SUPPLY CHAINS TO ADMIRE // 2022
11
Comparison of Methodologies
Client requests initiated the development of the Supply Chains to Admire methodology. The industry was frustrated with the Gartner Top 25 approach. Companies wanted more than a popularity contest. The request was for a data-driven analysis based on corporate financials, allowing comparisons of large and small companies across currencies. The goal was to understand the relative positions of companies within industry peer groups. Shown in Table 3 is a comparison of the two approaches.
For the 2022 analysis, AbbVie, Apple, and Nike are the only three companies that meet the criteria for these two very different comparisons. As shown in Table 4, The Gartner methodology biases underperforming companies on growth, inventory management and asset utilization. The process lacks a peer group comparison. Instead, in the Gartner work, all companies are compared without a reference to industry sector performance.
Table 3. Comparison of Methodologies
Methodology Comparison: Gartner Top 25 and Supply Chains to Admire
Comparison of Methodologies
Comparison
Gartner Top 25
Supply Chains to Admire™
Comparison
Gartner Top 25
Supply Chains to Admire TM All public companies by analyzed by industry peer groups. 600 companies by 26 peer groups. No revenue minimum. No limit on the number of winners peer group. Likewise, there may be no winner by industry. All public companies analyzed by industry peer groups. 480 companies by 26 peer groups. No revenue minimum for consideration. No limit on the number of winners by peer group. Likewise, there may be no winner by industry.
Focus
Fortune Global 500 and Forbes 2000 lists. 12 $B minimum annual revenue. (roughly 300 companies) Fortune Global 500 and Forbes 2000 lists. 15$B minimum annual revenue. (roughly 300 companies)
Focus
Analysis Analysis
2018-2021 2018-2020
2011-2020
2012-2021
Calculation
50% Opinion: (Equally split between analyst and peer voting) 50% Quantitative Analysis: 1. Return on Plant Assets (ROPA): [(2021 operating income / 2021 net property, plant, equipment + year-end inventory) × 50%] + {[(2020 opearting income / 2020 net property, plant equipment + year-end inventory)} × 30%) + ((2019 operating income / 2019 net property, plant, equipment + year-end inventory)) × 20%) 2. Inventory (Average for 2019-2021) 5% 3. Revenue Growth: ((change in revenue 2021-2020) × 50%) + ((change in revenue 2020-2019) × 30%) + ((change in revenue 2019-2018) × 20%) (10%) 4. ESG Component Score: Index of third-party environmental, social, and governance easures of commitment, transparency, and performance 50% Opinion: (Equally split between analyst and peer voting) 50% Quantitative Analysis: . 1, Return on Plant Assets (ROPA): ((2020 operating income / 2020 net property, plant, equipment + year-end inventory)) *50%) + ((2019 operating income / 2019 net property, plant, equipment + year-end inventory)) *30%) + ((2018 operating income / 2018 net property, plant, equipment + year-end inventory)) *20%). (20%) 2. Inventory (Average for 2018-2020) 5% 3. Revenue Growth: ((change in revenue 2020-2019) *50%) + ((change in revenue 2019-2018) *30%) + ((change in revenue 2018-2017) *20%). (10%) 4. ESG Component Score: Index of third-party environmental, social and governance measures of commitment, transparency and performance.
Improvement: Top 2/3 ranking on the Supply Chain Index. Improvement: Top 2/3 ranking on the Supply Chain Index. Performance: At or above the industry mean for: • Year-over-year revenue growth. • Operating margin. • Inventory turns. • Return on Invested Capital (ROIC). Value: At or above the mean for Price-to- Tangible Book or Market Capitalization. Performance : At or above the industry mean for: • Year-over-year revenue growth. • Operating margin. • Inventory turns. • Return on Invested Capital (ROIC). Value: At or above the mean for Price-to-Tangible Book or Market Capitalization.
Calculation
Index Calculations: https://www.slideshare.net/loracecere/sci-summit-2014-math-behind-sc- index?qid=27326733-0325-4ee7-aacd-e2827bd216de&v=&b=&from_search=11
History History
17 th Year
8 th Year
18 th Year
9 th Year
Made with FlippingBook - professional solution for displaying marketing and sales documents online