metrics that matter in a market-driven world

Metrics That Matter in a Market-Driven World

September 2015

Disclaimer: I am a Skeptic

A Social Scientist

A Curmudgeon…

A Fortune-teller of Sorts….

We Write for the Supply Chain Leader

Four Years of Work

WileyDecember 2012

Wiley December 2014

Self-publishedSeptember 2014

Self-publishingSeptember 2015

#SCIWEBINAR

What is Supply Chain Excellence?

• Metrics That Matter: Metrics that can be improved by the supply chain leader and have high correlation to market capitalization.

• Market-Driven: The ability to sense and respond from market-to-market (from the customer’s customer to the supplier’s supplier)

• NAICS Codes: US census classification(s) of industry groupings.• Orbit Chart: A comparison of year-over-year improvement between

two supply chain metrics.• Supply Chain Index: A methodology developed by Supply Chain

Insights in 2014 to measure supply chain improvement based on orbit chart measurements.

• Supply Chains to Admire: An objective, and independent analysis of supply chains that are outperforming in the Supply Chain Metrics That Matter and are driving supply chain improvement as measured by the Supply Chain Index.

Let’s Start with Definitions

Current State

9 out of 10 Supply Chains are Stuck

Progress: All Industries

Industry Snapshots (2006-2013)

IndustryYear –over-

Year Revenue Growth

Operating Margin

Inventory Turns

Cash-to-Cash Cycle

Revenue per Employee

(K$)SG&A Ratio

Retail Apparel Industry

18%39%

0.3927%

32518%

27%05%

Apparel Manufacturing Industry

14%82%

0.1232%

15008%

400355%

27%63%

Mass Retail Industry

09%50%

0.0620%

03148%

35048%

Beverage Industry

09%61%

0.1916%

512 NC

24% 16%

Pharmaceutical Industry

08%47%

0.2329%

15547%

57232%

27%08%

Chemical Industry

08%45%

0.1010%

55723%

14%27%

Medical Device Industry

06%38%

0.1432%

20616%

35112%

34%04%

Grocery Retail Industry

06%31%

0.0337%

40554%

14%06%

Consumer Packaged Goods

05%25%

0.1473%

08482%

33314%

26% 09%

Food Industry

05%55%

0.1019%

07 17%

53455%

20% 18%

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2013Industry Average comprised of public companies (combined food & beverage industry: NAICS 3112% where % is any number from 0-9, 311320, 311520, 311821, 311941 & 312111), (chemical: NAICS 325188 & 325998), (consumer packaged goods: NAICS 3256% where % is any number from 0-9), (medical device industry: NAICS 339112), (pharmaceutical industry: NAICS 325412) reporting in One Source with 20123annual sales greater than $1billionNC=no change

Descriptors Used by Leaders

Improvement With Effective S&OP

Fallacy: Functional Excellence

A Project-based Focus

Which Metrics Matter?

What We Expected

A Supply Chain is a Complex System

with Complex Processes

with Increasing Complexity

What We Learned….

The Supply Chain Effective Frontier

Why? The Long Tail of the Supply Chain: Growing Complexity

Correlations to Market Capitalization

Orbit Chart: Wal-Mart(Inventory Turns and Operating Margin)

Orbit Chart: Apple (Inventory Turns and Operating Margin)

Orbit Charts: Dow Chemical Company

Measuring Supply Chain Improvement

Overall Ranking per Company• Balance: Return on Invested Capital & Revenue Growth Vector Trajectory (30%)• Strength: Inventory Turns & Operating Margin Vector Trajectory (30% of score)• Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)

𝑺𝒖𝒑𝒑𝒍𝒚 𝑪𝒉𝒂𝒊𝒏 𝑰𝒏𝒅𝒆𝒙=𝟏𝟑𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑 𝑺𝒕𝒓𝒆𝒏𝒈𝒕𝒉 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑 𝑹𝒆𝒔𝒊𝒍𝒊𝒆𝒏𝒄𝒚 𝑭𝒂𝒄𝒕𝒐𝒓

Supply Chains to Admire Methodology

PerformanceBeats the industry

average for operating margin, inventory turns

and ROIC for 2006-2014 and 2009-2014

ImprovementRanks above peer group average on The Supply Chain

Index for 2006-2014 or 2009-2014

Winners Two Years in a Row

Consumer Products Group

Consumer Packaged Goods

Losing Ground: Kimberly-Clark

0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.197.50

Kimberly ClarkOperating Margin

20042005

20102011

Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from YCharts

Best Scenario

KMB0.15, 9.01

Trace the line from 2000 point to 2014 point to follow the performance over time.

The diamond shows the company’s average over the period. Ex: The Kimberly Clark Co. (KMB) has an average of .15 for operating margin and 9.01 for inventory turns.

Ideally, companies are increasing inventory turns and operating margin moving towards the upper right corner of the graph over time.

Average (Operating Margin, Inventory Turns)

Here, we plot inventory turns (y-axis) vs. operating margin (x-axis).

Colgate and Procter & Gamble

Colgate Versus Unilever

Beauty

Estee Lauder and L’Oreal

Food Manufacturing

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 0.259.00

General MillsOperating Margin

20012002

20062007

20092010

General Mills: Visualizing the Patterns

Best Scenario

GIS0.17, 10.77

Average (Revenue per Employee, Inventory Turns)

#SCIWEBINAR

General Mills versus Kellogg

0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.205.0

General Mills KelloggOperating Margin

K0.14, 12.68

20142006

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014

GIS0.17, 11.00

Best Scenario

Hershey and Danone

Beverages

0.08 0.11 0.14 0.17 0.20 0.23 0.26 0.29 0.32 0.35 0.38 0.41 0.44 0.4710.00

Anheuser-Busch Inbev SABMiller

Operating Margin

AB Inbev versus SAB Miller(2006 – 2014)

Best Scenario

SBMRF0.18, 17.14

BUD0.31, 14.57

#SCIWEBINAR

Coca-Cola and PepsiCo

Apparel

Nike: Inventory Turns vs. Operating Margin

0.09 0.10 0.11 0.12 0.13 0.14 0.157.0

NikeOperating Margin

Average (Operating Margin, Inventory Turns)Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts

Best Scenario

NKE0.13, 6.10

Nike and Adidas

0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.195.0

Adidas NikeOperating Margin

2006 2014

Average (Operating Margin, Inventory Turns)Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts

Best Scenario

NKE0.13, 6.10

ADDD0.08, 6.10

• Which metrics matter?– Growth, operating margin, inventory turns, ROIC, customer

service (in the eyes of the customer)

• How do we get unstuck?– Focus cross-functionally on a balanced portfolio. Bonus

employees against a portfolio. – Augment with functional metrics focused on improving

RELIABILITY.

• What are the functional reliability metrics?– Examples include: Forecasting, first pass yield, OEE, on-time

delivery, orders shipped complete, hands-free orders, schedule attainment, safety metrics, employee turnover

How do You Improve Value?

• Continuity of leadership• Supply chain talent development• Focus on a multi-year supply chain strategy• Clear governance to guide cross-functional decision-making• Strength in horizontal processes• Excellence in supply chain planning, network design and inventory

management

What Drives Top Performance?

Why TechnologyMatters

Current State of Planning

IT Systems: Importance & Satisfaction by Role & Supply Chain

Gaps in Visibility

Best of Breed versus ERP Planning

S&OP: Technology Matters

4.4X Higher Agility

Effective S&OP: Improved Alignment

• Kill the Spreadsheet Ghettos!!!• Work for Clarity of the Supply Chain Planning

Footprint and Time Horizons• Carefully Define the Terms.• Be Clear on the Goal: Responsive, Efficient and

Agile• Ensure the Fit of the Model• Redefine Demand to be About the Market• Give Planners Time to Plan

How do You Improve Value Through Planning?

Questions?

Launches Oct. 15,

Founder: Lora Cecere

• Founder of Supply Chain Insights• “LinkedIn Influencer”

• Guest blogger for Forbes

• Author of 4 books: Bricks Matter (2012), Shaman’s Journal (2014) and Supply Chain Metrics That Matter (December 2014), Shaman’s Journal (2014)

• 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 (8,000 pageviews/month)• Forbes: http://www.forbes.com/search/?q=lora+cecere• Twitter: lcecere (6200 followers)• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (46,000 followers)

metrics that matter in a market-driven world

Business

data-driven devops: mining machine data for 'metrics that...

sales metrics that matter

which social metrics matter?

agile metrics that matter

the metrics that matter

metrics that matter

metrics that matter for building, transformations ·...

metrics that matter 2016

metrics-driven engineering

metrics that matter 2019 - futurereadyiowa.gov · 4 metrics...

metrics-driven design -...

preparing metrics that matter

accessible metrics that matter

metrics driven recruitment

metrics driven development 10.09.2014

marketing metrics matter: beyond essentials - magento...

what metrics matter?

supply chain metrics that matter in market-driven world

email metrics that matter

maintenance metrics that matter