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AMR Research's Supply Chain Top 25 for 2007 was dominated by consumer brand names like top 5 finishers Nokia, Apple, Procter & Gamble, IBM, and Toyota. High-tech, consumer goods, and retail companies have owned the list the past three years, with diverse capital goods manufacturers and conglomerates not seeing the Top 25. Only Caterpillar gained a position in the top 50, coming in at No. 31.
Three metrics are used because of their public availability, with inventory turns providing an indication of supply chain cost, ROA as a general proxy of operational efficiency and productivity, and revenue growth as an indicator of innovation.
As mentioned above, only Caterpillar showed up in the top 50, with a total score of 2.63. Nokia, the 2007 leader, had a total composite score of 6.74, and AstraZeneca came in at No. 25 with a score of 2.88.
Analysis of those in the Top 25 shows these companies have more mature, demand-driven supply chains that take advantage of global scale and innovation. We have developed an organizational maturity model that identifies stages of development as transformation occurs. The change involves a strategic business project portfolio to move the organization through four stages of maturity to value-driven operational excellence, summarized as follows:
Stage 1--Local markets focused
Stage 2--Customer and brand control focused
Stage 3--Demand-driven, integrated, transactional supply chain
Stage 4--Value-driven network relationships and workflows
Overall, the diverse organizations we looked at are in Stages 1 and 2 and tend to have the following attributes:
1. Focus on operational excellence and technological innovation in their markets and for their brands. They have the potential to capitalize on global standardization and scale given their diversity, upstream and particularly downstream.
2. Relatively low inventory turns, which could be improved by becoming more demand driven with an outside-in focus.
3. Individual businesses manage their performances and asset utilization well. In some cases, however, when rolled up to the total company, the results don't compare with globally integrated Top 25 companies that are in Stage 3 or Stage 4 where the focus is on demand and ultimately value.
4. Companies with longer customer and/or product lifecycles tend to focus on upstream supply management versus a shorter lifecycle where downstream gets the attention.
Leaders in this group are crossing into Stage 3 on the supply side and chasing improved perfect order performance. However, in Stage 3, perfect order delivery is about low cost versus Stage 4's goal of perfect order profitability.
In their relentless efforts to drive business unit and value chain performance, leaders are investing in several global initiatives:
1. Standardized processes and metrics across the organization for scale and efficiency, which unlocks value tradeoffs and provides analytical sophistication that enables fact-based decision making.
2. Better understanding of global demand and consumer/user/buyer insights that can help facilitate the right tradeoff decisions.
3. Taking an external, outside-in view of business processes for maximum use of assets to generate higher revenue and profit, which means squeezing more margin out of assets with best practices.
4. Standardized sales and services processes, tools, and technologies for global visibility and optimization.
5. The top organizations should be recognized for their superior business unit performances in very diverse markets. These companies typically have long product lifecycles, highly engineered innovative products and services, and a loyal customer base.
Manufacturers in these sectors have traditionally focused on their supply networks. Leaders, however, are very customer focused. They are now looking to value chain transformation and sustainability through employing globally consistent processes and balancing the tradeoffs of risk and opportunity through sales and operations planning.
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