presentation at cscmp chicago roundtable event on april 8, 2014

Metrics That MatterLora Cecere

Supply Chain Insights LLC Copyright © 2013, p. 2

Supply Chain Insights is focused on delivering independent, actionable and objective

advice for supply chain leaders. A company dedicated to research,

turn to us when you want the latest insights on supply chain trends, technologies to know

and metrics that matter.

About Us


• To Launch in May 2014– All industries– All company sizes– Three ratios: Strength, Resiliency, and Balance– Augmented by Peer Input

Supply Chain Index


Supply Chain Index= .33(Strength Ranking)+.33(Resiliency Ranking)+.33(Balance Ranking)+.10 (Peer Assessment Ranking)

Calculation

NAICS Code

Strength Ratio

Strength Ranking

Resiliency Ratio

Resiliency Ranking

Balance Ratio

Balance Ranking

Peer Rating

Peer Ranking

Total Score


Resilience: Mean Distance Analysis of Orbit Charts


A Supply Chain

is a Complex System

with Complex Processes

with Increasing Complexity


The Supply Chain Effective Frontier


Source: Supply Chain Insights 2012

Average Days of Inventory by Year

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Consumer Packaged Goods

59 57 62 64 67 67 68 70 70 64 64 67

Chemical

71.5 71.9 78.2 75.1 62 70.3 68.1 64.3 64.3 78.6 72.9 72.8

Pharma

122.236691097

87

133.699100562

175

190.147616165

968

170.986522478

989

184.342617399

859

175.550260476

877

167.799951139

247

149.815153981

283

154.915781882

591

198.663134119

976

154.313480863

244

131.819794240

294

High Tech

93.1 57.6 46.5 48.5 35.9 37.3 43.8 36.8 34.6 41.3 34.8 30.4

Average

86.4591727744

674

80.0497751405

437

94.2119040414

919

89.6466306197

473

87.3106543499

647

87.5375651192

192

86.9249877848

117

80.2287884953

207

80.9539454706

477

95.6407835299

941

81.5033702158

11

75.5049485600

736

25.0

75.0

125.0

175.0

225.0

Da

ys

o

f In

ve

nto

ry


The Efficient Supply Chain is not Effective


Perform better than peer group

Improve year-over-year results

Align internally on metrics

Deliver against the business strategy

Demonstrate consistency in results

Use innovation in supply chain processes

Balance. Be leaders in managing trade-offs

Our Point of View: Definition of Supply Chain Excellence


In a way that is:

Resilient and predictable

Balanced across the set of metrics to maximize value

Showing year-over-year improvement against peer group

To Drive Corporate Performance


Mining 20 Years of Financial Data


Most Interesting Patterns

• Cash-to-Cash Cycle versus Inventory Turns

• Revenue per Employee versus Inventory Turns

• Operating Margin versus Inventory Turns


What Have We Learned?

• Each industry has a different pattern of trade-offs of balancing growth, profitability, cycles and complexity.

• Companies that are supply chain leaders have very small movement with a balanced portfolio of metrics.

• It is about MUCH more than Return on Assets (ROA), growth and inventory.


A Look at the Last Decade


Progress in Manufacturing Productivity


Productivity in Retail


Progress in Inventory Turns and Operating Margin


Impact of A Recession


0 250 500 750 1,000 1,2500

3

6

9

12

15

2002 2012

The Dow Chemical Company

Revenue per Employee (K$)

Inv

en

tory

Tu

rns

Visualizing the Patterns

Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source

Best Scenario

DOW999, 6.7

Trace the line from 2002 point to 2012 point to follow the performance over time.

The diamond shows the company’s average over the period. Ex: The Dow Chemical Company (DOW) has an average of 999 K$ for revenue per employee and 6.7 for inventory turns.

Ideally, companies are increasing inventory turns and revenue per employee, moving towards the upper right corner of the graph over time.

Here, we plot inventory turns (y-axis) vs. revenue per employee (x-axis).

Average (Revenue per Employee, Inventory Turns)


Corporate Summary


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


Corporate Summary


Operating Margin vs. Revenue per Employee (2002-2012)


Corporate Summary


Operating Margin vs. Revenue per Employee (2002-2012)


Corporate Summary


Inventory Turns vs. Operating Margin (2000-2012)


Corporate Summary


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


Inventory Turns vs. Operating Margin (2000-2012)


Corporate Summary


Cash-to-Cash Cycle (2000-2012)


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


Inventory Turns vs. Operating Margin(2000-2012)


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


Case Study


Inventory Turns vs.

Operating Margin (2000-2012)


• Supply chain is a complex system with increasing complexity.

• Different industries have different patterns, but the cash-to-cash metrics have the highest correlation to market capitalization with some of the poorest performance.

Wrap-up


1. Finish the work on the Supply Chain Index

2. Place the rankings on balance, strength and resilience into the Supply Chain Insights Community for Shaman Circle members to vote on supply chain excellence

3. Final analysis of companies to be revealed at the 2014 Supply Chain Insights Global Summit

Next Steps


PAST WEBINARS: ON DEMAND

• From August 29, 2013: Supply Chain Index, Overview

• From August 15, 2013: Supply Chain Talent: The Missing Link

• From July 25, 2013: What is the Role of the Store

Webinars

www.supplychaininsights.com/upcoming-webinars

UPCOMING WEBINARS

• November 13, 2013: Shaman’s Circle

• November 14, 2013: Healthcare Value Chain

• December 12, 2013: Digital Manufacturing & 3D Printing

• January 23, 2014: Voice of the Supply Chain


Global Summit 2014 Registration is Now Open

Supply Chain Insights Global Summit 2014September 10-11, 2014

The Phoenician – Scottsdale, AZ USAwww.supplychaininsightsglobalsummit.com


Upcoming Corporate TrainingChicago, IL and Atlanta, GA

November 11-12, 2013Chicago, IL USA

January 16-17, 2014Atlanta, GA USA

www.supplychaininsights.com/training


Questions?


Who is Lora?

• Founder of Supply Chain Insights

• 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.


Where Do You Find Lora?

Contact Information: [email protected]

Blog: www.supplychainshaman.com (5000 pageviews/month)

Twitter: lcecere 5200 followers.

LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (5450 in the network)

presentation at cscmp chicago roundtable event on april 8, 2014

Business

supply chain leaders

supply chain trends

efficient supply chain

supply chain processes

peer input supply chain

latest insights

average revenue

average days of inventory