Supply Chains to Admire 2025 - v1.0

2025

Lora Cecere Founder and CEO Supply Chain Insights, LLC

Regina Denman Client Services Director Supply Chain Insights, LLC

A TEN-YEAR VIEW OF PROGRESS ON SUPPLY CHAIN EXCELLENCE

SUPPLY CHAINS TO ADMIRE | 2025

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Table of Contents Disclosure...................................................................................................................................................................... 4 Executive Summary.......................................................................................................................................................5 Recalibrating the Industry's View of Excellence..........................................................................................................7 What Should Be Measured?..........................................................................................................................................8 Balanced Scorecard to Drive Value..............................................................................................................................8 Companies Do Not Have Unlimited Potential to Drive Improvement.......................................................................10 Driving Progress by Conquering the Effective Frontier.............................................................................................12 The Right Stuff.............................................................................................................................................................13 Comparison of Methodologies...................................................................................................................................15 The Role of Complexity...............................................................................................................................................16 A Closer Look at Supply Chains to Admire Results by Industry ..............................................................................17 Improving The Value of the Firm Through Supply Chain .........................................................................................18 Recommendations...................................................................................................................................................... 19 Conclusion................................................................................................................................................................... 20 Analysis by Industry ...................................................................................................................................................22 Retail Overview ...........................................................................................................................................................23 Discrete Industry Overview ........................................................................................................................................30 Research Methodology...............................................................................................................................................54 Calculations................................................................................................................................................................. 55 The Criteria...................................................................................................................................................................56 Fundamental Score.....................................................................................................................................................58 Prior Reports in this Series.........................................................................................................................................61 About Supply Chain Insights LLC...............................................................................................................................61 About Lora Cecere.......................................................................................................................................................61

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Disclosure We value your trust and are open and transparent about our financial relationships and research processes. This research report is based on Supply Chain Insights’ Supply Chains to Admire methodology, which was built over the last decade using purchased data from Y Charts , a syndicated public corporate reporting data feed. From October 2023 to March 2025, we partnered with Georgia Tech IYSE to refine and validate the Supply Chains to Admire model and build linear regression models for each industry while testing the co-linearity of metrics. This testing used data from 1982 to 2024. A gift from Kinaxis to Georgia Tech funded the graduate student effort supporting this analysis. Some of this work is referenced in the report. When using the data in this report, please share this data freely within your Company and across the industry. All we ask for in return is attribution when you use the materials. We publish under the Creative Commons License Attribution , and you will find our citation policy here .

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Executive Summary

Business leaders are action-oriented and competitive. Executive teams strive to drive significant improvement in supply chain results. However, as shown in this report, only 5.3 percent of public companies succeeded in driving leadership through the COVID period to enter the Winners Circle for the Supply Chains to Admire for 2025. The Supply Chains to Admire™ methodology evaluates the progress of public companies over ten years. The analysis includes over five hundred and thirty public companies within twenty- eight industry sectors. We designed this report to meet several goals:

objective function for correlation to understand how the choices made by supply chain leaders tie to value.) 2. Benchmarking. Share industry benchmarks for industry peer groups to guide supply chain leaders in setting realistic goals. 3. Drive Learning. Reward companies that achieve higher levels of supply chain excellence. Use these insights to help others excel. 4. Understand Industry Potential. Understand what companies can achieve in executing multi-year roadmaps. Understand industry patterns and sector potential over time.

METHODOLOGY OVERVIEW The Supply Chains to Admire™ report is an annual assessment of supply chain supply chain excellence. Now in its twelve year, the methodology measures industry sector performance for 2015-2024. In this report, we also unveil a new measure, the Supply Chain Fundamental Score to help companies judge if they are making progress agains their peer group. Within each peer group, we track the year-over-year patterns for publicly-held companies in the areas of improvement, performance, and value.

1. Understand Value. Give a clear definition of supply chain excellence for the Supply Chain Insights research. (The analysis enables an explicit

In the 2025 analysis, twenty-eight companies meet the Supply Chains to Admire Award criteria for improvement, control,

Figure 1. Supply Chains to Admire Winners for 2025

RETAIL (4)

PROCESS (7)

DISCRETE (17)

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Table 1. Year-over-Year Winner Analysis

Supply Chains to Admire Summary Award Winners by Year

2017

2018

2019

2020

2021

2022

2023

2025

RETAIL

PROCESS

DISCRETE

performance, and value. The winners include Air Products, Apple, Armstrong World Industries, BorgWarner, Beiersdorf, CF Industry, Church & Dwight, Intuitive Surgical, Home Depot, Hubble, Inditex, John Deere, Lockheed Martin Corporation, L’Oreal, Lenovo, LG, LyondellBasell, Monster Beverages, Nathans Famous, Inc, Nike Inc., Nitendo, Northrup Grumman, PACCAR Inc, Rockwell Automation, Ross Stores, Taiwan Semiconductor Manufacturing (TSMC) Company, Somnigroup International (Tempur-Pedic), and TJX. Sixteen of these companies are year-over-year winners. (There was no report in 2024 due to COVID and the methodology's revamp.) No company met the criteria in nine of the twenty-eight sectors studied. The results by year in Table 1 are relatively consistent. More companies win in discrete industries than in process and retail..

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Recalibrating the Industry's View of Excellence

There is a stark difference between the conventional beliefs of companies believed to be industry top performers and their actual business results. While some companies like Apple, Nike, and L’Oreal are readily accepted supply chain leaders by the industry, more companies on the Supply Chains to Admire list are not recognized easily as leaders. Supply chain economies of scale are elusive. Small regional players outperform global multi-nationals. For example, Monster Beverages has been a winner for five years, outperforming large beverage companies like Anheuser-Busch, Coca-Cola, and PepsiCo. Church & Dwight outperforms Colgate, Procter & Gamble, and Unilever. We find industry leaders positively biased toward the performance of large brand companies in the process and retail sectors. While many of these companies were supply chain leaders outperforming their peer groups twenty years ago, today, many underperform against the industry averages. The story of shifts in the market carries lessons for all. Table 2 shares the list of multiple-year winners of the Supply Chains to Admire analysis. The Supply Chains to Admire methodology is a data-driven analysis less subject to industry bias. The source is public reporting in global markets. We obtain the raw information for the report through a syndicated data provider, Y Charts. The methodology is shared openly. We aim for the Supply Chains to Admire methodology to be a valuable assessment tool for companies of all sizes and regions.

Table 2. Winners for Multiple Years

COMPANY

FREQUENCY THIS YEAR

Apple

L'Oréal

TSMC

Broadcom

Nike

Lockheed Martin

TJX

Paccar

Ross Stores

Dollar General

Intuitive Surgical

Monster Beverages

Borg Warner

Dollar Tree

Eastman

Sleep Number

AbbVie

Assa Abloy

Celanese

Clorox

Koninklijke Ahold Delhaize NV

ResMed

Toro

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What Should Be Measured?

While the companies vary by year over the eleven years of the analysis, the win rate remains constant at 4-7%. The percentage for this time period is 5.3%. The path to excellence for supply chain leaders takes 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 see an adverse impact on results

control, metrics performance, and superior value in public markets during 2015-2024. The analysis tracks year-over-year progress on the metrics: year-over-year growth, operating margin, inventory turns, and Return on Capital Employed (ROCE). This work aims to move the definition of supply chain excellence from a cost- based focus to align the organization with a balanced scorecard to improve market capitalization. For supply chain leaders to be effective, they need to speak the language of the balance sheet.

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 launches. Cost of Goods Sold is less correlated with market capitalization than operating margin.

for IT standardization and outsourcing. Supply chain excellence is easier said than explained. The Supply Chains to Admire methodology identifies companies within an industry peer group that drove higher levels of improvement,

Balanced Scorecard to Drive Value

The journey from a focus on functional cost to maximizing shareholder value is a major but needed transition. To understand what metrics, in combination, maximize shareholder value, we worked with the statistics department at Georgia Tech to develop linear regression models for each industry to predict market capitalization. We carefully analyzed collinearity and tested the models through backcasting to select the most important metrics. (The data set was from 1982 to 2019, and the backcasting attempted to predict 2019 using 2011-2018.) The results show that supply chain matters. Table 3A shows that over 40% of market capitalization value is explainable through a focus on the core metrics of year-over-year revenue growth, operating margin, inventory turns, and Return on Capital Employed (ROCE). We aim to have companies adopt these metrics in a balanced scorecard and work to align supply chain

planning to produce value for the firm. This journey requires the rethinking of the functional optimization present in traditional supply chain planning technologies. Focusing on cost-of-goods versus operating margin reduces the market capitalization potential by 10-50%. As a result, focusing on functional costs sub-optimizes shareholder value. We share this analysis in Figure 3B. A common mistake is assuming that supply chain excellence is at the center of a simple triangle that trades costs, customer service, and safety stock. While this is a valuable model for calculating safety stock levels, defining supply chain excellence to maximize market capitalization requires analyzing the trade- offs of growth, operating margin (not cost), inventory turns (total inventory turns), and the effectiveness of asset strategies (ROCE).

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So, you might ask, why don’t we use these linear regression models to determine the Supply Chains to Admire Award Winners? The answer is easy. The supply chain is not linear. The answer is more complex, requiring an analysis of improvement over time, performance against industry potential, control of outcomes, and value delivery. To help us understand these trends, we use orbit charts. This report uses these key metrics

of growth, operating margin, inventory turns, and ROCE to analyze 530 companies in 28 industries. The supply chain is a non-linear, complex system with many moving parts. Market influences define industry potential. Performance benchmarking should always be by peer group against industry potential.

Table 3B. Comparison of Operating Margin versus Cost of Goods Sold in Regression Analysis using Market Capitalization/Employee As An Objective Function

Number of Companies

Operating Margin

Inventory Turns

Jarque Bera Statistic

Testing (2019)

INDUSTRY

Revenue

ROCE

R²

Apparel Manufacturing

0.45

3.4

0.31

Automotive

0.51

29.9

0.44

Automotive Aftermarket

0.45

0.4

0.43

Beverage Industry

0.71

4.6

0.62

B2B Technology

0.30

29.9

0.46

Chemical Industry

0.48

17.6

0.50

Containers and Packaging

0.42

0.4

0.38

Diversified Industries

0.44

9.4

0.16

Food Manufacturing

0.73

30.9

0.44

Medical Device

0.49

14.7

0.09

Pharmaceuticals

0.32

80.2

0.28

Semiconductor

0.40

25.8

0.17

Telecommunications

0.80

24.2

0.21

Table 3B. Comparison of Operating Margin versus Cost of Goods Sold in Regression Analysis using Market Capitalization/Employee As An Objective Function

R 2 Operating Margin R 2 Cost of Goods Sold ...and Inventory Turns Regression Analysis to Market Capitlization/Employee

INDUSTRY SEGMENT

Food

0.464

0.170

Pharmaceuticals

0.532

0.361

Chemical

0.601

0.349

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Companies Do Not Have Unlimited Potential to Drive Improvement

A common mistake is assuming supply chains have endless potential and that continuous improvement programs will drive substantial improvement. What may be surprising to many leaders is the realization that a continuous improvement program in an industry hammered by market factors may shelter the company from deleterious market impacts, helping

efficient frontier . The reason? Many misinformed business executives believe that the most effective supply chain is efficient, operating at the lowest cost per unit. As seen in this report, focusing solely on cost will throw the supply chain out of balance, sub-optimizing market capitalization. Our research shows that only 20% of volume can be managed effectively with a focus on cost.

the company to tread water. As a result, a strong, continuous improvement program may help a company to report consistent earnings in a declining market.

Each industry has a unique pattern. For the period of this report, 54% of industries experienced a decline in operating margin, 82% saw a decrease in inventory turns, and ROCE declined. Industry growth potential declined in 40% of industries. So, a company trying to drive continuous improvement must first understand the market's headwinds to benchmark what is possible. For example, in the chemical industry, as

DEMAND SHAPING The initiation of programs to increase baseline lift including price management, promotinos, distribution incentives, rebates, advertising, and new product launch.

Programs must be aligned to a balanced scorecard to drive value and continuous improvement. Optimizing costs within a function may reduce the function's costs but increase total costs. Likewise, reductions in the cost of goods may not translate to margin improvements. Companies that drive improvement best take a holistic approach while aligning to what is possible based on industry potential. Supply chains do not have endless potential. In this research, the boundaries or trade-offs between the metrics are termed the effective frontier. We are deliberate in not naming this the

shown in Figure 2, margin and inventory turns have fallen. While the average is 17% operating margin and 4.97 inventory turns, it is important to understand the pattern. (We openly share industry patterns to help business leaders understand industry potential here .)

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Chemical Industry Operating Margin vs. Inventory Turns (2015 - 2024) Figure 2. Shifts in Industry Potential for the Chemical Industry for the Period of 2015-2024

Best Scenario

2015

5.50

2016

2020

2017

5.00

2019

2018

2021

Chemical 0.17, 4.97

2023

4.50

2024

2022

4.00

0.07

0.08

0.09

0.10

0.11

0.12

0.13

0.14

0.15

Operating Margin

Chemical Industry

 Average (Operating Margin, Inventory Turns) Source: Supply Chain Insights LLC Corporate Annual Reports 2015 2024 from YCharts

Many factors drive supply chain potential. Some include: ‣ Commodity prices.

‣ Rise of supplier delivery and quality issues.

‣ Reliability of factories.

‣ Lack of organizational alignment. Corporate politics.

‣ Data latency and the organization's ability to use data at the speed of business.

‣ Unchecked complexity and the increase in the size of the product portfolio. ‣ Shifts in demand variability with an increase in items that are not forecastable by conventional means.

‣ Slowing of transportation modes.

‣ Increase in governmental compliance legislation. A common mistake is the belief that progress on supply chain improvement is unlimited rather than bounded by market reality. For this reason, the Supply Chains to Admire report compares each company within a peer group to industry potential.

‣ A rise in demand shaping programs.

‣ Growth and complexity of nodes within the distribution network.

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Driving Progress by Conquering the Effective Frontier Globalization, channel complexity, war, and scarce resources all challenge business resilience: a company's ability to deliver consistent and reliable results despite demand and supply variability. Globalization increased both complexity and non-linearity. In 2012, Supply Chain Insights worked with Arizona State University to 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 of growth, operating margin, inventory, and Return on Invested Capital (ROIC) for the balanced scorecard analysis. In this report, we replace ROIC with ROCE based on two years of work with the Georgia Tech Statistics Department. Both of these efforts support two facts: the supply chain can be modeled, and that the metrics on the effective frontier are essential to maximize market capitalization. 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.

Figure 3. The Approach: Balanced Scorecard Analysis

PERFORMANCE FACTORS

Year-over-Year Growth

Operating Margin

Inventory Turns

Return on Capital Employed (ROCE)

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The Right Stuff Winning is not magic. Leaders drive higher levels of improvement by focusing on cross-functional process development and organizational alignment. Defining metrics to align the organization to a balanced scorecard is essential. Shown in Figure 4 is an example of a metrics hierarchy to drive value. The organization is aligned with a balanced scorecard. To optimize performance on the balanced scorecard, functional metrics are defined to drive reliability. In this journey, Forecast Value Added (FVA) replaces error as a goal, the form and function of inventory analysis replace safety stock analysis, schedule reliability replaces OEE, procurement reliability replaces Purchase Price variance, and no function is rewarded solely for functional costs. These shifts are outlined in Table 4. Here are some guidelines: ‣ The Efficient Supply Chain Does Not Create the Greatest Value. Historically, the focus has been building efficient selling, delivering, making, and sourcing processes. When the organization emphasizes functional efficiency, the supply chain is thrown out of balance, decreasing value.

‣ Economy of Scale Is Elusive. Achieving economies of scale in the supply chain is a challenge. In our analysis, the smaller, regional player consistently outperforms the Global multinational. For example, Monster Beverages outperforms in the beverage sector, and Nathan’s hot dogs drive better performance in the restaurant sector. ‣ It is easier to Drive Improvement in Growth Markets. Supply chains perform better in periods of growth than decline. In the words of one of our clients, “We pedal uphill better together than navigating the downward decline.” ‣ Driving Improvement is Easier than Sustaining Market Leadership. 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. Companies can drive improvement and achieve peer group performance through an infusion of leadership, but performance can quickly shift when management teams change.

Figure 4. Alignment of Functional Metrics to a Balanced Scorecard

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‣ For Top Performers, the Budget is Never Tightly Integrated to the Operating Plan. The close coupling of the supply chain to the budget is a barrier to improving the balance sheet. (In contrast, the budget is input but not a constraint for winners.) A worst-case scenario is defining the supply chain as another function within a rigid set of silos. The definition of supply chain finance is more problematic in Europe than in the Americas. ‣ Alignment with R&D Innovation is Key to Results. Smaller, innovative, newer companies focusing on customer value tend to win the Supply Chains to Admire award. Examples of smaller innovative companies winning the award include Intuitive Surgical, Paccar, and TSMC. The retail winners drove excellence through business model innovation.

A characteristic of a true supply chain leader is the ability to drive higher performance levels within a peer group and sustain this competitive advantage over time. Amazon and Alibaba, the giant e-commerce providers, 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. This is just not possible within this industry: there are too few companies to drive a good peer group for comparison, thus eliminating their inclusion in the analysis.

Table 4. Shifts in Functional Metric Definition

Shifts in Functional Metric Definition

Conventional Thinking

Shifts to Optimize Market Potential

Forecasting

Error and Bias

Forecast Value Added and Bias

Inventory Management

Safety Stock

Targets for Form & Function of Inventory Inventory Value Added

Manufacturing

Operational Equipment Efficiency (OEE)

Schedule Adherence First-Pass Yield

Transportation

Transportation Costs

On-time Delivery Reliability in First-Pass Tender Reliability and Quality of Supply Minimal Bullwhip

Procurement

Purchase Price Variance

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Comparison of Methodologies Client discussions sparked the development of the Supply Chains to Admire methodology. The industry was frustrated with the Gartner Top 25 approach. Companies wanted a more data-driven approach that reflected industry trends. The concern

The Gartner methodology biases large branded companies. The analysis shows that 67% of the Gartner Top 25 companies underperform their peer group on growth, 44% on operating margin, and 41% on inventory turns. The blue highlights underperformance, while the yellow highlights mark the companies meeting the criteria for both analyses. In the 2025 analysis, Apple, Lenovo, and L'Oreal are common in these two very different techniques to assess supply chain excellence.

was that the Gartner Top 25, based 50% on the opinion of analysts and industry leaders, was a popularity contest. The request was for a data-driven analysis based on corporate financials, allowing a comparison of large and small companies across currencies. The goal was to understand the relative positions of companies within industry peer groups. In Table 5, we share a comparison of the two methodologies. The Gartner analysis lacks a peer group comparison. As shown in this report, each industry's market drivers and inherent potential differ.

Methodology Comparison: Gartner Top 25 and Supply Chains to Admire

Table 5. Comparison of the Gartner Top 25 to the Supply Chains to Admire

Comparison

Gartner Top 25

Supply Chains to Admire™

Focus

Gartner Top 25 Public Manufacturing and Retail Companies from 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) 2018-2020

Supply Chains to Admire TM All public companies analyzed by industry peer groups. 530 companies by 28 peer groups. No revenue minimum. There is no limit on the number of winners by peer group. Likewise, there may be no winner by industry. All public companies by analyzed by industry peer groups. 600 companies by 26 peer groups. No revenue minimum. 2015-2024 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. 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. • Return on Invested Capital (ROIC). Value: At or above the mean for Price-to- Tangible Book or Market Capitalization. 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 No limit on the number of winners peer group. Likewise, there may be no winner by industry. 2011-2020

Comparison of Methodologies

Comparison

Focus Analysis

Calculation

2021-2023 50% Opinion: (Equally split between analyst and peer voting) 50% Quantitative Analysis: . 50% Opinion: (Equally split between analyst and peer voting) 50% Quantitative Analysis: • 10% of score is Revenue Growth: (Change in revenue 2022-2021)*50%+(Change in Revenue 2021-2020)*50% 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. • 5% of score is Inventory Turns: 2022 cost of goods sold / 2022 quarterly average inventory • 15% of the Score is a Weighted Return on Physical Assets (ROPA). Three- year weighted average. (50% 2022 ROPA, 30% 2021 ROPA and 20% 2020 ROPA). • 20% is Environmental, Social, and Governmental responsibility (3 rd party indexes) - 20%

Analysis

Calculation

History

17 th Year

8 th Year

History

20 th Year

12 th Year

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The Role of Complexity

Complexity throws the supply chain out of balance. In business, there is both good and bad complexity. It is analogous to cholesterol. Good complexity increases market share and drives growth with a minimal impact on margin, while bad complexity does not improve share but has a significant detrimental effect on margin. Leaders actively manage complexity through robust horizontal processes, focusing on revenue management, Sales and Operations Planning (S&OP), new product launch/ innovation (NPI), Corporate Social Responsibility, and Supplier Development. These cross-functional programs align strategy with execution. Through the processes, there is a conscious choice to manage and actively reduce bad complexity through cross-functional processes.

The issue? The reality is sadly out of step with what drives value. Only 1/3 of companies have a supplier development program, and more S&OP processes are out of alignment (65%) than aligned organizationally. New product launches and Corporate Social Responsibility programs usually have grand aspirations but operate in silos. Due to complexity issues, the gap in performance between process-based and discrete industries has widened over the last decade. We feel this is one of the reasons many process-based companies are regressing on the Supply Chain Metrics That Matter.

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A Closer Look at Supply Chains to Admire Results by Industry

This analysis starts by mapping industry trends. Supply chain practices grew in importance as the margins of 85% of the industry sectors regressed over the last decade. Companies cannot drive progress based on traditional process paradigms without redesigning the supply chain. In many organizations, inventory is a sticky wicket—a political hot potato. At the end of 2022, inventory levels were significantly higher across industries than pre-recession levels in 2007. Today, many companies have burgeoning inventories but lack

the right products to ship orders reliably. They are drowning in inventory, decreasing cash-to-cash performance, but have the wrong products to ship orders. The lack of performance in inventory optimization is a significant factor in determining the winners in the Supply Chains to Admire Award process.

Table 7. Inventory Levels by Industry Sector Across Time Periods

Days of Inventory by Industry: Comparison across Years

Years

Diffeence (2023 - 2024 vs 2004 - 2006)

Industries

2004 - 2006 2007 - 2008 2009 - 2013 2014 - 2019 2020 - 2022 2023 - 2034

Semiconductor

138

Pharmaceuticals

155

144

170

195

200

216

Beverage

115

119

138

191

164

169

Medical Device

110

113

131

143

159

162

Automotive Parts

Beauty

108

116

125

124

121

Chemical

Household Products

Apparel Retail

Aerospace & Defense

103

118

113

Automotive

Food

Broadline Retail

-17

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Improving The Value of the Firm Through Supply Chain When I wrote the book Bricks Matter, one of the reviewers asked, " How do you define value? " I struggled to answer. The focus of the traditional supply chain organization is cost management. Saving money does not drive value, and improving cost does not necessarily improve margin. So, as part of this analysis, our goal was to answer the questions, " What drives value? " and " What steps should companies take to improve Price to Book Value? " The definition is: Price to Book Value = Book VMaalurkee/tShSharaereOPurtiscteanding Our research finds that companies with strong organizational alignment between supply chain and R&D, operate an effective S&OP process, and drive supplier development programs to improve supplier reliability are more likely to enhance value. These processes have become even more critical to managing the supply chain during the pandemic. Winning companies have longer tenures of their leadership teams and focus on driving long-term outcomes. They avoid supply chain fads and multiple consulting-based projects and constantly emphasize supply chain excellence.

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Recommendations When benchmarking a supply chain, companies must look at performance and improvement (together) within a peer group over time. There are trade-offs. Companies operating with higher performance levels will struggle with improvement. In contrast, companies with a lower level of performance will drive faster progress rates, but improvement processes do not always drive value. Why? The average global multinational has more than a thousand improvement initiatives . Many are overlapping and conflicting. As a result, there is a need to define a multi-year plan reinforced by cross-functional metrics to drive progress against a strategy. As supply chain leaders develop strategies and focus on driving balance sheet improvement, we recommend that supply chain teams consider these seven recommendations: 1. Build a Guiding Coalition to Drive Improvement Based on Industry-Specific Data. Organizations should benchmark against companies within their industry sector to maximize potential and set goals. Each industry has unique rhythms and cycles, so supply chain excellence analysis needs to be an industry-specific comparison. 2. Understand the Supply Chain Potential and Orchestrate Trade-offs. Balanced metrics portfolios drive higher levels of value for the Company. The metrics are nonlinear and tightly coupled. Managing them as a group in a balanced portfolio requires systems thinking. Higher-performance companies use advanced analytics to plan outcomes and design the supply chain. 3. Drive Horizontal Alignment. We find that those with the best performance on the Effective Frontier align teams to focus on supply chain finance and translate supply chain processes and strategies into balance sheet results. Holistic organizational thinking is a marked departure from traditional functional thinking, shifting the need for new forms of analytics and reporting. For example, today, while most organizations can easily access functional costs, only 24% of companies can quickly access total costs across the source, make, and deliver together. As a result, it is tough for operational teams to make trade-offs. 4. Make the Supply Chain an Engine for Growth. There is a pushback when we present this data to many supply

chain teams. Many do not understand how their work can drive growth. Unfortunately, companies in a cost-focused paradigm struggle with significant horizontal organizational alignment gaps between operations and commercial teams. To break the cycle, use this report to highlight the opportunity and take steps to drive growth. 5. Effectively Manage Complexity. When we interviewed the leaders in past reports, we heard a consistent theme: Increasing product and customer complexity degrades value. In an organization, there is good complexity and bad complexity. Good complexity drives growth with minimal impact on the performance factors on the Effective Frontier, while bad complexity degrades performance. Maximize the growth opportunity with good complexity and eliminate bad complexity. 6. Focus on Building Value Networks. While many of the companies in this report could leverage power in the network to be a powerbroker in the industry to redefine outside-in processes and build effective value chains, 95% of companies accept the limitations of the inside-out supply chain. Over the last decade, only TSMC and Walmart successfully executed value network strategies. In this decade, only Maersk successfully built a value network. The efforts are few and far between. The next frontier of supply chain effectiveness lies in the bi-directional orchestration of process flows with trading partners. 7. Learn from Other Industries. Use a Steady Hand and Focused Leadership to Drive Improvement. Over the years, when we have interviewed the Supply Chain to Admire winners and asked, "What do you think drove improvement?" They responded, "The avoidance of fads and a steady focus on supply chain strategy." The Story of Supply Chains to Admire award winners is not a story of consultants driving a project for change transformation or technology implementation. Instead, it is a story of supply chain leadership driven by a focused internal team over many years.

1 https://www.slideshare.net/loracecere/driving-supply-chain-excellence18june2015final

SUPPLY CHAINS TO ADMIRE | 2025

Conclusion Supply chain excellence does not just " happen ." Progress requires moving past "end-to-end" supply chain excellence buzzwords to drive cross-functional programs focused on balance sheet improvements. Success requires teams to focus over many years based on a multi-year roadmap with a clear definition of supply chain strategy. Higher levels of performance require leadership, patience, and organizational alignment. This report aims to provide feedback to leadership teams to help them better align supply chain programs with corporate finance efforts to drive improved shareholder value. It recognizes 5.3% of companies creating value while improving and outperforming on the Supply Chain Metrics That Matter against their industry peer group. Please join us in celebrating the achievements of twenty-eight winners.

Appendix

SUPPLY CHAINS TO ADMIRE | 2025

Analysis by Industry Here, we share the individual analyses by industry peer groups to help the reader understand the data behind this report. Companies are listed in alpha order within an industry peer group. Each chart enables a quick assessment of revenue, control, improvement, performance, and value. In Figures 7A-7C , we share the improvement index cut-off information to understand improvement. As outlined in the methodology, the Supply Chain Index measures improvement. Based on performance, companies are stack ranked on orbit charts at the intersection of operating margin and inventory turns. The performance criteria establishes which companies are driving improvement over 2/3 of the industry sector on the orbit charts at this metrics intersection. The Supply Chain Index cut-off in Tables 7A-7C allows quick reference to determine who met this criterion.

Table 7A. Retail Industry Improvement Cut-off Information

Supply Chain Index Cut-off

RETAIL

Total

Winners

Winners by Name

Broadline Retail

Ross Stores, TJX

Drug Retail

Food Retail

Home Improvement Retail

Restaurants

Nathans Famous Inc

Retail Apparel

Home Depot

SUMMARY

Table 7B. Discrete Industry Improvement Cut-off Information

Supply Chain Index Cut-off

PROCESS

Total

Winners

Winners by Name

Beverages

Monster Beverages

Chemical

LyondellBassell, Air Products, and CF Industries

Consumer Nondurables

Church & Dwight

Containers and Packaging

Food

Personal Products

L’Oreal, Biersdorf

Pharmaceuticals

SUMMARY

161

23 SUPPLY CHAINS TO ADMIRE | 2025

Table 7C. Process Industry Improvement Cut-off Information

Supply Chain Index Cut-off

PROCESS

Total

Winners

Winners by Name

Aerospace and Defense

Lockheed Martin, Northrup Grumman

Apparel

Inditex and Nike

Automotive

Automotive Aftermarket

BorgWarner

B2B Technology

Apple, Lenovo, LG, and Nintendo

Contract Manufacturing

Consumer Durables

Armstrong World Industries

Diversified Industries

Hubell and Rockwell Automation

Furniture

Somnigroup International Inc ( used to be Tempur Sealy)

Medical Device

Intuitive Surgical

Semiconductor

TSMC

Tires

Telecommunications

Trucks and Heavy Equipment

Paccar and John Deere

SUMMARY

294

Retail Overview In this analysis, we evaluate 78 companies in seven retail sectors. In the report, four companies—Koninklijke Ahold Delhaize NV (Ahold), Ross Stores, TJX, and Urban Outfitters—qualify for the Winner's Circle. There are no winners in the other retail sectors. Shift from restaurants to food retail, less spending in do-it-yourself stores, Broadline retail shift to e-commerce, 30 percent growth in drug

Table 8. Retail Overview

FUNDAMENTAL SCORE

PRICE TO BOOK VALUE

INVENTORY TURNS

OPERATING MARGIN

RETURN ON INVESTED CAPITAL

AVERAGE REVENUE (M$)

YEAR- OVER-YEAR GROWTH

NUMBER OF COMPANIES

RETAIL

AVERAGE FOR 2015-2024

Apparel

$ 10,728

5.9%

4.46

8.5%

17.6%

4.64

Broadline

$ 81,329

4.7%

5.39

6.0%

4.19

Drug

$ 90,735

8.0%

7.57

7.1%

18.1%

4.50

Home Improvement

$ 48,393

5.2%

3.36

8.5%

22.4%

4.66

Grocery

$ 51,938

3.7%

12.51

3.0%

10.4%

2.41

Restaurants

$ 7,332

5.9%

85.42

14.5%

7.7%

5.78

AVERAGES

$ 48,409

5.6%

19.78

7.9%

13.7%

4.36

SUPPLY CHAINS TO ADMIRE | 2025

Apparel Retail

The Apparel Retail sector has two Supply Chain to Admire Award winners for 2023: Ross Stores for the seventh year, and TJX for the eighth year. Prior winner Urban Outfitters falls out of the winner’s circle for a less effective job of managing capital.

Table 9. Retail Sector Averages for Apparel Retail for the Period of 2015-2024

INDUSTRY: Retail-Apparel