Advertisement

Blog

Becoming a Supply Chain to Admire

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?

15 comments on “Becoming a Supply Chain to Admire

  1. t.alex
    October 30, 2014

    I admired Amazon supply chain system the most. Even tho they do not make any profit at the moment but their customer service is outstanding. Especially Amazon Prime is the best way to shop and it's the best money i spend to get that kind of service. 

  2. ITempire
    October 30, 2014

    Jennifer

    “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”

    I personally like these two points the most. Relevant experience of leadership and competant human resources are the drivers to ensuring efficient supply chain processes because they can look at processes critically and modify them for better.

  3. ITempire
    October 30, 2014

    T.alex

    Online businesses have a unique supply chain. Since they are new ones therefore they often better adopt to the best practices.

  4. Houngbo_Hospice
    October 30, 2014

    @t.alex:

    “In March 2014, Amazon announced an increase in the annual membership fee for Amazon Prime, from $79 to $99.”

    It seems that Amazon is making money with their customer service after all. I wonder if Amazon will keep increasing the Amazon Prime membership fees to make profit with the service.

  5. Houngbo_Hospice
    October 30, 2014

    @WaqasAltaf  

    I agree that Supply Chain needs the right talents to improve its performance. I will add that these talents should be able to adopt cloud-friendly solutions.

  6. iLogistics
    October 31, 2014

    The ultmate goal any supply chain is to add value to the organizations products and services by competing for the right time, location and price. Since value is speculative and determined by the end-user, every supply chain will be unique and based upon the core compitencices and customer satisfaction.

  7. Himanshugupta
    October 31, 2014

    “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.”


    I did not quite understand or know what is the difference in good complexity and bad complexity. Is it in terms of the relationship with suppliers or the whole supply chain.

  8. Himanshugupta
    October 31, 2014

    @iLogistics, i think that every member of the organization has the same aim; to add value to the products and services. However, i agree that supply chain professional help the organization by procuring parts from different parts of the world at a competitive cost and make sure that the all the required components reach the assembly in time.

  9. Hailey Lynne McKeefry
    October 31, 2014

    @iLogistics, thanks for chiming in! Do you believe that there are best practices and lessons that can be culled from industry leaders though? Are there measurements that are worth using?

  10. Hailey Lynne McKeefry
    October 31, 2014

    @t.alex, I am a big fan of Amazon too. However, the lack of profits concerns me. That's not a sustainable model. I find myself wondering what place Amazon's fulfillment has in serving business customers. Perhaps there's money to be made there. What do you think?

  11. Hailey Lynne McKeefry
    October 31, 2014

    @WaqasAltaf, I'm a fan of the HR perspective too. I think that there's also a big benefit to the supply chain industry in general. As high profile companies like these take about the importance of their supply chain and a willingness to hire people with these skills, it raises the profile of the profession in general. That's good for everyone.

  12. Taimoor Zubar
    October 31, 2014

    “What supply chain do you admire? How is your company managing the intersection of operating margins and inventory turns?”

    @Jennifer: I am particularly impressed with supply chain of companies that are operating globally. Their parts are sourced from multiple places, have production plants at multiples sites and sell all over the globe through their own outlets as well as distributors. Most auto manufacturers these days are operating at this model. The way these global players streamline the operations and reduce the inventory required is amazing to study.

  13. Taimoor Zubar
    October 31, 2014

    @t.alex: What I find most impressive in Amazon's supply chain is the way they capitalize on information throughout the supply chain. Each suppplier's information about inventory is present with Amazon and it's amazing how they make use of this information to prevent stock-outs and maintain other KPIs.

  14. Ashu001
    November 2, 2014

    Taimoor,

    Well Said!

    The Best Supply Chains today are “GLOCAL” they have the right Mix of Global and Local in place to help them demonstrate robustness and Flexibility in the space of Changing Demand & Supply Dislocations.

    As most of the Articles at EBN have repeatedly demonstrated;You can't depend on any one particular Supplier for all your Parts today.You need a good mix in place to prepare yourself for any eventuality going ahead.

    Regards

    Ashish.

  15. ITempire
    November 15, 2014

    Hospice, agreed. These days supply chain managers must be totally equipped with the knowledge of best practices in both processes and systems whether it be cloud-based or conventional ones.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.