Top 15 Supply Chains to Admire from the Supply Chain Insights Conference

The Supply Chain Insights annual conference was held on September 10-11, 2014 at the Phoenician in Scottsdale, Arizona. As an ex-AMR Research analyst, this was my favorite venue. Great memories here, as so much has changed in the supply chain research world these past 5+ years. Reliving the old days was made even more rich, as there was a panel session at the conference with Lora Cecere, Roddy Martin, Mickey North-Rizza and myself. All ex-AMR analysts on the stage, talking about the ‘Top 15 Supply Chains we Admire’.

There has been so much discussion on the “top” supply chain lists. When we did the Top 25 list at AMR, we mixed a bit of science, art and influence. While there was always passionate discussions on companies and metrics, the end goal was to raise awareness of supply chain as a practice. I know the Sales and Marketing folks have lots of elaborate events to celebrate their achievements, and we in supply chain needed to pause from our 17 hour flights to far off places to negotiate a 2% reduction in cost, and celebrate our industry.

The panel discussed the Top 15 Supply Chains we Admire, as built off the Supply Chain Index. While other “lists” use ROA, Inventory Turns and Revenue Growth, I find Lora’s science very objective. She is analyzing growth, inventory turns, operating margin, and return on invested capital, performance and improvement over time.

The Supply Chain Index methodology was built on the belief that the supply chain is a complex system with increasing complexity. We believe it is the supply chain leader’s role to build and manage supply chain performance to drive year-over-year improvements which are balanced, strong and resilient. We find that most companies throw the system out balance and are able to only drive progress on a single metric, not the metrics portfolio.”

Lora Cecere, Founder and CEO, Supply Chain Insights LLC and Abby Mayer, Research Associate, Supply Chain Insights LLC

So, drum roll please…

The Top Supply Chain We Admire are:

1. TSMC (Taiwan Semiconductor)
2. Intel
3. EMC
4. Cisco
5. Apple
6. Seagate
7. Colgate
8. General Mills
9. BASF
10. Eastman Chemical
11. TRW
12. Audi
13. Nike
14. Ralph Lauren
15. AB Inbev

Very happy to see two of my prior employers, EMC and Apple, make the list. I would highly recommend you read the Supply Chain Insights report. This provides the depth of analysis that created these rankings. With some AMR history on this, I have to say this is a great step in a more objective and mathematical measurement of supply chains. I find it more objective because it is broken down by industry. I’ve always believed it’s too unfair to compare a life science supply chain (whose primary goal is to manage profitability across the drug lifecycle) against a consumer electronic supply chain (who’s primary goal is market share).

At the conference, Lora held a session, “The Math Behind the Supply Chain Index” with Dr. George Runger, Arizona State, and Abby Mayer, Supply Chain Insights. This made it fun for us ex-AMR analysts, as we got to talk about our viewpoints and opinions, and Dr. Runger & Abby Mayer had the tough task of going through the methodology.

Some interesting insights:

• There were 0 companies from Retail, Paper & Packaging, Pharmaceutical, or Medical Devices.
• Some “big” names from other lists, like P&G, Toyota, Samsung and Walmart didn’t make the lists.

During the panel, I shared my thoughts on Samsung. They are a supply chain that I very much like, especially from an S&OP practice. However, they seem to fall under the conglomerate issue, where multiple business units may skew the summary metrics. Samsung has Visual Displays, Appliances, Semiconductor, Digital Imaging, Networks, PC/Laptop/Printer, Mobile Communications, and LCD panels. Their S&OP is great across these business units.

• Demand and supply volatility makes the supply chain “tough”. And when the going gets tough, the tough get going. Industrial networks rank highest, followed by consumer. No healthcare networks made the list.
• While 12 out of 13 improved resilience, 11 out of 13 lost ground at the intersection of operating margin and inventory turns.

During the Panel, I was asked to comment on the 5 leading factors that make a difference:

1. A clear definition of supply chain excellence by leadership
2. Strong horizontal processes
3. Intentional design
4. Value of supply chain planning and analytics
5. Development of organizational capabilities

The one that stands out the most is strong horizontal processes. For years, supply chains have evolved from the Plan, Buy, Make, Deliver model, building Functional processes, with Functional systems. Each Functional area built “middleware” to bridge the gaps. Most of this middleware was Excel and Meetings. As we made the supply chain more global and complex (see Supply Chain Insights findings on how we describe our supply chain today), we keep thinking functionally when we should transform to an end-to-end solution.

Speed and Agility will improve dramatically when the process AND solution is focused end-to-end.

You can see it with the high tech companies on the list. Each has a story, or driving force behind their transformation to an end-to-end network.

TSMC: driven by a desire to manage the cost and sustainability at their n^th tier suppliers, as well as TSMC and their customers, they continually are recognized as a strong partner from both their network as well as external organizations. Tracking and optimizing costs at all your supply chain nodes requires an end-to-end strategy.

Cisco: for many years, Cisco has led the charge for raising the awareness of supply chain, through their risk management focus as well as their leadership and educational programs. Having a highly outsourced supply chain and managing the risks requires an end-to-end strategy.

EMC: while EMC’s product line is not as complex as, say, Samsung, they are strong at aligning end customers with supply chain with engineering. One of the best tours is the EMC factory. You will see how their supply chain is in lock step with test engineering. This end-to-end focus allows EMC to manage the end customer environment, using manufacturing results to predict customer installed product events, and EMC pre-event resolutions. It also allows EMC to drive detailed new product introduction success, aligning NPI dates with supply chain plans.

Seagate: it took a big external event, the Thailand floods, to force Seagate to an end-to-end strategy. Existence as a company was at stake, and Seagate had to support their suppliers financially. During this crisis, Seagate leadership rose to the occasion, and created the journey as an end-to-end supply chain.

And, Apple: Having worked there, I would say their strongest ability is leverage. From cash, to product, to dates, to future business, they align end-to-end very tightly to leverage their supply chain network. Some would call this “demand shaping”. There’s been many views on the Apple supply chain. They’ve ranked #1 in the AMR/Gartner list for 7 straight years, since 2008.

Trivia question: Who was the #1 Supply Chain prior to Apple’s 7 Year run?

Answer: Nokia

This brings me to a perfect conclusion: The Supply Chain needs to transform to an end-to-end, business leader role.

Nokia had a great supply chain, focused on the mobile phone hardware.  They failed to integrate software and watched other brands leverage digital content.  They failed to transition to the smart phone era, thinking their brand in mobile will allow them to “catch up”.

“The high tech era has taught people to expect constant innovation; when companies fall behind, consumers are quick to punish them. Late and inadequate: for Nokia, it was a deadly combination.” The New Yorker, James Surowiecki, September 3, 2013.

Functional excellence is no longer good enough.  Supply Chains are in danger of being punished by consumers, who have the balance of power, if they don’t establish end-to-end control. And, not just for agility & speed, but to leverage the business strategy.