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Supply Chains to Admire Webinar 2021

The document analyzes supply chain excellence for 600 publicly-traded companies over 2011-2020. It identifies 20 companies as Supply Chain award winners based on metrics like growth, operating margin, inventory turns, and return on invested capital. The winners are grouped in retail, process, and discrete categories. Trends for the winners show consistently strong performance across metrics compared to industry averages, such as higher inventory turns and operating margins. An example analysis of Dollar General in the retail sector shows its above-average performance relative to broadline retail peers over the period.

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Supply Chains to Admire RESEARCH 2021 Supply Chain Insights LLC Copyright © 2021 LORA CECERE, FOUNDER | lora.cecere@supplychaininsights.com
Introduction Supply Chain Insights LLC. Copyright © 2020 S E C T I O N 1 2
Supply Chain Insights LLC Copyright © 2021 1. A study of Supply Chain Excellence 2. 600 Publicly-Traded Companies in 26 Industry Sectors 3. Period of 2011-2020 4. Twenty companies outperform their peer groups. Introduction 3
Supply Chain Insights LLC Copyright © 2021 4 Now in its 8th year, the Supply Chains to Admire award analyzes public reporting for manufacturing and retail companies for the period of 2011-2020. The methodology evaluates companies against a peer group for improvement, value, and performance using the scorecard metrics of growth, operating margin, inventory turns and Return on Invested Capital (ROIC). Methodology Overview I N T R O D U C T I O N
5 Why the Supply Chains to Admire? Supply Chain Insights LLC. Copyright © 2021 1. The goal is to define an objective measurement of supply chain excellence for our research. 2. We want to share data to help supply chain leaders objectively benchmark and build balanced portfolios. 3. Our mission is to gain an understanding of how fast supply chain actions translate to balance sheet performance. 4. Together, we want to help supply chain leaders talk the language of finance, and to help finance teams understand what is possible in supply chain. 5. In summary, the goal is to build an objective standard that is data-driven.
6 What Is Supply Chain Excellence? Supply Chain Insights LLC. Copyright © 2021 Resilience Ability to drive consistent results year- over-year and weather market factors. Balance Organizational alignment on a balanced scorecard. Performance Outperforming industry peer group on the key metrics. Improvement Driving year-over-year improvement. Delivering Value A shift from cost to value.
A Balanced Scorecard Focused on Value 7 Supply Chain Insights LLC. Copyright © 2021
Rewarding Companies that Drive Improvement and Value while Outperforming Their Peers 8 Supply Chain Insights LLC. Copyright © 2021
9 Supply Chain Insights LLC. Copyright © 2021 The Definition of Supply Chain Excellence Requires Selecting the Right Balance Between Performance and Improvement Improvement is fast when you have a lot to lose. However, high-performing companies reach a level of performance and then struggle to drive improvement. While low- performing companies take four-to-five years to reach peer- group performance. It is a balance requiring a clear strategy.
Rewarding Companies that Drive Improvement and Value while Outperforming Their Peers 10 Supply Chain Insights LLC. Copyright © 2021 Supply Chain Index™: Measuring Improvement1 Driving Improvement at the Intersection of Inventory Turns and Operating Margin (A Vector Analysis) Driving Improvement at the Intersection of Growth and Return on Invested Capital (A Vector Analysis) Reliability of Results at the Intersection of Inventory Turns and Operating Margin (Tightness of the Pattern) The Supply Chain Index is a composite of three factors: strength, resiliency and balance. These are calculated based on orbit chart patterns. 1Source: https://www.slideshare.net/loracecere/launch-of-the-supply-chain-index-webinar-slide-deck Strength Resiliency Balance
The Challenges Supply Chain Insights LLC. Copyright © 2021 S E C T I O N 2 11
Industries Struggle with Inventory 12 Supply Chain Insights LLC. Copyright © 2021
50% 50% 48% 35% 34% 31% 29% 25% 25% 24% 24% 22% 21% 18% 17% 16% 2% Supply chain visibility Cross-functional alignment Demand and supply volatility Ability to use data Executive team understanding of the supply chain Organizational change management Availability of skilled people to do the job Software usability Increasing speed of business Management of value network relationships Innovation Globalization Product quality and supplier reliability Risk management Clarity of business strategy Increasing regulations and compliance Other Top Five Elements of Business Pain for Respondents Top Elements of Pain 13 Over the Decade, Same Problems With No Resolution Source: Supply Chain Insights LLC, Sales & Operations Study (Mar-May, 2020 Base: HAVE A S&OP PROCESS -- Total (n=107) Q37. When it comes to doing your job, which of the following are your top 5 elements of business pain? Please select no more than five.
14 Mistakes Made Supply Chain Insights LLC. Copyright © 2021 1. Too many measurements. 2. A focus on functional performance. 3. Singular cost goals with a short-term focus. 4. Lack of awareness of industry performance (what is possible). 5. Confusion between financial reengineering and the delivery of value.
The Winners Supply Chain Insights LLC. Copyright © 2021 S E C T I O N 3 15
Supply Chains to Admire 2020: 22 Award Winners Retail (3) Process (5) Discrete (14) 16
Supply Chains to Admire 2021: Returning to the Winners Circle Retail (4) Process (4) Discrete (12) 17
Supply Chains to Admire 2021 Winners Retail (4) Process (4) Discrete (12) 18
Award Winner Summary 19 Supply Chain Insights LLC. Copyright © 2021 Year 2014 2015 2016 2017 2018 2019 2020 2021 Retail 2 6 6 4 9 5 3 4 Process 4 5 3 4 11 6 5 4 Discrete 6 12 7 16 11 12 14 12 Total 12 23 16 24 31 23 22 20 Supply Chains To Admire Award Winners
Looking at the Patterns Supply Chain Insights LLC. Copyright © 2021 S E C T I O N 4 20
Supply Chain Insights LLC. Copyright © 2021 21 Retail Average Revenue (M$) Year-over- Year Growth Inventory Turns Operating Margin Return on Invested Capital Price to Tangible Value Retail Winners Restaurants 19 0 4923 4.9% 79.89 13.7% 17.5% 6.10 Apparel 20 1 8522 4.5% 4.58 9.5% 16.6% 4.65 Broadline 17 3 57287 4.8% 5.02 7.1% 14.2% 3.92 Drug 7 0 63924 8.9% 6.80 7.0% 14.1% 5.70 Home Improvement 7 0 27413 6.7% 5.77 6.8% 9.5% 5.27 Grocery 10 0 45838 2.7% 12.71 3.5% 11.6% 2.30 Number of Companies Average for 2011-2020 5% Winners
Process 22 Supply Chain Insights LLC. Copyright © 2021 Average Revenue (M$) Year-over- Year Growth Inventory Turns Operating Margin Return on Invested Capital Price to Book Value Process Winners Pharmaceuticals 32 1 23,984 5.7% 2.23 22.2% 11% 5.21 Beverages 21 0 13,264 4.9% 5.26 17.4% 10.4% 4.34 Consumer Nondurables 12 0 19,490 2.7% 4.88 16.1% 15.2% 32.60 Oil & Gas 39 0 28,821 1.9% 12.14 10.1% 2.3% 1.75 Chemical 40 3 8,908 1.3% 5.06 10.9% 8.2% 2.51 Personal Products 14 0 8,165 3.4% 2.81 11.3% 10.9% 4.01 Containers and Packaging 19 0 7,756 5.7% 6.49 10.0% 7.0% 3.82 Food Manufacturing 32 0 15,455 4.6% 6.32 9.9% 6.7% 2.71 Number of Companies Average for 2011-2020 2% Winners
Supply Chain Insights LLC. Copyright © 2021 23 Discrete Average Revenue (M$) Year-over- Year Growth Inventory Turns Operating Margin Return on Invested Capital Price to Book Value Discrete Winners Medical Device 29 1 6,079 6.91% 2.91 18.00% 10.88% 4.65 Semiconductor 33 3 11,261 10.0% 4.5 15.5% 9.8% 3.81 Diversified Industries 28 1 12,702 3.0% 5.00 14.0% 9.7% 2.78 Telecommunications 18 0 16,839 6.4% 10.24 11.7% 9.1% 1.80 Apparel 27 1 10,283 6.1% 3.05 11.1% 13.6% 3.90 Automotive Aftermarket 35 0 10,726 4.9% 7.45 10.0% 9.1% 2.43 Consumer Durables 17 0 14,465 1.8% 4.48 9.5% 9.4% 2.27 Tires 4 0 16,568 -1.7% 4.42 9.4% 9.3% 1.63 Aerospace & Defense 26 1 2,072 2.9% 7.19 8.8% 10.9% 3.20 Trucks and Heavy Equipment 17 1 14,778 2.5% 4.32 8.1% 7.2% 1.96 Furniture 16 2 15,455 4.3% 5.86 7.0% 9.8% 2.41 Automotive 21 0 80,590 3.7% 6.98 5.7% 6.1% 1.25 B2B Technologies 28 2 30,912 3.3% 6.63 4.5% 5.5% 2.29 Contract Manufacturing 11 0 7,756 4.1% 6.0 3.6% 6.1% 5.60 Number of Companies Average for 2011-2020 4% Winners
Example L O O K I N G AT T H E PAT T E R N S
IMPROVEMENT NAME 2020 REVENUE SUPPLY CHAIN INDEX GROWTH (Year Over Year Revenue) INVENTORY TURNS OPERATING MARGIN RETURN ON INVESTED CAPITAL PRICE TO BOOK MARKET CAPITALIZATION Bed Bath & Beyond Incorporated 11,159 17 3.8% 2.81 10.2% 15% 2.51 8,090 Best Buy Company 43,638 4 -1.0% 5.96 4.2% 14% 3.78 14,632 Big Lots 5,323 15 1.2% 3.57 5.1% 19% 2.72 1,853 Burlinton Stores Incorporated 7,286 1 7.0% 3.40 5.9% 14% 15.57 6,692 Costco Wholesale 166,761 3 8.0% 11.61 3.0% 14% 6.22 80,357 Dillard's Incorporated 6,343 16 1.0% 3.04 6.0% 9% 1.47 2,666 Dollar General Corporation 27,754 9 8.9% 4.63 9.3% 14% 4.38 25,562 Dollar Tree Stores 23,611 13 18.0% 4.75 9.8% 17% 5.63 17,628 Kohl's 19,974 11 1.5% 3.35 8.6% 10% 1.77 9,909 Macy's 25,331 10 0.8% 3.01 7.7% 9% 2.45 11,883 Office Depot Incorporated 9,710 6 -1.5% 7.01 2.6% 1% 1.28 2,090 Pricesmart Incorporated 3,329 12 9.3% 8.58 4.8% 12% 4.28 2,511 Target 78,112 5 1.8% 6.06 6.7% 9% 3.56 46,988 The Michaels Companies Incorporated 5,072 2 2.4% 2.35 13.1% 23% 0.01 2,349 Tractor Supply Company 10,620 7 11.5% 3.39 9.6% 27% 7.22 10,107 WalMart 523,964 8 2.5% 8.36 5.1% 11% 3.56 268,120 Williams-Sonoma Incorproated 5,898 14 6.7% 3.49 9.4% 22% 0.29 5,210 MEAN WITH OUTLIERS 4.8% 5.02 7.1% 14% 3.92 30,391 MEAN WITHOUT OUTLIERS 57,287 4.8% 5.02 7.1% 14% 3.92 11,211 INDUSTRY: Retail Broadline COMPANY INFORMATION PERFORMANCE VALUE 2011 - 2020 Dollar General in Broadline Retail
[CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] 4.0 4.5 5.0 5.5 0.05 0.07 0.09 0.11 Inventory Turns Operating Margin Dollar General Broadline Retail Industry Best Scenario Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Dollar General 0.09, 4.63 Broadline Retail 0.07, 5.05 Dollar General Operating Margin Versus Inventory Turns (2011 - 2020)
[CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 4.0 4.5 5.0 5.5 0.08 0.09 0.10 Inventory Turns Operating Margin Dollar General Best Scenario Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Dollar General 0.09, 4.63 Operating Margin vs. Inventory Turns (2011 - 2020)
[CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 0.08 0.13 0.18 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 Return on Invested Capital (ROIC) Growth Dollar General Broadline Retail Industry Best Scenario Broadline Retail 0.05, 0.13 Average (Growth, Return on Invested Capital (ROIC)) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Dollar General 0.09, 0.14 Growth vs. Return on Invested Capital (ROIC) (2011 - 2020)
Comparison Supply Chain Insights LLC. Copyright © 2021 29 The Supply C hains t o A dmire A nalysis C ompared t o The Ga rt ne r Top 2 5 f or 2 0 2 1
Comparison Gartner Top 25 Supply Chains to Admire™ Focus Fortune Global 500 and Forbes 2000 lists. 15$B minimum annual revenue. (roughly 300 companies) All public companies by analyzed by industry peer groups. 600 companies by 26 peer groups. No revenue minimum. No limit on the number of winners peer group. Likewise, there may be no winner by industry. Analysis 2018-2020 2011-2020 Calculation 50% Opinion: (Equally split between analyst and peer voting) 50% Quantitative Analysis:. 1, Return on Plant Assets (ROPA): ((2020 operating income / 2020 net property, plant, equipment + year-end inventory)) *50%) + ((2019 operating income / 2019 net property, plant, equipment + year-end inventory)) *30%) + ((2018 operating income / 2018 net property, plant, equipment + year-end inventory)) *20%). (20%) 2. Inventory (Average for 2018-2020) 5% 3. Revenue Growth: ((change in revenue 2020-2019) *50%) + ((change in revenue 2019-2018) *30%) + ((change in revenue 2018-2017) *20%). (10%) 4. ESG Component Score: Index of third-party environmental, social and governance measures of commitment, transparency and performance. Improvement: Top 2/3 ranking on the Supply Chain Index. Performance: At or above the industry mean for: • Year-over-year revenue growth. • Operating margin. • Inventory turns. • Return on Invested Capital (ROIC). Value: At or above the mean for Price-to- Tangible Book or Market Capitalization. Index Calculations: https://www.slideshare.net/loracecere/sci-summit-2014-math-behind-sc- index?qid=27326733-0325-4ee7-aacd-e2827bd216de&v=&b=&from_search=11 History 17th Year 8th Year Methodology Comparison: Gartner Top 25 and Supply Chains to Admire
Supply Chains to Admire Data-driven Comparison to Peer Group Long View 31 Comparison
Companies We Both Agree Are Winners Supply Chain Insights LLC. Copyright © 2021
33 Gartner Top 25 Comparison to Peer Group for 2011-2020 • 75% underperformed on growth • 29% underperformed on margin • 42% underperformed on inventory turns
34
Sample Orbit Charts for Gartner Top 25 Winners Supply Chain Insights LLC. Copyright © 2021
Supply Chain Master P&G Operating Margin vs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CEL… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 4.5 5.5 6.5 7.5 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.21 0.22 0.23 Inventory Turns Operating Margin Procter & Gamble Household Non-Durable Industry Best Scenario Household Non-Durable Industry 0.16, 5.27 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Procter & Gamble 0.20, 6.52 P&G growth is -1% against an industry average of 2%
#1 Cisco Operating Margin vs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 0.10 0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 Inventory Turns Operating Margin Cisco Systems Telecommunications Industry Best Scenario Telecommunications 0.12, 12.94 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Cisco 0.24, 12.29 Growth significantly below peer group.
#3 J&J Operating Margin vs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [C… [CELLRANGE] [CELLRANGE] [CELLRANGE] [C… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [C… [CELLRANGE] [CELLRANGE] [C… [CELLRANGE] 2.3 2.8 3.3 0.19 0.20 0.21 0.22 0.23 0.24 0.25 0.26 0.27 0.28 0.29 0.30 Inventory Turns Operating Margin Johnson & Johnson Pharmaceutical Industry Best Scenario Pharmaceuticals 0.22, 2.58 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Johnson & Johnson 0.26, 2.92 J&J growth is 3% while the industry grew 6%
#4 Schneider Electric Orbit Chart Operating Margin vs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CEL… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 4.2 4.7 5.2 5.7 0.11 0.12 0.13 0.14 0.15 0.16 Inventory Turns Operating Margin Schneider Electric Diversified Industries Best Scenario Diversified Industries 0.14, 4.96 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Schneider Electric 0.14, 5.14 Below industry performance on growth and inventory
#5 Nestle Operating Margin vs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 0.08 0.10 0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 Inventory Turns Operating Margin Nestle Food Manufacuring Industry Best Scenario Food Manufacturers 0.11, 6.72 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Nestle 0.16, 5.13 1/5 the rate of growth of peer group. Declining inventory performance.
Supply Chain Insights LLC Copyright © 2021 • Why do you not include customer service? • Is there a reason that you do not include corporate social responsibility data? • Why not divide the companies into “Weight Groups” like wrestling? (small, medium, large) • Why inventory turns versus working capital? • Growth? Should this be in a supply chain assessment? Frequent Questions 41
We Must Learn to Unlearn and Build Better Supply Chain Insights LLC Copyright © 2021 42
Start by Defining Supply Chain Excellence Supply Chain Insights LLC Copyright © 2021 43
Supply Chain Insights LLC Copyright © 2021 01 There is no perfect method for determining supply chain excellence. 02 Business leaders’ perceptions of corporate performance are not in alignment with balance sheet results. 03 Only 4% of companies outperform their peer groups. Peer analysis matters. Insights 44
Join the Guiding Coalition for Change. Imagine the Supply Chain of the Future with Peers. Supply Chain Insights LLC. Copyright © 2021 Register for the Supply Chain Insights Global Summit. www.supplychaininsightsglobalsummit.com
Supply Chain Insights LLC. Copyright © 2021 Founded in February 2012 by Lora Cecere, Supply Chain Insights LLC is in its eighth year of operation. The Company's mission is to deliver independent, actionable, and objective advice for supply chain leaders. Our goal is to help leaders understand supply chain trends, evolving technologies, and which metrics matter. 46
47 2 years Partner at Altimeter Group (leader in open research) 8 years Gartner and AMR Research 8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA/Blue Yonder) Supply Chain Insights LLC Copyright © 2021 Who Is Lora? Founder of Supply Chain Insights “LinkedIn Influencer”, Guest blogger for Forbes, Author: Bricks Matter (2012), Supply Chain Metrics That Matter (2014), and Shaman’s Journal (2014-19) 15 Years Leading Teams in Manufacturing and Distribution for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble.
Thank You… Supply Chain Insights LLC Copyright © 2021 LORA CECERE, FOUNDER | lora.cecere@supplychaininsights.com

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Supply Chains to Admire Webinar 2021

  • 1.
    Supply Chains toAdmire RESEARCH 2021 Supply Chain Insights LLC Copyright © 2021 LORA CECERE, FOUNDER | lora.cecere@supplychaininsights.com
  • 2.
    Introduction Supply Chain InsightsLLC. Copyright © 2020 S E C T I O N 1 2
  • 3.
    Supply Chain InsightsLLC Copyright © 2021 1. A study of Supply Chain Excellence 2. 600 Publicly-Traded Companies in 26 Industry Sectors 3. Period of 2011-2020 4. Twenty companies outperform their peer groups. Introduction 3
  • 4.
    Supply Chain InsightsLLC Copyright © 2021 4 Now in its 8th year, the Supply Chains to Admire award analyzes public reporting for manufacturing and retail companies for the period of 2011-2020. The methodology evaluates companies against a peer group for improvement, value, and performance using the scorecard metrics of growth, operating margin, inventory turns and Return on Invested Capital (ROIC). Methodology Overview I N T R O D U C T I O N
  • 5.
    5 Why the Supply Chains to Admire? SupplyChain Insights LLC. Copyright © 2021 1. The goal is to define an objective measurement of supply chain excellence for our research. 2. We want to share data to help supply chain leaders objectively benchmark and build balanced portfolios. 3. Our mission is to gain an understanding of how fast supply chain actions translate to balance sheet performance. 4. Together, we want to help supply chain leaders talk the language of finance, and to help finance teams understand what is possible in supply chain. 5. In summary, the goal is to build an objective standard that is data-driven.
  • 6.
    6 What Is Supply Chain Excellence? SupplyChain Insights LLC. Copyright © 2021 Resilience Ability to drive consistent results year- over-year and weather market factors. Balance Organizational alignment on a balanced scorecard. Performance Outperforming industry peer group on the key metrics. Improvement Driving year-over-year improvement. Delivering Value A shift from cost to value.
  • 7.
    A Balanced Scorecard Focused onValue 7 Supply Chain Insights LLC. Copyright © 2021
  • 8.
    Rewarding Companies that DriveImprovement and Value while Outperforming Their Peers 8 Supply Chain Insights LLC. Copyright © 2021
  • 9.
    9 Supply Chain InsightsLLC. Copyright © 2021 The Definition of Supply Chain Excellence Requires Selecting the Right Balance Between Performance and Improvement Improvement is fast when you have a lot to lose. However, high-performing companies reach a level of performance and then struggle to drive improvement. While low- performing companies take four-to-five years to reach peer- group performance. It is a balance requiring a clear strategy.
  • 10.
    Rewarding Companies that Drive Improvement andValue while Outperforming Their Peers 10 Supply Chain Insights LLC. Copyright © 2021 Supply Chain Index™: Measuring Improvement1 Driving Improvement at the Intersection of Inventory Turns and Operating Margin (A Vector Analysis) Driving Improvement at the Intersection of Growth and Return on Invested Capital (A Vector Analysis) Reliability of Results at the Intersection of Inventory Turns and Operating Margin (Tightness of the Pattern) The Supply Chain Index is a composite of three factors: strength, resiliency and balance. These are calculated based on orbit chart patterns. 1Source: https://www.slideshare.net/loracecere/launch-of-the-supply-chain-index-webinar-slide-deck Strength Resiliency Balance
  • 11.
    The Challenges Supply ChainInsights LLC. Copyright © 2021 S E C T I O N 2 11
  • 12.
  • 13.
    50% 50% 48% 35% 34% 31% 29% 25% 25% 24% 24% 22% 21% 18% 17% 16% 2% Supply chain visibility Cross-functionalalignment Demand and supply volatility Ability to use data Executive team understanding of the supply chain Organizational change management Availability of skilled people to do the job Software usability Increasing speed of business Management of value network relationships Innovation Globalization Product quality and supplier reliability Risk management Clarity of business strategy Increasing regulations and compliance Other Top Five Elements of Business Pain for Respondents Top Elements of Pain 13 Over the Decade, Same Problems With No Resolution Source: Supply Chain Insights LLC, Sales & Operations Study (Mar-May, 2020 Base: HAVE A S&OP PROCESS -- Total (n=107) Q37. When it comes to doing your job, which of the following are your top 5 elements of business pain? Please select no more than five.
  • 14.
    14 Mistakes Made Supply Chain InsightsLLC. Copyright © 2021 1. Too many measurements. 2. A focus on functional performance. 3. Singular cost goals with a short-term focus. 4. Lack of awareness of industry performance (what is possible). 5. Confusion between financial reengineering and the delivery of value.
  • 15.
    The Winners Supply ChainInsights LLC. Copyright © 2021 S E C T I O N 3 15
  • 16.
    Supply Chains toAdmire 2020: 22 Award Winners Retail (3) Process (5) Discrete (14) 16
  • 17.
    Supply Chains toAdmire 2021: Returning to the Winners Circle Retail (4) Process (4) Discrete (12) 17
  • 18.
    Supply Chains toAdmire 2021 Winners Retail (4) Process (4) Discrete (12) 18
  • 19.
    Award Winner Summary 19 SupplyChain Insights LLC. Copyright © 2021 Year 2014 2015 2016 2017 2018 2019 2020 2021 Retail 2 6 6 4 9 5 3 4 Process 4 5 3 4 11 6 5 4 Discrete 6 12 7 16 11 12 14 12 Total 12 23 16 24 31 23 22 20 Supply Chains To Admire Award Winners
  • 20.
    Looking at thePatterns Supply Chain Insights LLC. Copyright © 2021 S E C T I O N 4 20
  • 21.
    Supply Chain InsightsLLC. Copyright © 2021 21 Retail Average Revenue (M$) Year-over- Year Growth Inventory Turns Operating Margin Return on Invested Capital Price to Tangible Value Retail Winners Restaurants 19 0 4923 4.9% 79.89 13.7% 17.5% 6.10 Apparel 20 1 8522 4.5% 4.58 9.5% 16.6% 4.65 Broadline 17 3 57287 4.8% 5.02 7.1% 14.2% 3.92 Drug 7 0 63924 8.9% 6.80 7.0% 14.1% 5.70 Home Improvement 7 0 27413 6.7% 5.77 6.8% 9.5% 5.27 Grocery 10 0 45838 2.7% 12.71 3.5% 11.6% 2.30 Number of Companies Average for 2011-2020 5% Winners
  • 22.
    Process 22 Supply Chain InsightsLLC. Copyright © 2021 Average Revenue (M$) Year-over- Year Growth Inventory Turns Operating Margin Return on Invested Capital Price to Book Value Process Winners Pharmaceuticals 32 1 23,984 5.7% 2.23 22.2% 11% 5.21 Beverages 21 0 13,264 4.9% 5.26 17.4% 10.4% 4.34 Consumer Nondurables 12 0 19,490 2.7% 4.88 16.1% 15.2% 32.60 Oil & Gas 39 0 28,821 1.9% 12.14 10.1% 2.3% 1.75 Chemical 40 3 8,908 1.3% 5.06 10.9% 8.2% 2.51 Personal Products 14 0 8,165 3.4% 2.81 11.3% 10.9% 4.01 Containers and Packaging 19 0 7,756 5.7% 6.49 10.0% 7.0% 3.82 Food Manufacturing 32 0 15,455 4.6% 6.32 9.9% 6.7% 2.71 Number of Companies Average for 2011-2020 2% Winners
  • 23.
    Supply Chain InsightsLLC. Copyright © 2021 23 Discrete Average Revenue (M$) Year-over- Year Growth Inventory Turns Operating Margin Return on Invested Capital Price to Book Value Discrete Winners Medical Device 29 1 6,079 6.91% 2.91 18.00% 10.88% 4.65 Semiconductor 33 3 11,261 10.0% 4.5 15.5% 9.8% 3.81 Diversified Industries 28 1 12,702 3.0% 5.00 14.0% 9.7% 2.78 Telecommunications 18 0 16,839 6.4% 10.24 11.7% 9.1% 1.80 Apparel 27 1 10,283 6.1% 3.05 11.1% 13.6% 3.90 Automotive Aftermarket 35 0 10,726 4.9% 7.45 10.0% 9.1% 2.43 Consumer Durables 17 0 14,465 1.8% 4.48 9.5% 9.4% 2.27 Tires 4 0 16,568 -1.7% 4.42 9.4% 9.3% 1.63 Aerospace & Defense 26 1 2,072 2.9% 7.19 8.8% 10.9% 3.20 Trucks and Heavy Equipment 17 1 14,778 2.5% 4.32 8.1% 7.2% 1.96 Furniture 16 2 15,455 4.3% 5.86 7.0% 9.8% 2.41 Automotive 21 0 80,590 3.7% 6.98 5.7% 6.1% 1.25 B2B Technologies 28 2 30,912 3.3% 6.63 4.5% 5.5% 2.29 Contract Manufacturing 11 0 7,756 4.1% 6.0 3.6% 6.1% 5.60 Number of Companies Average for 2011-2020 4% Winners
  • 24.
    Example L O OK I N G AT T H E PAT T E R N S
  • 25.
    IMPROVEMENT NAME 2020 REVENUE SUPPLYCHAIN INDEX GROWTH (Year Over Year Revenue) INVENTORY TURNS OPERATING MARGIN RETURN ON INVESTED CAPITAL PRICE TO BOOK MARKET CAPITALIZATION Bed Bath & Beyond Incorporated 11,159 17 3.8% 2.81 10.2% 15% 2.51 8,090 Best Buy Company 43,638 4 -1.0% 5.96 4.2% 14% 3.78 14,632 Big Lots 5,323 15 1.2% 3.57 5.1% 19% 2.72 1,853 Burlinton Stores Incorporated 7,286 1 7.0% 3.40 5.9% 14% 15.57 6,692 Costco Wholesale 166,761 3 8.0% 11.61 3.0% 14% 6.22 80,357 Dillard's Incorporated 6,343 16 1.0% 3.04 6.0% 9% 1.47 2,666 Dollar General Corporation 27,754 9 8.9% 4.63 9.3% 14% 4.38 25,562 Dollar Tree Stores 23,611 13 18.0% 4.75 9.8% 17% 5.63 17,628 Kohl's 19,974 11 1.5% 3.35 8.6% 10% 1.77 9,909 Macy's 25,331 10 0.8% 3.01 7.7% 9% 2.45 11,883 Office Depot Incorporated 9,710 6 -1.5% 7.01 2.6% 1% 1.28 2,090 Pricesmart Incorporated 3,329 12 9.3% 8.58 4.8% 12% 4.28 2,511 Target 78,112 5 1.8% 6.06 6.7% 9% 3.56 46,988 The Michaels Companies Incorporated 5,072 2 2.4% 2.35 13.1% 23% 0.01 2,349 Tractor Supply Company 10,620 7 11.5% 3.39 9.6% 27% 7.22 10,107 WalMart 523,964 8 2.5% 8.36 5.1% 11% 3.56 268,120 Williams-Sonoma Incorproated 5,898 14 6.7% 3.49 9.4% 22% 0.29 5,210 MEAN WITH OUTLIERS 4.8% 5.02 7.1% 14% 3.92 30,391 MEAN WITHOUT OUTLIERS 57,287 4.8% 5.02 7.1% 14% 3.92 11,211 INDUSTRY: Retail Broadline COMPANY INFORMATION PERFORMANCE VALUE 2011 - 2020 Dollar General in Broadline Retail
  • 26.
    [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] 4.0 4.5 5.0 5.5 0.05 0.070.09 0.11 Inventory Turns Operating Margin Dollar General Broadline Retail Industry Best Scenario Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Dollar General 0.09, 4.63 Broadline Retail 0.07, 5.05 Dollar General Operating Margin Versus Inventory Turns (2011 - 2020)
  • 27.
    [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 4.0 4.5 5.0 5.5 0.08 0.09 0.10 Inventory Turns OperatingMargin Dollar General Best Scenario Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Dollar General 0.09, 4.63 Operating Margin vs. Inventory Turns (2011 - 2020)
  • 28.
    [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 0.08 0.13 0.18 0.02 0.030.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 Return on Invested Capital (ROIC) Growth Dollar General Broadline Retail Industry Best Scenario Broadline Retail 0.05, 0.13 Average (Growth, Return on Invested Capital (ROIC)) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Dollar General 0.09, 0.14 Growth vs. Return on Invested Capital (ROIC) (2011 - 2020)
  • 29.
    Comparison Supply Chain InsightsLLC. Copyright © 2021 29 The Supply C hains t o A dmire A nalysis C ompared t o The Ga rt ne r Top 2 5 f or 2 0 2 1
  • 30.
    Comparison Gartner Top25 Supply Chains to Admire™ Focus Fortune Global 500 and Forbes 2000 lists. 15$B minimum annual revenue. (roughly 300 companies) All public companies by analyzed by industry peer groups. 600 companies by 26 peer groups. No revenue minimum. No limit on the number of winners peer group. Likewise, there may be no winner by industry. Analysis 2018-2020 2011-2020 Calculation 50% Opinion: (Equally split between analyst and peer voting) 50% Quantitative Analysis:. 1, Return on Plant Assets (ROPA): ((2020 operating income / 2020 net property, plant, equipment + year-end inventory)) *50%) + ((2019 operating income / 2019 net property, plant, equipment + year-end inventory)) *30%) + ((2018 operating income / 2018 net property, plant, equipment + year-end inventory)) *20%). (20%) 2. Inventory (Average for 2018-2020) 5% 3. Revenue Growth: ((change in revenue 2020-2019) *50%) + ((change in revenue 2019-2018) *30%) + ((change in revenue 2018-2017) *20%). (10%) 4. ESG Component Score: Index of third-party environmental, social and governance measures of commitment, transparency and performance. Improvement: Top 2/3 ranking on the Supply Chain Index. Performance: At or above the industry mean for: • Year-over-year revenue growth. • Operating margin. • Inventory turns. • Return on Invested Capital (ROIC). Value: At or above the mean for Price-to- Tangible Book or Market Capitalization. Index Calculations: https://www.slideshare.net/loracecere/sci-summit-2014-math-behind-sc- index?qid=27326733-0325-4ee7-aacd-e2827bd216de&v=&b=&from_search=11 History 17th Year 8th Year Methodology Comparison: Gartner Top 25 and Supply Chains to Admire
  • 31.
    Supply Chains toAdmire Data-driven Comparison to Peer Group Long View 31 Comparison
  • 32.
    Companies We Both AgreeAre Winners Supply Chain Insights LLC. Copyright © 2021
  • 33.
    33 Gartner Top 25 Comparisonto Peer Group for 2011-2020 • 75% underperformed on growth • 29% underperformed on margin • 42% underperformed on inventory turns
  • 34.
  • 35.
    Sample Orbit Charts for GartnerTop 25 Winners Supply Chain Insights LLC. Copyright © 2021
  • 36.
    Supply Chain MasterP&G Operating Margin vs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CEL… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 4.5 5.5 6.5 7.5 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.21 0.22 0.23 Inventory Turns Operating Margin Procter & Gamble Household Non-Durable Industry Best Scenario Household Non-Durable Industry 0.16, 5.27 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Procter & Gamble 0.20, 6.52 P&G growth is -1% against an industry average of 2%
  • 37.
    #1 Cisco Operating Marginvs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 0.10 0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 Inventory Turns Operating Margin Cisco Systems Telecommunications Industry Best Scenario Telecommunications 0.12, 12.94 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Cisco 0.24, 12.29 Growth significantly below peer group.
  • 38.
    #3 J&J Operating Marginvs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [C… [CELLRANGE] [CELLRANGE] [CELLRANGE] [C… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [C… [CELLRANGE] [CELLRANGE] [C… [CELLRANGE] 2.3 2.8 3.3 0.19 0.20 0.21 0.22 0.23 0.24 0.25 0.26 0.27 0.28 0.29 0.30 Inventory Turns Operating Margin Johnson & Johnson Pharmaceutical Industry Best Scenario Pharmaceuticals 0.22, 2.58 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Johnson & Johnson 0.26, 2.92 J&J growth is 3% while the industry grew 6%
  • 39.
    #4 Schneider ElectricOrbit Chart Operating Margin vs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CEL… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 4.2 4.7 5.2 5.7 0.11 0.12 0.13 0.14 0.15 0.16 Inventory Turns Operating Margin Schneider Electric Diversified Industries Best Scenario Diversified Industries 0.14, 4.96 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Schneider Electric 0.14, 5.14 Below industry performance on growth and inventory
  • 40.
    #5 Nestle Operating Marginvs. Inventory Turns (2011 – 2020) [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] [CELLRANGE] [CE… [CELLRANGE] 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 0.08 0.10 0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 Inventory Turns Operating Margin Nestle Food Manufacuring Industry Best Scenario Food Manufacturers 0.11, 6.72 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2011-2020 from YCharts Nestle 0.16, 5.13 1/5 the rate of growth of peer group. Declining inventory performance.
  • 41.
    Supply Chain InsightsLLC Copyright © 2021 • Why do you not include customer service? • Is there a reason that you do not include corporate social responsibility data? • Why not divide the companies into “Weight Groups” like wrestling? (small, medium, large) • Why inventory turns versus working capital? • Growth? Should this be in a supply chain assessment? Frequent Questions 41
  • 42.
    We Must Learn toUnlearn and Build Better Supply Chain Insights LLC Copyright © 2021 42
  • 43.
    Start by Defining SupplyChain Excellence Supply Chain Insights LLC Copyright © 2021 43
  • 44.
    Supply Chain InsightsLLC Copyright © 2021 01 There is no perfect method for determining supply chain excellence. 02 Business leaders’ perceptions of corporate performance are not in alignment with balance sheet results. 03 Only 4% of companies outperform their peer groups. Peer analysis matters. Insights 44
  • 45.
    Join the Guiding Coalitionfor Change. Imagine the Supply Chain of the Future with Peers. Supply Chain Insights LLC. Copyright © 2021 Register for the Supply Chain Insights Global Summit. www.supplychaininsightsglobalsummit.com
  • 46.
    Supply Chain InsightsLLC. Copyright © 2021 Founded in February 2012 by Lora Cecere, Supply Chain Insights LLC is in its eighth year of operation. The Company's mission is to deliver independent, actionable, and objective advice for supply chain leaders. Our goal is to help leaders understand supply chain trends, evolving technologies, and which metrics matter. 46
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    47 2 years Partnerat Altimeter Group (leader in open research) 8 years Gartner and AMR Research 8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA/Blue Yonder) Supply Chain Insights LLC Copyright © 2021 Who Is Lora? Founder of Supply Chain Insights “LinkedIn Influencer”, Guest blogger for Forbes, Author: Bricks Matter (2012), Supply Chain Metrics That Matter (2014), and Shaman’s Journal (2014-19) 15 Years Leading Teams in Manufacturing and Distribution for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble.
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    Thank You… Supply ChainInsights LLC Copyright © 2021 LORA CECERE, FOUNDER | lora.cecere@supplychaininsights.com