Supply Chain Insights Global Summit 2013 - Supply Chain Financial Benchmarking with Lora Cecere

Supply Chain Insights Global Summit #SCISummit September 2013, p.1TM

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

September 2013, p.3TM
Supply Chain Insights Global Summit #SCISummit
The Supply Chain Effective Frontier

Ratios Considered
Growth Profitability Cycle Complexity
R&D Margin Cash on Hand C2C Cycle Altman Z
R&D to COGS Ratio Free Cash Flow Ratio Days of Finished Goods Capital Turnover
SGA Margin Gross Margin Days of Inventory Current Ratio
SGA/COGS Net Profit
Days of Payables
Outstanding
Quick Ratio
COGS as Percent of Net
Sales
Operating Margin Days of Raw Materials Return on Assets
Pretax Margin (EBIT) Days of Sales Outstanding Return on Equity
YoY Sales Growth Days of Work in Progress Return on Invested Capital
Operating Margin DPO/DSO Return on Net Assets
Inventory Turns Revenue/Employee
Receivables Turns Cost of Sales

Household Products
Supply Chain
Financial Benchmarking
Answering the Question:
What Is the Role of Supply Chain Effectiveness in
Driving Corporate Performance?

An Example of Benchmarking
in Household Products

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

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

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

Household Products Comparison

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

Chemical
Supply Chain

An Example of Benchmarking for
Two Chemical Companies

Chemical:

Chemical Comparison

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

Pharmaceutical
Supply Chain

Two Pharmaceutical Companies

Pharmaceutical:

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

Pharmaceutical:

Pharmaceutical Comparison

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

High-tech & Electronics
Supply Chain

Two High-tech & Electronics Companies

High-tech & Electronics:

High-tech & Electronics Comparison

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

Apparel Retail
Supply Chain

Note: Zara is a brand of Inditex
Two Apparel Retail Companies

Apparel Retail:
Cash-to-Cash Versus Inventory Turns 2001-2012

Apparel Retail:

Apparel Retail Comparison

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

Mass Merchant Retail
Supply Chain

Two Mass Merchant Retail Companies

Mass Merchant Retail:

Mass Merchant Retail Comparison

Our Interpretation:
Mass Merchant Retail Summary
• Each industry has a different pattern.
• Industry leaders have very tight patterns showing year-
over-year improvement on a balanced portfolio of
metrics.
• Leaders improve the potential of the supply chain and
make conscious trade-offs.

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