SUPPLY CHAINS TO ADMIRE // 2022
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As with most comparisons, the devil is in the details:
• Winner Analysis: The methodology is not limited to the best Company in the peer group. Within a peer group, there can be multiple winners. There is also a possibility of the peer group having no winners. In this year's analysis, there are no winners for 11 of the 28 industries. • Peer Group Analysis: The analysis is within single industry peer groups only. There is no stacked ranking across multiple peer groups. We believe that comparison across industries is "fools play" because the sectors are so different. Industry Peer Group Means: In calculating the industry peer group mean for the value metrics (Market Capitalization and Price to Book Value), we removed outliers. 3 • Margin of Error: To determine the allowable distances from the industry peer group mean for the value and performance metrics (Market Capitalization, Price to Book Value, Growth, Inventory Turns, Operating Margin and Return on Invested Capital), we calculated the margin of error (at a 95% level of confidence, excluding outliers) for each metric among all companies in the analysis. We then allowed "winners" to be within the equivalent of one margin of error of the mean. 4
• Supply Chain Index: The Supply Chain Index is a ranking within an industry peer group across three measurements:
1. Balance -r analysis of the rate of change at the intersection of Return on Invested Capital & Revenue Growth for the period
2. Strength - vector analysis of the rate of change at the intersection of Inventory Turns & Operating Margin)
3. Resiliency - the tightness of the pattern at the intersection of Inventory Turns & Operating Margin as measured by the mean distance of years on an orbit chart.
3 Major outliers were calculated according to this formula: http://www.wikihow.com/Calculate-Outliers
4 Margin of error formula: http://www.dummies.com/education/math/statistics/how-to-calculate-the-margin-of-error-for-asample-mean/
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