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The “Top 15 Supply Chains to Admire” is a way to give supply chain professionals a guidepost for measuring their operations against leaders in comparable companies to see where they need to improve, says Cecere, who launched the research program this year.
“As supply chain leaders make investments in technology and processes, they want to know how they are doing against their peer group,” she says.
The 2014 report is based on financial balance sheet and income statement data for the period 2006-2013. Companies within 13 industries were analyzed for performance and improvement; those performing above their peer group and demonstrating consistent improvement made the list of Supply Chains to Admire.
Of all the publicly held companies analyzed, only one in nine showed improvement for more than three years running on inventory turns and operating margins, Cecere says. “You hear everyone boast about how well they are doing on these two criteria, but they are often talking on a project basis. Maybe a particular project made improvements and maybe a company was doing multiple projects, but you don’t see improvements on the balance sheet.”
The analysis also shows that companies often invest in functional excellence, “but they don’t orchestrate across functions so there is no impact on total costs.”
Cecere identifies several capabilities common to the companies that outperform. These are:
• A strong focus on designing network and inventory flows
• A strong focus on human resources and capital
• Really good planning “because you cannot manage modern supply chains on Excel spreadsheets”
• Leadership that is strong, continuous and has an understanding of supply chain complexity
• Metrics that matter, particularly growth, return on invested capital, operating margin and inventory turns as well as forecast accuracy and customer service
In addition to these five elements, companies that make the most progress are “outside-in vs. inside-out,” says Cecere. “Traditional processes focus on capturing orders and delivering shipments; the new model for success is to focus on channels and sensing and translating demand.”
Cecere and her team continue to mine the research data for additional insights. “For example, we found that when companies organize source/make/deliver under a common leader, they have a much more reliable and resilient supply chain,” Cecere says.
The relationship between sales and operations also is important. “Companies with a good balance between commercial teams and operations teams achieved 11 percent better performance on inventory turns than their peer groups, so organizational design and horizontal processes matter.”
It also is clear that change doesn’t happen in big bangs, says Cecere. “The best performing companies are those that make small, incremental improvements. Sometimes such a company will actually send itself backwards by taking on a big project. It’s best to be cautious and to focus on incremental improvements.”
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