With all the supply chain investments and process development that have been made over the years, it's high time to recognize companies who are doing a bang-up job on this front. Along those lines, Supply Chain Insights, a supply chain analyst and research company, recently announced its 15 “Supply Chains to Admire.” Eight of them will be familiar to supply chain professionals in the industrial, high-tech, and automotive value networks: Apple, Audi, Cisco, EMC, Intel, Seagate, TSMC, and TRW.
The list of companies and the corresponding in-depth, cross-industry report are a result of 2.5 years of research aimed at analyzing and understanding which companies are operating at top performance levels and how they are still driving improvement. “Supply chain leaders are competitive, and they want to look at are they driving improvement and are they driving performance. We wanted to understand where we're at and what kinds of technologies or processes have made the greatest difference in supply chain,” said Lora Cecere, founder and CEO of Supply Chain Insights, during a webinar discussing the key research findings.
The big aha moment was that nine out of ten companies are stuck at the intersection of operating margin and inventory turns, Cecere said. In the wake of declining growth and increasing complexity, supply chain excellence helps companies to drive superior performance on the balance sheet, but many companies have a hard time making significant (and simultaneous) gains on both operating margins and inventory turns.
“What we find in each industry is that we have improved revenue per employee over the last decade. Also, we have improved the cash-to-cash cycle. But when you look at inventory turns, it's not as pretty of a picture. And when we look at operating margins, we find we're struggling at the intersection of operating margin and inventory turns.” She added that companies may make strides for a couple years but are unable to sustain that over the long term in both categories. “Companies may move one metric forward but not the other. And some companies have not made any progress on either metric. They are in the same place where they were in 2000 in 2013.”
Why are companies getting stuck? Cecere spelled out a few reasons, including:
- Companies, many of which maintain traditional or cautious approaches, have a hard time distinguishing bad complexity from good complexity. Further, they don't understand the issues around managing such a complex system.
- They focus on functional excellence. In these cases, one function area (such as manufacturing or sourcing) becomes really strong, but it doesn't necessarily work well in relation to other function areas.
- Companies put their attention on projects. They see the equation as Project A + Project B + Project C = Greatness, she said. While that formula may yield progress for a couple years, it's hard to sustain the momentum.
- The post-recession recovery means things are going back to how they were. During the recession, companies simplified their businesses, but now the trend is drifting back to how the company was run before the downturn, and the focus is back on becoming more functionally oriented.
Companies and supply chains worth admiring
So what are the best supply chains doing right and how can you apply what they do to your supply chain? Cecere said that best supply chains are balanced across different metrics, drive towards best-case scenarios, and are resilient because they have tight control patterns. She said they also have these defining characteristics as well:
- Stable leadership and executives who have gone through the source, make, and deliver cycle for many years
- A focus on building talent and implementing strong human resources systems that look at career progression
- The use of outside-in processes and channel data to manage and define supply chain processes
- Horizontal processes that hinge to things such as revenue management, demand planning, and corporate social responsibility
- Active and intentional design in their supply chain practices
- Better utilization of supply chain planning capabilities
What supply chain do you admire? How is your company managing the intersection of operating margins and inventory turns?