Supply Chains to
Admire 2016
Webinar
July 20, 2016

Supply Chain Insights LLC Copyright © 2016, p. 2
Your Speaker Today
Lora Cecere, Founder and CEO, Supply Chain Insights

Supply Chain Insights LLC Copyright © 2016, p. 3
We wanted to have an objective measurement
of supply chain excellence for our research.
Why Do We Do This?

Supply Chain Insights LLC Copyright © 2016, p. 4
• The methodology is in its third year.
• Constantly learning and refining the
methodology based on feedback from supply
chain leaders.
• Data sourced from YCharts.
• Based on financial ratios.
History?

Supply Chain Insights LLC Copyright © 2016, p. 5
Comparison
Gartner Top 25 Supply Chains to Admire
Focus
• Fortune Global 500 and
Forbes Global 2000 lists
• $12B minimum revenue
• Companies by industry,
regardless of size
Calculation
• 50% quantitative
measures:
• ROA (3 year weighted
average)
• Inventory Turns (1 year
quarterly average)
• Revenue Growth (3 year
weighted average)
• Corporate Social
Responsibility 3rd party index
• 50% peer and Gartner
analyst opinions
• Improvement greater than peer
group average based on the
Supply Chain Index rank:
• Strength, Balance, and Resiliency
• Value relative to peer group
average
• Price to Tangible Book Value
• Performance better than peer
group average on the Supply
Chain Metrics That Matter:
• Revenue Growth, Operating
Margin, Inventory Turns, Return on
Invested Capital
Experience • 13th year • 3rd year

Supply Chain Insights LLC Copyright © 2016, p. 6
What We Expected

Supply Chain Insights LLC Copyright © 2016, p. 7
2006
2015
5
6
7
8
0.15 0.16 0.17 0.18 0.19 0.20 0.21
InventoryTurns
Operating Margin
Procter & Gamble
Best Scenario
PG
0.19, 5.75
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts
Procter & Gamble
(2006-2015)

Supply Chain Insights LLC Copyright © 2016, p. 8
Colgate-Palmolive
(2006-2015)

Supply Chain Insights LLC Copyright © 2016, p. 9
2006
2015
5.50
6.50
7.50
8.50
0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.20 0.21
InventoryTurns
Operating Margin
Best Scenario
K
0.14, 7.22
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts
Kellogg
(2006-2015)

Supply Chain Insights LLC Copyright © 2016, p. 10
Dow Chemical Company and DuPont
(2006-2015)

Supply Chain Insights LLC Copyright © 2016, p. 11
Honda and Toyota
(2006-2014)

Supply Chain Insights LLC Copyright © 2016, p. 12
Bristol-Myers Squibb and Merck
(2006-2015)

Supply Chain Insights LLC Copyright © 2016, p. 13
Laggards Leaders
Focus on Functional Metrics Focus on Horizontal Processes
Driving Singular Metric Strategies Building of Balanced Scorecards
Changing Leadership Consistency of Leadership and Culture
Focus Solely on Transactional
Processes
Strong Planning and Network Design
Changing Focus. Adoption of Fads. Clarity of Supply Chain Excellence.
Why?

Supply Chain Insights LLC Copyright © 2016, p. 14
Process
Evaluate Supply Chain
Improvement Using the
Supply Chain Index
Determine Relative
Position Against Peers for
Price to Tangible Book
Select Higher Performing
Companies Against
Performance Factors

Supply Chain Insights LLC Copyright © 2016, p. 15
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%)
• Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)
𝑺𝒖𝒑𝒑𝒍𝒚 𝑪𝒉𝒂𝒊𝒏 𝑰𝒏𝒅𝒆𝒙 =
𝟏
𝟑
𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝑭𝒂𝒄𝒕𝒐𝒓 +
𝟏
𝟑
𝑺𝒕𝒓𝒆𝒏𝒈𝒕𝒉 𝑭𝒂𝒄𝒕𝒐𝒓 +
𝟏
𝟑
𝑹𝒆𝒔𝒊𝒍𝒊𝒆𝒏𝒄𝒚 𝑭𝒂𝒄𝒕𝒐𝒓

Supply Chain Insights LLC Copyright © 2016, p. 16
Process
Evaluate Supply Chain
Improvement Using the
Supply Chain Index
Determine Relative
Position Against Peers for
Price to Tangible Book
Select Higher Performing
Companies Against
Performance Factors

Supply Chain Insights LLC Copyright © 2016, p. 17
Value
Price to Tangible Book =
Market Price/Tangible Book Value

Supply Chain Insights LLC Copyright © 2016, p. 18
Process
Evaluate Supply Chain
Improvement Using the
Supply Chain Index
Determine Relative
Position Against Peers for
Price to Tangible Book
Select Higher Performing
Companies Against
Performance Factors

Supply Chain Insights LLC Copyright © 2016, p. 19
Performance Factors:
A Balanced Portfolio Drives the
Highest Level of Value:
The Supply Chain Effective Frontier
Year-over-
Year Growth
Operating
Margin
Inventory
Turns
Return on
Invested Capital

Supply Chain Insights LLC Copyright © 2016, p. 20
Inventory Turns =
Cost of Goods Sold/Inventory
Cycle Measurement

Supply Chain Insights LLC Copyright © 2016, p. 21
Asset Utilization/Complexity
𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑰𝒏𝒗𝒆𝒔𝒕𝒆𝒅 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒 + 𝐼𝑛𝑐𝑜𝑚𝑒 𝑇𝑎𝑥 𝑇𝑜𝑡𝑎𝑙
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦

Supply Chain Insights LLC Copyright © 2016, p. 22
Determining Winners
PTBV
IMPROVEMENT VALUE PERFORMANCE

Supply Chain Insights LLC Copyright © 2016, p. 23
• Divided 293 public companies into 26 industry peer groups based on
NAICS codes.
• Evaluated the companies within industry peer groups for
improvement, value, and performance across two periods: 2006-
2015 and 2009-2015.
Methodology
Supply Chains to Admire 2016: Winners and Finalists
2006-2015 2009-2015
Winners Finalists Winners Finalists
17 17 16 21

2009-2015

Supply Chain Insights LLC Copyright © 2016, p. 26
2006
2015
5
6
7
0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16
InventoryTurns
Operating Margin
Cummins
Best Scenario
CMI
0.11, 5.82
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts
Cummins Engine
(2006-2015)

Supply Chain Insights LLC Copyright © 2016, p. 27
Cisco Systems
(2006-2015)

Supply Chain Insights LLC Copyright © 2016, p. 28
2006
2015
14
15
16
17
18
19
20
21
0.03 0.04 0.05 0.06 0.07 0.08
InventoryTurns
Operating Margin
Whole Foods Market
Best Scenario
WFM
0.05, 18.44
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts
Whole Foods
(2006-2015)

Supply Chain Insights LLC Copyright © 2016, p. 29
2006
2015
37
42
47
52
57
62
67
72
77
82
87
92
97
102
107
112
0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 0.32 0.34 0.36
InventoryTurns
Operating Margin
Apple
Best Scenario
AAPL
0.26, 60.74
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2015 from YCharts
Apple
(2006-2015)

Supply Chain Insights LLC Copyright © 2016, p. 30
Conclusion
• A focus on balanced metrics
• Strong culture/leadership.
Avoidance of fads
• Strong horizontal processes
and focus on supply chain
talent.

Visit Us Online
www.supplychaininsights.com
www.supplychainshaman.com
www.beetfusion.com
www.linkedin.com/company/supply-chain-insights
www.slideshare.com/loracecere
Follow Us on Twitter
@scinsightsllc
@lcecere
Attend a Live Event
www.supplychaininsightsglobalsummit.com
www.supplychaininsights.com/the-shamans-circle

Supply Chain Insights LLC Copyright © 2016, p. 34
About Lora Cecere
• Founder of Supply Chain Insights
• “LinkedIn Influencer”
• Guest blog 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)
• 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 (15,000 pageviews/month)
• Forbes: www.forbes.com/sites/loracecere
• Twitter: twitter.com/lcecere (7,700 followers)
• LinkedIn: www.linkedin.com/in/loracecere (110,000 followers)
• LinkedIn Influencer: www.linkedin.com/today/author/446631