave the way for others. Their ability to lead will drive cross-industry demand and growth agendas.
We hope that this report is a useful guide for companies in other industries to understand the impact of technology adoption on supply chain excellence.
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.
Putting Together the Pieces: Supply Chain Analytics - 2 SEP 2017Lora Cecere
RESEARCH OVERVIEW:
Report Details: This report is the result of six months of studying the emerging supply chain analytics technology market. This report is based on qualitative research completed in the period of January-July 2016. In this research effort, we interviewed thirty-five technology analytics providers to understand their solutions. This was followed by interviews with thirty innovative supply chain leaders. To support this research and take it one step further, we augment these qualitative insights with quantitative survey analysis collected in preparation for the Supply Chain Insights Global Summit. In this research, we share insights on the importance of supply chain analytics in Supply Chain 2030 strategies. Here we share these findings.
Objective: To understand the changing role of supply chain analytics in supply chain strategy.
Highlight: With the changing face of supply chain analytics companies have greater opportunities to drive insights and gain competitive advantage. This report is designed to help companies bridge traditional thinking on supply chain analytics while embracing emerging technologies.
Executive Summary
Supply chains are drowning in data, but are low on insights. While the cost of computing memory was once a barrier to executing an analytics strategy, this is no longer the case. The largest barrier is the understanding of new forms of analytics.
Historically, the term supply chain analytics was used to describe reporting. This is no longer the case. Today there are more options and capabilities for supply chain analytics. There is a proliferation of new technologies flooding the market.
Ironically, despite the explosion of options as shown in Figure 1, the supply chain operating team is more conservative. It is a skewed distribution. When it comes to decision support, the number of late adopters outnumber the early adopters three to one. The lack of early adopters, the rapid rate of change, and the conventional architectural definitions (primarily focused on Enterprise Resource Planning or ERP-based architectures) are barriers to the adoption of new forms of supply chain analytics.
Executive Summary
Supply chain excellence makes a difference to corporate value. Resilient, predictable, and forward-looking supply chain processes drive sustained balance sheet improvement. This is especially true in times of declining growth. (In this research, only four industries—aerospace & defense, apparel, automotive, and packaging suppliers—experienced growth for 2009-2014.)
Leaders want to drive excellence. By their nature these leaders are competitive. They want to power performance improvements, increase corporate value, and outpace competitors. It is not easy. The rate of business change is intense and the personal stakes are high. Day after day, supply chain 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 there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology there is now a way to gauge improvement.
When we started this work we were fearful that the methodology would not be selective enough to reward leaders. Our fear was that the list would be too large. However, we should not have worried. For two consecutive years only 10% of the companies studied are performing above the average of their peer group on the Supply Chain Metrics That Matter—operating margin, inventory turns and Return on Invested Capital—while driving improvement to a greater degree than their peer group. It is a select group. Figure 5 shows the 26 winners of the 2015 Supply Chains to Admire analysis.
The 26 companies are: Anheuser-Busch InBev; Audi AG; Biogen Inc; CCL Industries Inc.; Cisco Systems, Inc.; Coloplast Corp.; CVS Pharmacy; Dollar General Corporation; Dollar Tree, Inc.; Eastman Chemical Company; EMC Corporation; The Estée Lauder Companies Inc.; General Mills, Inc.; Intel Corporation; Deere & Company; Lexmark International Inc.; L'Oréal Group; Nike, Inc.; PPG Industries; Qualcomm Inc.; Samsung Electronics Co. Ltd.; United Tractors; Wal-Mart Stores, Inc.; Western Digital Corporation; and Whole Foods Market Inc. (Note: Shorter corporate or trade names are used in the tables within this report.)
Seven companies have made the list for two consecutive years: Cisco Systems, Inc.; General Mills, Inc.; Eastman Chemical Company; EMC Corporation; Anheuser-Busch InBev; Intel Corporation; and Nike, Inc.
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:
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.
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).
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.
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 Critical Look at Operating Margin -10 DEC...Lora Cecere
Executive Overview
If a supply chain leader cannot demonstrate improvement in operating margin, they are often fired. Consequences are severe. However, as complexity in global supply chains has increased, it has become increasingly difficult to improve profitability metrics. Among supply chain leaders, operating margin is one of the preferred measures of profitability.
Successful supply chain management is about balance and particularly the balancing of growth, profitability, cycle and complexity. This is what we call The Effective Frontier. Supply chain management is getting tougher as commodity markets get more volatile, wage prices increase, and product life cycles shorten. It is up to the supply chain leader to design the network and processes to protect margin and balance the supply chain. This is becoming an increasingly difficult task.
The challenges are many and they vary by industry. Commodity pressure is higher than at any previous point in time as shown in Figure 2. There is a limited toolkit for how to offset margin pressure. They include better planning, transportation optimization, rethinking network design, improved Sales & Operations (S&OP) execution, and Kanban events with suppliers and customers. None are easy or quick fixes.
Additionally, while many think that calculating cost and monitoring profitability should be easy, this is not true. In our research, we find that only 24% of companies surveyed can easily access total supply chain cost information. The ability to get to the data and connect the dots on cost to operating margin performance remains difficult for most. In fact, as shown in Figure 3, for 53% of survey respondents, getting to total supply chain cost is difficult.
Operating margin is a straightforward calculation with serious implications. Of the ten industries profiled in Table 1, only two have increased operating margin over the period: consumer electronics and consumer packaged goods. Furthermore, of the 18 companies profiled individually in this report, less than 40% (7/18 = 39%) have made progress on margin in 2012 compared to their result in 2000. As shown in Table 1, it is becoming more and more difficult for companies to maintain balance on their portfolio of supply chain metrics. This trend is true across all industry subgroups.
Companies with the highest operating margin tend to be the least mature in their understanding of supply chain principles. As a result, they demonstrate the worst performance in balancing competing priorities on the Supply Chain Effective Frontier and are stuck on the Supply Chain Plateau. The positions of companies, and their relative successes over the last decade, are shown in figure 4.
Table 1 is sorted by average operating margin with pharmaceutical companies returning the highest average value at 0.25 over the period. With the patent cliff, and significant changes in the healthcare environment including ongoing implementation of the Affordable Care Act, ...
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: A Focus on Food and Beverage Companies - 15...Lora Cecere
Executive Overview
Food and Beverage supply chains serve local markets. Regional taste buds drive localized assortment. While many are attempting to be global, they have strong regional governance drivers. As a result, growth agendas have driven an increase in items by 32% since 2010. Product complexity grew faster than growth. Average sales per item dropped 22% . This increase in complexity lengthened the long tail of the supply chain affecting both cost and inventory.
We hope this report can be a guide to help companies understand what is possible to determine more accurate set points, and understand the relationship between supply chain metric performance and value.
As will be seen, in the Food and Beverage industries we find most companies to be stuck on the critical metrics that drive value. They have either regressed in supply chain performance or they are at the same point they were a decade ago. For many supply chain leaders who attend conferences this may seem unfathomable. There is an industry belief that companies have implemented new technologies, and evolved processes, and driven improved balance sheet results. As will be shown in this report, this is not true.
The analysis also demonstrates the importance of outside-in supply chain excellence programs. Who does the best? Hershey outperforms within the Food group and makes the Supply Chains to Admire list for 2016; and while AB/InBev drives the strongest performance in the Beverage category, it is not sufficient to make the list. The goal of this report is to enable benchmarking and to spark a new conversation on value in the definition of supply chain excellence.
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 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: A Focus on Apparel - 9 May 2013Lora Cecere
Different industries are making progress on supply chain excellence at different rates. In the writing of the Supply Chain Metrics That Matter series of reports, we see that the consumer electronics industry is one of the only sectors making consistent and sustainable progress in balancing growth, profitability, cycles and complexity. We also see that many other industries—chemical, consumer products, pharmaceutical and medical device—are stuck on a horizontal plateau. They are treading water with no company able to move forward. In contrast, we see that the apparel industry is trending backwards.
When we analyze progress in the apparel industry over the last decade, we see a degradation of results on the Supply Chain Effective Frontier: days of inventory are flat or increasing and three of the six companies show flat or decreasing performance on operating margin. This is the sharpest reversal in progress on supply chain excellence that we have seen in the Supply Chain Metrics That Matter series (for a complete series listing see the Appendix).
Figure 1 illustrates the intersection of inventory turns and revenue per employee over the preceding decade. Ideally, companies would be moving consistently from the lower left to the upper right as they increased both inventory turns and revenue per employee performance. Instead, we see inconsistency, a lack of resiliency and stagnancy across the industry.
Supply Chain Metrics That Matter: A Focus on Chemical, and Oil & Gas Companie...Lora Cecere
Executive Overview
Chemical supply chains serve global markets and multiple industries at varying levels of maturity. Over the last decade, no company stands out as a leader. The industry is stuck unable to make significant improvement on margin, inventory and asset utilization. The facts run counter to traditional beliefs. In most companies, there is a pervasive belief that Chemical and Oil and Gas companies implemented new technologies, and evolved processes to drive improved balance sheet results. As will be shown in this report, this is not true.
Why did this happen? The focus of the chemical companies remains functional and inside-out. The industry is slow to build adaptive networks and even slower to adopt demand-driven processes. This is in sharp contrast to an industry like consumer electronics where the thrusts and changes were swift and direct. To survive, these companies adopted new processes and technologies at a quicker rate than those in the Chemical, and Oil and Gas industries.
BASF wins the Supply Chains to Admire award while Statoil becomes a finalist. To help the industry to understand the current state and benchmark current processes, here we share insights.
The Race for Growth
The chemical industry experienced a post-recessionary boom with growth rates of 11% in the period of 2010-2012. In the recent three years, the growth rate has slowed to -1%. These recent growth rates were greatly affected by the boon and slowing of the Chinese markets and by the ups and down in crude. Over the period, AgroSciences and Specialty chemicals experienced the highest growth rates of the sector.
With the dramatic impact of the economy of growth and industry sector performance, one would think that the supply chain leaders of this sector would be aggressively pursuing market-driven supply chain practices to forecast based on market indicators and translate channel demand to supply. This is not the case. These processes remain very supply-centered with no chemical company driving market-driven programs.
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: A Focus on Food & Beverage Companies 2017Lora Cecere
Executive Overview
The Food and Beverage industry is a crowded market with many players. While the competition is intense, demand for healthy and fresh food products is high, and the industry is poised to grow in a volatile economy. During tough economic times, consumers will cut spending on products they do not need; however, they will not cut spending on food and beverages to the same extent.
The key to a competitive advantage is aligning and synchronizing the supply chain to manage material spend in the face of ever-changing demand. Few do this well. Consumers want local and fresh. They want brands they can trust. Traditional food manufacturing supply chains are in conflict, offering packaged foods with long shelf lives.
To try to drive excitement, companies invested in line extensions, a variety of different flavors, sizes, and variety packs, all causing supply chain difficulties for them. This complexity added cost, increased demand volatility, and created uncertainty. As a result, companies struggle to anticipate which flavor, or size, consumers will demand at a given time.
Consumers are fickle about what they eat. As a result, the Food and Beverage Industry arguably sees more consumer shift in demand than any other industry. Thus it becomes crucial that food and beverage companies implement outside-In processes. Becoming market-driven allows companies to better sense shifts in demand.
The Food and Beverage industry is also heavily regulated, due to it being a potential risk to so many consumers. The Food Safety Modernization Act dictates that companies must use approved suppliers and perform due diligence in monitoring supplier activity. Product fraud in the Global Food and Beverage industry has been extremely prevalent and presents a high-level risk to the company. Olive oil containing motor oil or corn oil, and alcoholic drinks containing ethanol are examples of fraudulent food products.
Traceability from supplier to consumer becomes ever more important for this industry to ensure product authenticity, as well as establishing trust with the consumer. Smart labeling and track-and-trace visibility are industry imperatives.
Update on the progress of supply chain leaders on progress on the Supply Chain Effective Frontier (balancing growth, profitability, cycles and complexity). Philippe Lambotte, SVP of Merck, recommends a seat at the table, focus on supply chain strategy, eliminate the white noise, and stay the course.
Executive Summary
Supply chain management it is now three decades old. The processes are maturing. With the increase in complexity in markets and new product launch, supply chain excellence matters more than ever.
Manufacturing and distribution companies are looking for insights on how to parlay advances in supply chain management into balance sheet results. This is the goal of this report.
This report is a summary of research conducted during 2015. It provides a short summary of the major insights gathered from six quantitative and four qualitative studies. For more in-depth analysis reference the full reports outlined in the appendix.
The Global Supply Chain Ups the Ante for Risk ManagementLora Cecere
Executive Summary
Unfortunately, supply chain disruptions are a fact of life for today’s global multinational company. The reasons are many. A risk management event can be triggered by natural events, geopolitical shifts, economic uncertainty and demand/supply volatility.
Historically, the roots and genesis of risk management programs were based on attempts to reduce insurance costs. Today it is much, much more. The focus is on prevention, early sensing, and the execution of well-orchestrated plans to mitigate the impact of a disruption. Global supply chain leaders understand that designing and implementing a robust risk management practice is essential and fundamental to running a global business. The size of the bubble in Figure 2 indicates the relative level of risk today, and the colors correspond to the level of risk.
Figure 2. Comparison of Risk Drivers for the Past Five Years and Future Five Years
While product quality and supply chain visibility are declining but still important, the areas of operations complexity and the definition of globalization infrastructure is increasing. The areas of economic uncertainty, supplier reliability, along with demand volatility, are continued risk factors.
Over time, as supply chains morphed from regional to global multinational organizations, globalization and regulatory compliance increased. As a result, procurement has shifted from traditional programs focused solely on contract management, price and term negotiations, and supplier scorecards to include the evolution of supplier development, to manage product quality and multi-tier supplier relationships, in and across value chain relationships.
Today is a less certain world than a decade ago. Geopolitical shifts, economic uncertainty and demand/supply volatility are rising. In addition, to spur growth companies are quick to add products to the item master, but slow to rationalize the portfolio. The rising complexity of items sold decreases the organization’s ability to forecast, and the longer lead times across multiple tiers of sourcing and supply increases the Bullwhip Effect’s impact (distortion of the demand signal across multiple tiers of the value network). As a result, there is a greater need for supplier development and supplier sensing to reduce supply risk. Inventory management and supplier financial sensing grow in importance with the increase in uncertainty.
Risk management is no longer narrowly focused: a technology, a response to a natural disaster, or improving supply chain visibility. Instead, it is more holistic with a focus on managing demand and supply variability cross-functionally and improving outcomes in an uncertain world.
In this report, we share insights on the current state of risk management programs while providing recommendations on what defines excellence.
Supply Chain Metrics That Matter: A Focus on the High-Tech Industry - 2016Lora Cecere
Executive Overview
High-Tech supply chains serve global markets with regional preferences. They include some of the most advanced processes and strongest supply chain leadership across all industries. As a result, the value chain made more progress than others in the course of the last decade.
Unlike other value chains, all four segments of this value chain improved inventory turns. It was through hard work, network design, and a focus on planning. While other industries implemented supply chain planning and then turned to spreadsheets, this industry got good at managing inventories. The stakes were higher. As inventories sit in the channel for the High-Tech industry, prices fall. As a result, this industry has developed some of the best inventory practices across all industries.
On the flip-side, the lack of growth and the declining margins of the Contract Manufacturing industry is a risk for this value chain. Within the High-Tech value chain, Contract Manufacturing is the weak link.
The industry will drive the autonomous supply chain. These leaders will make the digital pivot first. With some of the earliest technology adopters, and with more to gain from the adoption of technology, look for companies like Apple, Cisco, Dell, EMC, Emerson, Intel, and Samsung to drive cloud-based computing, cognitive computing, the Internet of Things (IoT), sensor development, and prescriptive analytics. The industry is also driving a shift through wide adoption and use of Open Source code from the Apache Software Foundation. These manufacturing leaders will pave the way for others. Their ability to lead will drive cross-industry demand and growth agendas.
We hope that this report is a useful guide for companies in other industries to understand the impact of technology adoption on supply chain excellence.
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.
Putting Together the Pieces: Supply Chain Analytics - 2 SEP 2017Lora Cecere
RESEARCH OVERVIEW:
Report Details: This report is the result of six months of studying the emerging supply chain analytics technology market. This report is based on qualitative research completed in the period of January-July 2016. In this research effort, we interviewed thirty-five technology analytics providers to understand their solutions. This was followed by interviews with thirty innovative supply chain leaders. To support this research and take it one step further, we augment these qualitative insights with quantitative survey analysis collected in preparation for the Supply Chain Insights Global Summit. In this research, we share insights on the importance of supply chain analytics in Supply Chain 2030 strategies. Here we share these findings.
Objective: To understand the changing role of supply chain analytics in supply chain strategy.
Highlight: With the changing face of supply chain analytics companies have greater opportunities to drive insights and gain competitive advantage. This report is designed to help companies bridge traditional thinking on supply chain analytics while embracing emerging technologies.
Executive Summary
Supply chains are drowning in data, but are low on insights. While the cost of computing memory was once a barrier to executing an analytics strategy, this is no longer the case. The largest barrier is the understanding of new forms of analytics.
Historically, the term supply chain analytics was used to describe reporting. This is no longer the case. Today there are more options and capabilities for supply chain analytics. There is a proliferation of new technologies flooding the market.
Ironically, despite the explosion of options as shown in Figure 1, the supply chain operating team is more conservative. It is a skewed distribution. When it comes to decision support, the number of late adopters outnumber the early adopters three to one. The lack of early adopters, the rapid rate of change, and the conventional architectural definitions (primarily focused on Enterprise Resource Planning or ERP-based architectures) are barriers to the adoption of new forms of supply chain analytics.
Executive Summary
Supply chain excellence makes a difference to corporate value. Resilient, predictable, and forward-looking supply chain processes drive sustained balance sheet improvement. This is especially true in times of declining growth. (In this research, only four industries—aerospace & defense, apparel, automotive, and packaging suppliers—experienced growth for 2009-2014.)
Leaders want to drive excellence. By their nature these leaders are competitive. They want to power performance improvements, increase corporate value, and outpace competitors. It is not easy. The rate of business change is intense and the personal stakes are high. Day after day, supply chain 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 there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology there is now a way to gauge improvement.
When we started this work we were fearful that the methodology would not be selective enough to reward leaders. Our fear was that the list would be too large. However, we should not have worried. For two consecutive years only 10% of the companies studied are performing above the average of their peer group on the Supply Chain Metrics That Matter—operating margin, inventory turns and Return on Invested Capital—while driving improvement to a greater degree than their peer group. It is a select group. Figure 5 shows the 26 winners of the 2015 Supply Chains to Admire analysis.
The 26 companies are: Anheuser-Busch InBev; Audi AG; Biogen Inc; CCL Industries Inc.; Cisco Systems, Inc.; Coloplast Corp.; CVS Pharmacy; Dollar General Corporation; Dollar Tree, Inc.; Eastman Chemical Company; EMC Corporation; The Estée Lauder Companies Inc.; General Mills, Inc.; Intel Corporation; Deere & Company; Lexmark International Inc.; L'Oréal Group; Nike, Inc.; PPG Industries; Qualcomm Inc.; Samsung Electronics Co. Ltd.; United Tractors; Wal-Mart Stores, Inc.; Western Digital Corporation; and Whole Foods Market Inc. (Note: Shorter corporate or trade names are used in the tables within this report.)
Seven companies have made the list for two consecutive years: Cisco Systems, Inc.; General Mills, Inc.; Eastman Chemical Company; EMC Corporation; Anheuser-Busch InBev; Intel Corporation; and Nike, Inc.
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:
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.
1000 Twitter Impressions Per Day In 2016 - 10 Easy Twitter Strategies To Incr...Thomas Lancaster
Twitter marketing can be challenging due to the volume of information being pushed to followers and the short survival time of most tweets. As an academic and marketer with an active following of several groups of people, I'm now in the positive position where my tweets average more than 1000 impressions per day (and, in some time periods, over 5000 impressions).
This presentation analyses my Twitter activity in early 2016, showcasing the tweets that were identified as the most successful. Based on the analysis, 10 strategies are identified that can be used to ensure high levels of Twitter engagement. The strategies are suitable for areas beyond academic circles and should apply equally to students, entrepreneurs, startup companies and others.
Luxury Men's Market - Where should you be?Yasha Chandra
Analysis done for luxury magazines in India purely from men's perspective. Suggestions created for Raghuvendra Rathore - a leading Indian designer synonymous for "Bandgala".
Visual effects for home and personal care.Umang Budhraja
Spheres and beads / Visual effects for Home and Personal care industry. Red, green, Blue, Black, Pink, purple, all beads enriched with vitamins, actives, flavors and fragrance. also surprise spheres with color changing beads. Also bio-degradable exfoliators.
Orchestrating a Supply Chain Competitive EdgeCognizant
An effective supply chain is the key to creating business value. This paper will help you benchmark your performance today and take a methodical organizational approach to improving your supply chain effectiveness.
Inventory Management: How Incremental Improvements Drive Big GainsCognizant
By feeding social and mobile data into planning systems and overlaying analytics, manufacturers and retailers can reduce inventory waste and more precisely target customers.
Summary report of research on supply chain performance in the pandemic. During COVID-19, supply chains were significantly less agile. Innovative companies did better than laggards. When companies were mature in finite scheduling, sales and operations planning and Available to Promise (ATP), manufacturers were more agile and reponsive.
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:
Today only one in three business leaders are satisfied with their supply chain. One of the issues is the lack of agility. In this report, we share case studies on how to improve supply chain agility. This report first defines supply chain agility and then shares case studies of agility techniques that work to improve the ability to deliver the same cost, quality and customer service given the rising levels of demand and supply volatility. Each case study is supported by the Supply Chains to Admire financial analysis.
While agility is bandied about in supply chain discussions, it is often meaningless because companies do not define and execute agility strategies. In this report, we share case studies of companies successfully implementing agility strategies.
Strategic value chain collaboration management case studyCharlie Chen
This paper aims to analyze the success business case of a global organization implemented strategic value chain collaboration network which enables them to achieve competitive advantage in the industry.
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.
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.
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.
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
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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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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.
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/
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
[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
chapter 10 - excise tax of transfer and business taxation
Supply Chain Metrics That Matter: A Focus on the Consumer Products Industry 25 SEP 2012
1. Supply Chain Metrics That Matter:
A Focus on the Consumer Products Industry
Using Corporate Annual Reports’ Financial Data to
Better Understand Consumer Packaged Goods and
Food & Beverage Supply Chains
9/25/2012
By Abby Mayer
Research Associate
Supply Chain Insights LLC