What Defines Supply Chain Excellence? Is It Defined by the Gartner Top 25?

For the Supply Chain Leader Who Wants to Rise Above
Defining Supply Chain Excellence

Supply Chain Insights LLC Copyright © 2019, p. 2
I Am A Social Scientist

I Write for the Supply Chain Leader

About Lora Cecere
• Founder of Supply Chain Insights
“LinkedIn Influencer”
Guest blogger for Forbes
Author of 5 books: Bricks Matter (2012), Shaman’s Journal (2014),
Supply Chain Metrics That Matter (2014), Shaman’s Journal (2015),
Shaman’s Journal (2016), Shaman’s Journal (2017)
• Partner at Altimeter Group (leader in open research)
• 7 years of Management Experience leading Analyst Teams at Gartner
and AMR Research
• 8 years Experience in Marketing and Selling Supply Chain Software at
Descartes Systems Group and Manugistics (now JDA)
• 15 Years Leading teams in Manufacturing and Distribution operations
for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream
and Procter & Gamble.
Contact Information:
• Email: lora.cecere@supplychaininsights.com
• Blog: www.supplychainshaman.com (18,000 pageviews/month)
• Forbes: www.forbes.com/sites/loracecere
• Twitter: twitter.com/lcecere (9,100 followers)
• LinkedIn: www.linkedin.com/in/loracecere (308,000 followers)
• LinkedIn Influencer: www.linkedin.com/today/author/446631

Are Supply Chains Working Well?
____________________________________________________________________
Source: Supply Chain Insights LLC, Sales & Operations Study ((Mar-May, 2019))
Base: HAVE A S&OP PROCESS -- Total (n=107)
Q29. For each of the following pair of words, please pick the one that best describes your company’s supply chain today.
 Higher than other answer at 90% or higher level of confidence
40%
39%
37%
37%
37%
33%
28%
27%
29%
23%
33%
25%
45%
31%
Independent silos
Cautious
Fixed
Reactive
Uncontrollable
Room for improvement
Inside-out
Supply Chain Descriptors*
Aligned
Risk-taking
Agile
Proactive
Controlled
Working well
Outside-in
WORSE BETTER
Strengths
Challenges

Do We Have Best Practices?
Or A Focus on Functional Excellence?
Efficient Silos Do Not Drive Business Value

Organizational Silos Are Not Aligned

To Align, They Need A Balanced Scorecard Focused on Value

What I Believed
…that companies
spent 1.7% of
revenue on
information
technology
investments and
drove
improvements at
the intersection of
operating margin
and customer
service.

I Was Wrong….

Inventory Levels Higher Now Than 2007

Ross Stores
Apparel Retail Industry Average
.10, 4.51
An example of a
company getting it
right. Driving
improvement,
consistent
progress and
beating the
industry peer
group.

Packaging Corporation of America
An example of a
company getting it
right. Driving
improvement,
consistent
progress and
beating the
industry peer
group.

PCA Outperforming Peer Group
Orbit Chart
comparison to
peer group.

2010
2018
2010
2018
3.0
4.0
5.0
6.0
7.0
8.0
9.0
0.11 0.13 0.15 0.17 0.19 0.21 0.23 0.25 0.27 0.29 0.31 0.33 0.35 0.37
InventoryTurns
Operating Margin
Boston Beer Co., Inc.
MNST
0.30, 5.50
◆Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2010-2018 from YCharts
SAM
0.15, 7.44
Boston Beer versus Monster Beverages
(2010 – 2018)
Best Scenario
Beverage Industry
Average
.16, 5.43
Boston Beer
going
backwards
while
Monster
makes
improvement
.

Akzo Nobel versus BASF
Chemical
Industry Average
.07, 5.20
Both companies
going backwards.

Dow and BASF
Chemical Company
Industry Average
.07, 5.20
Dow driving
progress. BASF
going backwards.

Novartis and Merck
Pharmaceutical
Company Average
.19, 2.75
Performance
out of
control.

Kraft and JM Smucker 2011-2018
2018
2018
Food Manufacturing
Industry Average
.10, 7.07

There are no companies in the
Gartner Top 25 that outperform
their peer group while driving
consistent improvement in
metrics performance.

Recent Progress and Outperforming
Peers

Coca-Cola
Beverage Industry
.16, 5.43

2010
2018
5.0
5.5
6.0
6.5
7.0
7.5
8.0
0.17 0.18 0.19 0.20 0.21 0.22
InventoryTurns
Operating Margin
Procter and Gamble Company
PG
0.19, 6.40
P&G
Best Scenario
Household
Products
.16, 4.82

5.9
6.4
6.9
7.4
0.13 0.15 0.17 0.19 0.21 0.23 0.25
InventoryTurns
Operating Margin
Unilever PLC
UL
0.16, 6.96
Unilever
Best Scenario
Household Products
.16, 4.82

L’Oreal
Personal Products
.07, 2.13

Colgate
Household Products
.16, 4.82

Recent Progress, But
Underperforming Peers

Schneider-Electric
Diversified
Manufacturing
.14, 5.28

Home Depot
Home
Improvement
Retail
04, 5.47

PepsiCo
Beverage Industry
.16, 5.43

Nestle
Food Manufacturing
.10, 7.07

Starbucks
Restaurants
.13, 67.92

Adidas
Apparel
Manufacturing
.12, 3.04

Diageo
Beverage Industry
.16, 5.43

Samsung
B2B Technologies
.67, 8.71

Cisco
B2B Technologies
.67, 8.71

Intel
Semiconductor
.15, 4.69

Novo Nordisk
Pharmaceuticals
.19, 2.75

BMW
Automotive
0.04, 7.25

Akzo Nobel
Chemical
.07, 5.20

BASF
Chemical
.07, 5.20

H&M
Apparel Retail
.10, 4.51

Nike
Apparel
Manufacturing
.12, 3.04

Johnson & Johnson
Pharmaceuticals
.19, 2.75
Medical Device
.16, 3.11
Household Products
.16, 4.82

HP
B2B Technologies
.67, 8.71

Inditex
Apparel
Manufacturing
.12, 3.04

Start by Defining Supply Chain Excellence

• Map Your “OOPS Chart”
• Build Your Orbit Charts
– Operating margin versus inventory turns: study your patterns
– Plot your patterns against peer group
– Review as a leadership team. Discuss why you are not making progress.
• Build a Balanced Scorecard with Cross-Functional Targets. Use in
S&OP and Network Design.
• Get Clear on Supply Chain Strategy. What Defines Value?
How To Get Started?

Build a Balanced Scorecard Focused on Value

Drive Value Across the Organization

Inventory: Focus on Form and Function

Inventory: Form and Function
Current
Focus

About Lora Cecere
• Founder of Supply Chain Insights
“LinkedIn Influencer”
Guest blogger for Forbes
Author of 5 books: Bricks Matter (2012), Shaman’s Journal (2014),
Supply Chain Metrics That Matter (2014), Shaman’s Journal (2015),
Shaman’s Journal (2016), Shaman’s Journal (2017)
• Partner at Altimeter Group (leader in open research)
• 7 years of Management Experience leading Analyst Teams at Gartner
and AMR Research
• 8 years Experience in Marketing and Selling Supply Chain Software at
Descartes Systems Group and Manugistics (now JDA)
• 15 Years Leading teams in Manufacturing and Distribution operations
for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream
and Procter & Gamble.
Contact Information:
• Email: lora.cecere@supplychaininsights.com
• Blog: www.supplychainshaman.com (18,000 pageviews/month)
• Forbes: www.forbes.com/sites/loracecere
• Twitter: twitter.com/lcecere (9,100 followers)
• LinkedIn: www.linkedin.com/in/loracecere (308,000 followers)
• LinkedIn Influencer: www.linkedin.com/today/author/446631

What To Learn More?

Network of Networks

Learn More: Upcoming Webinar
Supply Chains to
Admire 2019
Webinar: June 20th
@ 1:00 PM EST
Registration: https://attendee.gotowebinar.com/register/8071554390
9386243

Industry Orbit Charts Based on
Yearly Industry Averages

2010
2018
2.7
3.2
0.10 0.11 0.12 0.13 0.14
InventoryTurns
Operating Margin
Apparel Manufacturers
Best
Scenario
Apparel
Manufacture
rs
0.12, 3.04
Apparel Manufacturers
Operating Margin vs. Inventory Turns (2010 - 2018)

2010
2018
6.0
6.5
7.0
7.5
8.0
-0.02 -0.01 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08
InventoryTurns
Operating Margin
Automotive
Best
Scenario
Automotiv
e
0.04, 7.25
Automotive

2010
2018
6.8
7.3
7.8
0.08 0.09 0.10 0.11 0.12
InventoryTurns
Operating Margin
Auto Parts
Best
Scenario
Auto Parts
0.10, 7.54
Auto Parts

2010
2018
4.4
4.9
5.4
5.9
0.13 0.18
InventoryTurns
Operating Margin
Beverages
Best
Scenario
Beverage
s
0.16, 5.43
Beverages

2010
2018
4.5
5.0
5.5
6.0
0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11
InventoryTurns
Operating Margin
Chemical
Best Scenario
Chemical
0.07, 5.20
Chemical

2010
2018
6.0
6.5
0.08 0.09 0.10 0.11
InventoryTurns
Operating Margin
Containers & Packaging
Best
Scenario
Containers &
Packaging
0.10, 6.40
Containers and Packaging

2010
2018
5.4
5.9
6.4
6.9
0.03 0.04 0.05 0.06 0.07
InventoryTurns
Operating Margin
Contract Manufacturers
Best
Scenario
Contract
Manufacturer
s
0.05, 6.04
Contract Manufacturers

2010
2018
4.9
5.4
0.12 0.13 0.14 0.15 0.16
InventoryTurns
Operating Margin
Diversified Industries
Best
Scenario
Diversified
Industries
0.14, 5.28
Diversified Industries

2010
2018
6.3
6.8
7.3
7.8
0.08 0.09 0.10 0.11 0.12
InventoryTurns
Operating Margin
Food Industry
Best
Scenario
Food
0.10, 7.07
Food Manufacturing

2010
2018
5.3
5.8
6.3
0.05 0.06 0.07 0.08 0.09
InventoryTurns
Operating Margin
Durable Household Products
Best
Scenario
Durable
0.07, 5.84
Consumer Durables

2010
2018
4.0
4.5
5.0
5.5
0.13 0.14 0.15 0.16 0.17 0.18
InventoryTurns
Operating Margin
Non-Durable Household Products
Best
Scenario
Non-Durable
0.16, 4.82
Non-Durable Household Products

2010
2018
4.7
5.2
5.7
6.2
6.7
0.04 0.05 0.06 0.07 0.08 0.09
InventoryTurns
Operating Margin
Furniture
Best
Scenario
Furniture
0.07, 5.74
Furniture

2010 2018
2.9
3.0
3.1
3.2
3.3
0.14 0.15 0.16 0.17 0.18
InventoryTurns
Operating Margin
Medical Devices
Best
Scenario
Medical Devices
0.16, 3.11
Medical Device

2010
2018
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11
InventoryTurns
Operating Margin
Personal Products
Best
Scenario
Personal Products
0.07, 2.13
Personal Products

2010
2018
2.5
2.6
2.7
2.8
2.9
3.0
0.03 0.05 0.07 0.09 0.11 0.13 0.15 0.17 0.19 0.21 0.23
InventoryTurns
Operating Margin
Pharmaceutical Industry
Best Scenario
Pharma
0.19, 2.75
Pharmaceutical

2010
2018
52.0
62.0
72.0
82.0
0.10 0.11 0.12 0.13 0.14 0.15 0.16
InventoryTurns
Operating Margin
Restaurants
Best
Scenario
Restaurants
0.13, 67.92
Restaurant

2010
2018
11.0
12.0
13.0
14.0
0.21 0.23 0.25 0.27 0.29 0.31 0.33 0.35 0.37 0.39 0.41 0.43
InventoryTurns
Operating Margin
Food Retail
Best Scenario
Food Retail
0.35, 12.76
Food Retail

2010
2018
4.2
4.7
0.07 0.08 0.09 0.10 0.11 0.12
InventoryTurns
Operating Margin
Apparel Retail
Best Scenario
Apparel Retail
0.10, 4.51
Apparel Retail

2010
2018
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
0.06 0.07 0.08
InventoryTurns
Operating Margin
Broadline Retail
Best Scenario
Broadline Retail
0.07, 7.16
Broadline Retail

2010
2018
4.2
4.7
0.07 0.08 0.09 0.10 0.11 0.12
InventoryTurns
Operating Margin
Apparel Retail
Best Scenario
Apparel Retail
0.10, 4.51
Apparel Retail

2010
2018
11.0
12.0
13.0
14.0
0.21 0.23 0.25 0.27 0.29 0.31 0.33 0.35 0.37 0.39 0.41 0.43
InventoryTurns
Operating Margin
Food Retail
Best Scenario
Food Retail
0.35, 12.76
Food Retail

2010
2018
3.5
4.5
5.5
6.5
0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07
InventoryTurns
Operating Margin
Home Improvement Retail
Best Scenario
Home Improvement
Retail
0.04, 5.47
Home Improvement Retail

2010
2018
6.9
7.9
8.9
9.9
0.40 0.50 0.60 0.70 0.80 0.90 1.00
InventoryTurns
Operating Margin
B2B Technology
Best
Scenario
B2B Technology
0.67, 8.71
B2B Technology

2010
2018
4.4
4.5
4.6
4.7
4.8
4.9
5.0
0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20
InventoryTurns
Operating Margin
Semiconductor
Best Scenario
Semiconductor
0.15, 4.69
Semiconductor

2010
2018
9.9
10.9
11.9
12.9
13.9
14.9
0.10 0.11 0.12 0.13 0.14
InventoryTurns
Operating Margin
Telecommunications
Best
Scenario
Telecommunicatio
ns
0.12, 12.31
Telecommunications

2010
2018
3.8
4.3
4.8
0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14
InventoryTurns
Operating Margin
Tires
Best
Scenario
Tires
0.10, 4.55
Tires

2010
2018
4.8
5.3
5.8
0.06 0.07 0.08 0.09 0.10
InventoryTurns
Operating Margin
Trucks & Heavy Equipment
Best
Scenario
Trucks & Heavy
Equipment
0.08, 5.35
Trucks & Heavy Equipment

What Defines Supply Chain Excellence? Is It Defined by the Gartner Top 25?

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What Defines Supply Chain Excellence? Is It Defined by the Gartner Top 25?