9 SUPPLY CHAINS TO ADMIRE | 2023
9
Driving Progress by Conquering The Effective Frontier
The supply chain is a complex, nonlinear system. Globalization increased both complexity and non-linearity. In 2012, Supply Chain Insights worked with Arizona State University to
marketing practices introduce complexity through product proliferation. These marketing programs also tend to shift and distort demand versus shaping demand by improving market potential (baseline 7
determine the most appropriate metrics to correlate to Market Capitalization. Based on the correlation of data from over 150 metrics for the period of 2006- 2012 for more than five hundred companies, we selected the parameters nced ard ed on Value
Figure 3. The Approach: Balanced Scorecard Analysis
lift). Shifting demand decimates the margin. The more significant the alignment gap between operational and commercial teams, the lower the Company's position in the sector, and
the less likely that the Company will meet the Supply Chains to Admire criteria. Mergers and Acquisitions (M&A) activity in the decade was more significant in process-based companies. No industry sector achieved economy of scale in delivering supply chain performance through M&A through the decade. Within process-based companies, manufacturing processes became more global, increasing logistics complexity and burgeoning in-transit inventories. The average Company entered the pandemic of 2020 with twenty more days of inventory than at the beginning of the Great Recession in 2007. Today, companies face inventory sell-offs while facing inflationary pressures. The giant e-commerce providers of Amazon and Alibaba are conspicuously absent from the list. While we recognize them as supply chain leaders, the Supply Chains to Admire methodology requires a peer group comparison. There are too few companies to drive a good peer group for comparison, thus eliminating the inclusion in the analysis.
of growth, operating margin, inventory, and Return on Invested Capital (ROIC) for the balanced scorecard analysis. We call this balanced scorecard the Effective Frontier, as shown in Figure 3 .
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While we wish to include customer service in the Supply Chains to Admire analysis, no industry standard exists for comparison. Likewise, while we strongly believe in corporate sustainability, we do not feel that any of the current sustainability indexes, due to dependency on self-reported data, accurately reflect company performance. A test of a true leader is the ability to drive higher performance levels within a peer group and sustain this competitive advantage over time. Using the Supply Chains to Admire analysis, in Table 1 , we show consecutive year winners. Over the ten years of analysis, fewer process manufacturers and retailers qualify for the Supply Chains to Admire recognition. We observe that discrete manufacturers are smaller and more agile, less likely to struggle with product complexity, and more aligned. In contrast, process industries tied to conventional
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