SUPPLY CHAINS TO ADMIRE // 2022
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What is the Right Stuff?
Supply chain excellence is easier to say than to explain. The Supply Chains to Admire methodology identifies companies within industry peer groups that drove higher levels of
is thrown out of balance when companies are marketing-driven or sales-driven. We also find that large organizations focused on functional metrics throw the supply chain out of balance
improvement, better performance, and a superior level of value in public markets during the 2012-2021 period. The analysis tracks year-over-year progress on the metrics: year-over-year growth, operating margin, inventory turns, and return on invested capital. The study focuses on moving the supply chain excellence from a cost-based focus to margin-driven performance. While the companies, over the nine years of the analysis, vary by year, the win rate remains constant at 4%. The path to excellence for supply chain leaders takes
and do not make it into the Winner’s Circle. From our research, it is clear that a focus on efficient organization-optimizes overall corporate performance. Supply chain leaders quickly find it easier to drive improvement than sustain performance. Progress requires patience and building capabilities to manage the supply chain as a complex nonlinear system based on a multi-year roadmap. Let’s take Ecolab as an example. Companies can drive improvement and achieve peer group performance through an infusion
WHY OPERATING MARGIN VERSUS TOTAL COST?
A focus on cost throws the supply chain out of balance increasing inventories. In contrast, an organizational focus on margin helps organizations to better align on channel programs and new product launch.
four-to-five years, and the most critical factor is leadership. Our research finds no correlation to performance based on technology or consultant selection. We also find an adverse impact of IT standardization and outsourcing. Winning is not magic. Leaders drive higher levels of improvement by focusing on cross-functional process development and organizational alignment.
of leadership but that relative positions can quickly shift when management teams change. In 2013, Alex Blanco, became SVP of Supply Chain for Ecolab. He left in 2020. Over the nine years of the Supply Chains to Admire, we tracked Ecolab as they became a Supply Chain to Admire award winner in 2020 and 2021, and then fall out of the winner’s circle in 2022. (Posted ROIC results below the peer group on a downward slide for the past three years.)
Historically, the focus has been on building efficient selling, delivering, making, and sourcing processes. The organization
In Figure 2, we show the progress of Ecolab against the industry in the period of 2013-2019 and the slight slide in 2020 and 2021.
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