understanding the supply chain index - 2015 - slide deck - 20 aug 2015
TRANSCRIPT
![Page 1: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/1.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 1
Understanding the Supply Chain Index
August 2015
![Page 2: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/2.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 2
About Me
• Founder of Supply Chain Insights• LinkedIn Influencer
• Guest Blogger for Forbes
• Author of three books: Bricks Matter (2012), The Shaman’s Journal (2014) and Supply Chain Metrics That Matter (December 2014)
• Partner at Altimeter Group (leader in open research)• Seven Years of Management Experience Leading Analyst Teams at Gartner
and AMR Research• Eight Years Experience in Marketing and Selling Supply Chain Software at
Descartes Systems Group and Manugistics (now JDA)• Fifteen Years Leading Teams in Manufacturing and Distribution Operations
for Clorox, Kraft/General Foods, Nestlé/Dreyer’s Grand Ice Cream and Procter & Gamble
Contact Information: • Email: [email protected]• Blog: www.supplychainshaman.com (10,000 page views/month)• Forbes: www.forbes.com/sites/loracecere/• Twitter: lcecere (6200 followers)• LinkedIn: www.linkedin.com/in/loracecere (46,000 followers)
![Page 3: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/3.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 3
Our Goal Is to Help the Average Joe
![Page 4: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/4.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 4
Four Years of Work
WileyDecember 2012
Wiley December 2014
Self-publishedSeptember 2014
Self-publishingSeptember 2015
![Page 5: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/5.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 5
The Goal
![Page 6: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/6.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 6
A Supply Chain Is a Complex System
with Complex Processes
with Increasing Complexity
What We Learned….
![Page 7: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/7.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 7
Descriptors Used by Leaders
#SCIWEBINAR
![Page 8: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/8.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 8
The Supply Chain Effective Frontier
![Page 9: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/9.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 9
9 out of 10 Supply Chains are Stuck
![Page 10: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/10.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 10
• Metrics That Matter: Metrics that can be improved by the supply chain leader and have high correlation to market capitalization.
• Market-Driven: The ability to sense and respond from market-to-market (from the customer’s customer to the supplier’s supplier)
• NAICS Codes: US census classification(s) of industry groupings.• Orbit Chart: A comparison of year-over-year improvement between two
supply chain metrics.• Supply Chain Index: A methodology developed by Supply Chain Insights in
2014 to measure supply chain improvement based on orbit chart measurements.
• Supply Chains to Admire: An objective, and independent analysis of supply chains that are outperforming in the Supply Chain Metrics That Matter and are driving supply chain improvement as measured by the Supply Chain Index.
• The Effective Frontier: Representation of a balanced set of measurements for the supply chain.
Let’s Start with Definitions
#SCIWEBINAR
![Page 11: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/11.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 11
Methodology Comparison
Gartner Top 25 Supply Chains to AdmireFocus Fortune 1000 Companies Companies by Industry Irrespective of
Size
Calculation
-25% ROA (3 Year Weighted Average)-15% Inventory Turns (2014)10% Growth (2013 versus 2014) -50 % Opinion
Performance Better than Peer Group for the Period of 2009-2014 on the Metrics That Matter
Improvement Greater than the Average of the Peer Group for 2009-2014
Experience 10th Year 2nd Year
#SCIWEBINAR
![Page 12: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/12.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 12
New Research
Coming Soon!Individual Industries Automotive
Consumer ElectronicsAugust 25, 2015September 1, 2015
Supply Chains to Admire Final Report September 8, 2015
Metrics That Matter Correlations
New Report on the Connection of Financial Metrics to Supply Chain Performance
October 1, 2015
Industries (20)
3-PLA&DApparelAutomotiveAutomotive SuppliersBeautyBeveragesChemicalContract ManufacturingConsumer Packaged GoodsConsumer Durables
Consumer ElectronicsDepartment StoresFood Grocery RetailHi-Tech and ElectronicsHeavy EquipmentMass MerchantsMedical DevicePackaging and ClosuresSemiconductor
#SCIWEBINAR
![Page 13: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/13.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 13
Progress: All Industries
Industry Snapshots (2006-2013)
IndustryYear –over-
Year Revenue Growth
Operating Margin
Inventory Turns
Cash-to-Cash Cycle
Revenue per Employee
(K$)SG&A Ratio
Retail Apparel Industry
18%39%
0.3927%
0505%
6826%
32518%
27%05%
Apparel Manufacturing Industry
14%82%
0.1232%
0568%
15008%
400355%
27%63%
Mass Retail Industry
09%50%
0.0620%
0606%
03148%
35048%
23%6%
Beverage Industry
09%61%
0.1916%
0204%
5346%
512 NC
24% 16%
Pharmaceutical Industry
08%47%
0.2329%
0316%
15547%
57232%
27%08%
Chemical Industry
08%45%
0.1010%
0604%
8723%
55723%
14%27%
Medical Device Industry
06%38%
0.1432%
0213%
20616%
35112%
34%04%
Grocery Retail Industry
06%31%
0.0337%
1701%
1050%
40554%
14%06%
Consumer Packaged Goods
05%25%
0.1473%
08482%
7217%
33314%
26% 09%
Food Industry
05%55%
0.1019%
07 17%
4004%
53455%
20% 18%
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2013Industry Average comprised of public companies (combined food & beverage industry: NAICS 3112% where % is any number from 0-9, 311320, 311520, 311821, 311941 & 312111), (chemical: NAICS 325188 & 325998), (consumer packaged goods: NAICS 3256% where % is any number from 0-9), (medical device industry: NAICS 339112), (pharmaceutical industry: NAICS 325412) reporting in One Source with 20123annual sales greater than $1billionNC=no change
#SCIWEBINAR
![Page 14: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/14.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 14
Which Metrics Matter?
#SCIWEBINAR
![Page 15: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/15.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 15
Correlations to Market Capitalization
#SCIWEBINAR
![Page 16: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/16.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 16
What We Expected
#SCIWEBINAR
![Page 17: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/17.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 17
A Supply Chain is a Complex System
with Complex Processes
with Increasing Complexity
What We Learned….
#SCIWEBINAR
![Page 18: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/18.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 18
The Supply Chain Effective Frontier
#SCIWEBINAR
![Page 19: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/19.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 19
Orbit Chart: Wal-Mart(Inventory Turns and Operating Margin)
#SCIWEBINAR
![Page 20: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/20.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 20
Orbit Chart: Apple (Inventory Turns and Operating Margin)
#SCIWEBINAR
![Page 21: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/21.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 21
Orbit Charts: Dow Chemical Company
#SCIWEBINAR
![Page 22: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/22.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 22
Measuring Supply Chain Improvement
Overall Ranking per Company• Balance: Return on Invested Capital & Revenue Growth Vector Trajectory (30%)• Strength: Inventory Turns & Operating Margin Vector Trajectory (30% of score)• Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)
𝑺𝒖𝒑𝒑𝒍𝒚 𝑪𝒉𝒂𝒊𝒏 𝑰𝒏𝒅𝒆𝒙=𝟏𝟑𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝑭𝒂𝒄𝒕𝒐𝒓+
𝟏𝟑 𝑺𝒕𝒓𝒆𝒏𝒈𝒕𝒉 𝑭𝒂𝒄𝒕𝒐𝒓+
𝟏𝟑 𝑹𝒆𝒔𝒊𝒍𝒊𝒆𝒏𝒄𝒚 𝑭𝒂𝒄𝒕𝒐𝒓
#SCIWEBINAR
![Page 23: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/23.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 23
Supply Chains to Admire Methodology
PerformanceBeats the industry
average for operating margin, inventory turns
and ROIC for 2006-2014 and 2009-2014
ImprovementRanks above peer group average on The Supply Chain
Index for 2006-2014 or 2009-2014
+
#SCIWEBINAR
![Page 24: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/24.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 24
Annual Study: Supply Chains To Admire
Supply Chains to Admire 2015 to be Announced at the Supply Chain Insights Global Summit on September 9th and 10th
#SCIWEBINAR
![Page 25: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/25.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 25
Consumer Products
#SCIWEBINAR
![Page 26: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/26.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 26
Consumer Packaged Goods
#SCIWEBINAR
Company2006-2014
2009-2014
2011-2014
2006-2014
2009-2014
2011-2014
2006-2014
2009-2014
2011-2014
2006-2014
2009-2014
Church & Dwight Co. Inc. 0.17 0.18 0.19 12.4 13.0 13.3 11% 13% 13% 4 2
Colgate-Palmolive 0.21 0.22 0.22 12.8 12.7 12.7 32% 33% 31% 7 8
The Clorox Company 0.17 0.17 0.16 14.9 14.5 14.4 21% 21% 22% 5 6
Kimberly Clark 0.13 0.13 0.13 8.7 8.9 9.0 16% 16% 16% 9 4
Newell Rubbermaid 0.09 0.10 0.09 7.7 8.0 8.2 7% 8% 9% 3 9
Procter & Gamble Co. 0.19 0.19 0.18 11.6 11.6 12.0 12% 12% 12% 6 5
Reckitt Benckiser Group 0.23 0.24 0.24 14.2 13.5 12.8 28% 26% 24% 8 7
Tupperware Brands Corp. 0.12 0.14 0.14 8.2 8.4 8.6 17% 20% 20% 1 1
Unilever plc 0.14 0.14 0.15 10.7 11.0 11.1 17% 17% 19% 2 3
Average 0.15 0.16 0.16 10.6 10.7 10.7 16% 17% 17%
Performance and Improvement
Operating Margin Inventory Turns Return on Invested CapitalSupply Chain Index
Rankings
![Page 27: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/27.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 27
-0.07 -0.02 0.03 0.08 0.13 0.189%
14%
19%
Procter & GambleReturn on Invested Capital (ROIC)
Rev
enue
Gro
wth
2000
2014
2001
2002
20032004
2005
2006
2007
2008
20092010
2011
20122013
P&G: Growth and ROIC
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from YCharts
Best Scenario
PG0.06, 14%
Trace the line from 2000 point to 2014 point to follow the performance over time.
The diamond shows the company’s average over the period. Ex: The Procter & Gamble Co. (PG) has an average of .06 for ROIC and 14% for revenue growth.
Ideally, companies are increasing growth and Return on Invested Capital (ROIC) moving towards the upper right corner of the graph over time.
Here, we Growth (y-axis) vs. ROIC (x-axis).
Average (Return on Invested Capital, Revenue Growth)
#SCIWEBINAR
![Page 28: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/28.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 28
0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.2110.00
11.00
12.00
13.00
Procter & GambleOperating Margin
Inve
ntor
y Tu
rns
2000
2014
2001 2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
P&G: Inventory Turns and Operating Margins
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from YCharts
Best Scenario
PG0.18, 11.75
Trace the line from 2000 point to 2014 point to follow the performance over time.
The diamond shows the company’s average over the period. Ex: The Procter & Gamble Co. (PG) has an average of .18 for operating margin and 11.75 for inventory turns.
Ideally, companies are increasing inventory turns and operating margins moving towards the upper right corner of the graph over time.
Here, we plot inventory turns (y-axis) vs. operating margins(x-axis).
Average (Operating Margin, Inventory Turns)
#SCIWEBINAR
![Page 29: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/29.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 29
0.17 0.18 0.19 0.20 0.21 0.22 0.23 0.24 0.2510.00
11.00
12.00
13.00
14.00
15.00
Colgate-PalmoliveOperating Margin
Inve
ntor
y Tu
rns
2000 2014
20012002
2003
200420052006
20072008
20092010
2011
2012
2013
Colgate: Operating Margins and Inventory Turns
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from YCharts
Best Scenario
CL0.21, 13.03
Trace the line from 2000 point to 2014 point to follow performance over time.
The diamond shows the company’s average over the period. Ex: The Colgate-Palmolive Co. (CL) has an average of .21 for operating margin and 13.03 for inventory turns.
Ideally, companies are increasing inventory turns and operating margin, moving towards the upper right corner of the graph over time.
Here, we plot inventory turns (y-axis) vs. operating margin (x-axis).
Average (Operating Margin, Inventory Turns)
#SCIWEBINAR
![Page 30: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/30.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 30
0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.197.50
8.00
8.50
9.00
9.50
10.00
10.50
11.00
Kimberly ClarkOperating Margin
Inve
ntor
y Tu
rns
2000
2014
2001
2002
2003
20042005
2006
2007
2008
2009
20102011
2012
2013
Biggest Loser: Kimberly-Clark
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from YCharts
Best Scenario
KMB0.15, 9.01
Trace the line from 2000 point to 2014 point to follow the performance over time.
The diamond shows the company’s average over the period. Ex: The Kimberly Clark Co. (KMB) has an average of .15 for operating margin and 9.01 for inventory turns.
Ideally, companies are increasing inventory turns and operating margin moving towards the upper right corner of the graph over time.
Average (Operating Margin, Inventory Turns)
Here, we plot inventory turns (y-axis) vs. operating margin (x-axis).
#SCIWEBINAR
![Page 31: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/31.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 31
0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.184.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
UnileverOperating Margin
Inve
ntor
y Tu
rns
2000
2014
20012002
20032004
200520062007 20082009
20102011
20122013
Unilever: Impressive Gains
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source & YCharts
Best Scenario
UN0.13, 8.66
Trace the line from 2000 point to 2014 point to follow the performance over time.
The diamond shows the company’s average over the period. Ex: The Unilever Co. (UN) has an average of .13 for operating margin and 8.66 for inventory turns. Ideally, companies are increasing
inventory turns and operating margin moving towards the upper right corner of the graph over time.
Here, we plot inventory turns (y-axis) vs. operating margin(x-axis).
Average (Operating Margin, Inventory Turns)
#SCIWEBINAR
![Page 32: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/32.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 32
0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.219.00
10.00
11.00
12.00
13.00
Procter & Gamble UnileverOperating Margin
Inve
ntor
y Tu
rns
2014
2006
2014 2006
Procter & Gamble and UnileverInventory Turns vs. Operating Margin
(2006 – 2014)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source & YCharts
Best Scenario
UN0.14, 10.74
Average (Operating Margin, Inventory Turns)
PG0.19, 11.59
#SCIWEBINAR
![Page 33: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/33.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 33
0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.21 0.22 0.239.50
10.50
11.50
12.50
13.50
Colgate Palmolive UnileverOperating Margin
Inve
ntor
y Tu
rns
2014
2006
2014
2006
Colgate and UnileverInventory Turns vs. Operating Margin
(2006 – 2014)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source & YCharts
Best Scenario
UN0.14, 10.74
Average (Operating Margin, Inventory Turns)
CL0.21, 12.77
#SCIWEBINAR
![Page 34: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/34.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 34
Procter & Gamble and ColgateInventory Turns vs. Operating Margin
(2006 – 2014)
#SCIWEBINAR
![Page 35: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/35.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 35
PharmaceuticalsWebinar
August 4, 2015
#SCIWEBINAR
![Page 36: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/36.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 36
Pharmaceuticals
#SCIWEBINAR
Company 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014 2011-2014 2006-2014 2009-2014Abbott Laboratories 0.11 0.11 0.12 8.98 8.79 8.11 12% 11% 10% 3 6AstraZeneca plc 0.27 0.27 0.22 14.96 15.79 14.28 22% 19% 15% 9 8Bristol-Myers Squibb Co. 0.08 0.08 0.08 7.77 7.76 7.48 7% 6% 7% 4 4Eli Lilly and Company 0.20 0.23 0.21 8.24 8.42 8.40 16% 21% 18% 7 7Merck and Company 0.15 0.13 0.16 9.12 7.35 7.22 15% 13% 11% 8 2Novo Nordisk A/S 0.36 0.35 0.37 6.47 7.31 8.16 42% 51% 60% 5 4Novartis AG 0.21 0.21 0.20 8.09 8.32 8.44 13% 11% 11% 1 1Pfizer, Inc. 0.50 0.23 0.26 8.13 7.83 8.10 12% 0.10 12% 7 5Teva Pharmaceutical Industries Limited 0.16 0.16 0.14 4.23 4.13 4.00 7% 8% 7% 2 3Average 0.19 0.20 0.20 8.44 8.41 8.95 16% 18% 17%
Operating Margin Inventory Turns Return on Invested Capital Supply Chain Index Performance and Improvement
![Page 37: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/37.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 37
0.21 0.22 0.23 0.24 0.25 0.26 0.27 0.28 0.299.00
10.00
11.00
12.00
13.00
14.00
Johnson & JohnsonOperating Margin
Inve
ntor
y Tu
rns
20002014
20012002
2003
20042005
200620072008 2009
2010
2011
20122013
Visualizing the Patterns
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2014 from YCharts
Best Scenario
JNJ0.25,11.36
Trace the line from 2000 point to 2014 point to follow the performance over time.
The diamond shows the company’s average over the period. Ex: The Johnson & Johnson Co. (JNJ) has an average of .25 for operating margin and 11.36 for inventory turns.
Ideally, companies are increasing inventory turns and operating margin, moving towards the upper right corner of the graph over time.
Here, we plot inventory turns (y-axis) vs. operating margin (x-axis).
Average (Operating Margin, Inventory Turns)
#SCIWEBINAR
![Page 38: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/38.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 38
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014
-0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.604.0
5.0
6.0
7.0
8.0
9.0
10.0
2006
Eli Lilly and Company Novo Nordisk
Operating Margin
2014 NVO0.31, 6.48
2014
2006
Best Scenario
LLY0.24, 8.30
Average (Operating Margin, Inventory Turns)
Inve
ntor
y Tu
rns
Novo Nordisk Making Progress
#SCIWEBINAR
![Page 39: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/39.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 39
0.17 0.18 0.19 0.20 0.21 0.22 0.23 0.24 0.25 0.26 0.27 0.28 0.297.00
8.00
9.00
10.00
11.00
12.00
13.00
Johnson & Johnson NovartisOperating Margin
Inve
ntor
y Tu
rns
2014
2006
20142006
Inventory Turns vs. Operating Margin(2006 – 2014)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts
Best Scenario
JNJ0.25, 11.11
Average (Operating Margin, Inventory Turns)
NVS0.21, 8.30
#SCIWEBINAR
![Page 40: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/40.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 40
0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.305.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
Johnson & Johnson PfizerOperating Margin
Inve
ntor
y Tu
rns
2014
2006
2014 2006
Inventory Turns vs. Operating Margin(2006 – 2014)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts
Best Scenario
JNJ0.25, 11.11
Average (Operating Margin, Inventory Turns)
PFE0.21, 8.13
#SCIWEBINAR
![Page 41: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/41.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 41
Inventory Turns vs. Operating Margin(2006 – 2014)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014
TEVA0.16, 4.28
Average (Operating Margin, Inventory Turns)
0.00 0.10 0.20 0.303.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
2006
TEVA Pharmaceutical Industries Mylan N.V.Operating Margin
2014
MYL0.16, 4.83
2014 2006
Best Scenario
Inve
ntor
y Tu
rns
#SCIWEBINAR
![Page 42: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/42.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 42
The Journey
#SCIWEBINAR
![Page 43: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/43.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 43
Metrics Maturity
#SCIWEBINAR
![Page 44: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/44.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 44
• Which metrics matter?– Growth, operating margin, inventory turns, ROIC, customer
service (in the eyes of the customer)
• How do we get unstuck?– Focus cross-functionally on a balanced portfolio. Bonus
employees against the portfolio. – Augment with functional metrics focused on improving
RELIABILITY.
• What are the functional reliability metrics?– Examples include: Forecasting, first pass yield, OEE, on-time
delivery, orders shipped complete, hands-free orders, schedule attainment, safety metrics, employee turnover
Insights
#SCIWEBINAR
![Page 45: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/45.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 45
• Continuity of leadership• Supply chain talent development• Focus on a multi-year supply chain strategy• Clear governance to guide cross-functional decision-making• Strength in horizontal processes• Excellence in supply chain planning, network design and inventory
management
What Drives Top Performance?
#SCIWEBINAR
![Page 46: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/46.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 46
Questions?
#SCIWEBINAR
![Page 47: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/47.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 47
#SCIWEBINAR
![Page 48: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/48.jpg)
#SCIWEBINAR
![Page 49: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/49.jpg)
![Page 50: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/50.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 50
About Me
• Founder of Supply Chain Insights• LinkedIn Influencer
• Guest Blogger for Forbes
• Author of three books: Bricks Matter (2012), The Shaman’s Journal (2014) and Supply Chain Metrics That Matter (December 2014)
• Partner at Altimeter Group (leader in open research)• Seven Years of Management Experience Leading Analyst Teams at Gartner
and AMR Research• Eight Years Experience in Marketing and Selling Supply Chain Software at
Descartes Systems Group and Manugistics (now JDA)• Fifteen Years Leading Teams in Manufacturing and Distribution Operations
for Clorox, Kraft/General Foods, Nestlé/Dreyer’s Grand Ice Cream and Procter & Gamble
Contact Information: • Email: [email protected]• Blog: www.supplychainshaman.com (10,000 page views/month)• Forbes: www.forbes.com/sites/loracecere/• Twitter: lcecere (6200 followers)• LinkedIn: www.linkedin.com/in/loracecere (46,000 followers)
![Page 51: Understanding the Supply Chain Index - 2015 - slide deck - 20 AUG 2015](https://reader036.vdocuments.mx/reader036/viewer/2022062823/58785dd91a28ab18098b5a21/html5/thumbnails/51.jpg)
Supply Chain Insights LLC Copyright © 2015, p. 51
Definition: Metric Equations
Source: Supply Chain Insights LLC, Corporate Annual Reports (2000-2014)
Metric EquationsCash-to-Cash Cycles = (Avg. Inventory/COGS + Avg. Accounts Receivable/Sales - Avg. Accounts Payable/Purchases)*91.5Days of Inventory = (Average Inventory/COGS)*91.5
Days of Payables = (Average Accounts Payables/Purchases)*91.5
Days of Receivables = (Average Accounts Receivable/Sales)*91.5
Inventory Turns = (Cost of Sales/Average Inventory)
Operating Margin = (Operating Income/Revenue)
Return on Invested Capital = (Net Income/Invested Capital)
Return on Net Assets = (Trailing 12 Month Net Income/Total Assets from the most recent quarter) Revenue Growth = (Quarterly Revenuei/Quarterly Revenuei-4 -1)
Revenue per Employees = (Revenue/Average Annual Employee)
#SCIWEBINAR