Metrics That Matter

Metrics That Matter
August 2017
For the Supply Chain Leader Who Wants to Rise Above

Supply Chain Insights LLC Copyright © 2017, p. 2
Disclaimer: I am a Skeptic

A Social Scientist

A Curmudgeon…

A Fortune-teller of Sorts….

I Write for the Supply Chain Leader

Today’s Reality

What I Believed

Only 12% Of Companies Are Driving Improvement and
Performance Better Than Their Peer Group at the Intersection
of Operating Margin and Inventory Turns.

The Supply Chain Is a Complex System with Increasing Complexity.
Each Supply Chain Operates on an Effective Frontier

2000
2001
2002
2003
20042005
2006
2007
2008
2009
2010
2011
2012 2013
2014
2015
2016
5
6
7
0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19
InventoryTurns
Operating Margin
Kimberly-Clark
Best Scenario
KMB
0.15 5.96
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2016 from YCharts
Ideally,
companies are
increasing
inventory turns
and Operating
Margin move
towards the
upper right
corner of the
graph over
time.
The diamond shows the company’s
average over the period. Ex: Kimberly
Clark has an average of 15% for
operating margin and 5.96 for inventory
turns.
Here, we plot inventory
turns (y-axis) vs.
operating margin (x-
axis).
Understanding Orbit Charts
Operating Margin vs. Inventory Turns
(2000 – 2016)
Trace the line from 2000 point
to 2016 point to follow the
performance over time.

2000
2016
2000
2016
5
6
7
8
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 0.22 0.23 0.24 0.25 0.26
InventoryTurns
Operating Margin
Colgate-Palmolive Kimberly-Clark
Best Scenario
KMB
0.15, 5.96
CL
0.21, 5.59
Colgate and Kimberly-Clark
(2000 – 2016)

2000
2016
2000
2016
5
6
7
8
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
Procter & Gamble Kimberly-Clark
Best Scenario
KMB
0.15, 5.96
PG
0.18, 5.92
(2000 – 2016)

2006
2016
2006
2016
3
4
5
6
7
8
0.07 0.10 0.13 0.16 0.19 0.22 0.25 0.28 0.31
InventoryTurns
Operating Margin
Mondelez Nestle
Best Scenario
NSRGY
0.13, 5.20
MDLZ
0.12, 5.90
Mondelez and Nestle
Operating Margin vs. Inventory Turns (2006 – 2016)

2004
2016
2004
2016
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
-0.03 -0.01 0.01 0.03 0.05 0.07 0.09 0.11
InventoryTurns
Operating Margin
Toyota Honda
Best Scenario
HMC
0.06, 6.88
TM
0.06, 11.35
Toyota and Honda
Operating Margin vs. Inventory Turns (2004 – 2016)

What Makes a Difference?

What Drives Value?

Managing in a Complex World

Supply Chains to Admire:
2017 Winners

1. Define an objective measurement of supply chain excellence for
our research.
2. Share data to help supply chain leaders objectively benchmark and
build balanced portfolios.
3. Gain an understanding of how fast supply chain actions translate to
balance sheet performance.
4. Help supply chain leaders talk the language of finance, and to help
finance teams understand what is possible in supply chain.
5. Build an objective standard that is data-driven.
Why the Supply Chains to AdmireTM
?

Improvement IS Fast When You Have a Lot to Lose

Manage Costs Like a Decathlete

Efficient Is Usually Not Effective

Fads Get Us Nowhere

Best Transformations Require Wings and Feet
Aspirational
Leadership and
Process Innovation
Grounded in Goals

Productivity From the Third Industrial Revolution Stopped in 2004

What Is Next-Generational Thinking?

The Move to Digital Business
Telematics

Current Supply Chain Process Thinking
Rows and Columns:
Transactional Data
Fixed Hierarchies with
Structured Data
One-to-One Enterprise Linear Flows
Descriptive and Predictive Analytics

Evolution of Cognitive Computing

Wrap-up
Driving supply chain excellence is a
balancing act and requires careful
orchestration over many years.
We hope that this research helps
companies to benchmark the
possible to set realistic balance
sheet goals.

Time to Take a Different Path?

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

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), 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 (15,000 pageviews/month)
• Forbes: www.forbes.com/sites/loracecere
• Twitter: twitter.com/lcecere (8,200 followers)
• LinkedIn: www.linkedin.com/in/loracecere (215,000 followers)
• LinkedIn Influencer: www.linkedin.com/today/author/446631

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SEVEN COURSES OFFERED
1. Supply Chain Metrics That Matter
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3. The Market-Driven Value Network Journey
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5. End-to-End Supply Chain Orchestration
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7. Building Agility Through Horizontal Processes
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