Presentation Transcript

1. Supply Chain IndexApril 25, 2013

   #sciwebinar
2. About Us Supply Chain Insights is focused on delivering independent, actionable and objective advice for supply chain leaders. A company dedicated to research, turn to us when you want the latest insights on supply chain trends, technologies to know and metrics that matter. #sciwebinar
3. Presenters Abby Mayer Research Associate Lora Cecere Founder and CEO #sciwebinar
4. 18 Reports in 2012 #sciwebinar
5. Over 30 Reports Planned for 2013 #sciwebinar
6. Second Printing of Bricks Matter: 13 Five-Star Reviews on Amazon This is the new bible for all supply chain executives. It provides an insider’s perspective that will prove incredibly valuable to even the most grizzled supply chain veteran. This is the next must-have business book. --Bruce Richardson, Chief Enterprise Strategist, Salesforce.com Today, the worlds of social business and supply chain management have many degrees of separation. I enjoyed working with Lora to understand what the future transformation of digital marketing to digital business could look like. --Jeremiah Owyang, Research Director, Altimeter #sciwebinar
7. 2013 Publications Publishing Two eBooks in 2013 on Supply Chain Metrics That Matter Consumer Value Networks Industrial Value Networks #sciwebinar
8. Supply Chain Metrics that Matter: Reports #sciwebinar
9. Our Focus www.supplychaininsights.com #sciwebinar
10. Agenda What Is Supply Chain Excellence? Understanding the Supply Chain as a Complex System Which Companies Have Maximized Market Valuation Through Supply Chain Excellence? Using the Insights #sciwebinar
11. What Is Best in Class? Perform better than peer group Improve year-over-year results Alignment in metrics Delivery of performance against the business strategy Consistency in results Be a leader in managing trade-offs #sciwebinar
12. Agenda What is Supply Chain Excellence? Understanding the Supply Chain as a Complex System Which Companies Have Maximized Market Valuation Through Supply Chain Excellence? Using the Insights #sciwebinar
13. A Supply Chain is a Complex System with Complex Processes with Increasing Complexity #sciwebinar
14. The Supply Chain Effective Frontier:First Representation #sciwebinar
15. Mining 20 Years of Financial Ratio Data #sciwebinar
16. The Supply Chain Effective Frontier: Second Representation #sciwebinar
17. Definitions Supply Chain Index: A formulaic representation of supply chain financial ratios correlated to stock market capitalization valuation. Supply Chain Effective Frontier: The balance of growth, profitability, cycle and complexity metrics to deliver the supply chain strategy. It may or may not maximize the company’s market valuation. Supply Chain Excellence: The behavior of companies working to maximize value through the setting of targets for supply chain financial ratios and aligning metrics that matter (tied to value chain strategy). #sciwebinar
18. A Look at History: Progress in Productivity #sciwebinar
19. Cross Industry View: (2000-2011) #sciwebinar
20. Company Performance within an Industry Sector: (2000-2011) #sciwebinar
21. Competitive Analysis: (2006-2011) #sciwebinar
22. Peer Group Analysis: (2000-2012) #sciwebinar
23. Healthcare Value Chain: Financial Metrics #sciwebinar
24. Agenda What Is Supply Chain Excellence? Understanding the Supply Chain as a Complex System Which Companies Have Maximized Market Valuation Through Supply Chain Excellence? Using the Insights #sciwebinar
25. Introducing the Supply Chain Index A formulaic representation of how companies are trading off growth, profitability, cycle and complexity performance on selected supply chain financial metrics against market valuation. #sciwebinar
26. Why Did We Do This? To better understand which supply chain metrics matter to corporate balance sheet performance in public markets. We want to help leaders better align supply chain and financial performance. To create an objective system for evaluating and ranking supply chains by industry peer group. To connect financial performance with supply chain excellence as measured through quantitative surveys in an effort to better identify and define best practices across industry groups. #sciwebinar
27. What It Is. What It Is Not. What it is: A way to understand the impact of companies’ supply chain (relative to peers within an industry sector) to market capitalization based a set of preselected supply chain ratio metrics. What it is NOT: A way to evaluate overall company performance or compare the model results to actual market capitalization. #sciwebinar
28. Now and Then April 25th: introduction of the Index and the application to 3 Morningstar sectors May: release of results for additional industries and discussion in Supply Chain Insights Community May, June, July, August: monthly reports and publication of additional industries September 11-12th: 1st annual Global Summit with speakers selected based on Index performance #sciwebinar
29. Supply Chain Index Methodology Step 1: Located data sources Step 2: Selected core supply chain ratios from over 50 financial metrics Step 3: Identified meaningful metrics per industry using regression analysis among selected ratios Step 4: Constructed industry equation based on correlation of industry metrics to market capitalization values Step 5: Determined company rankings within industry by applying 2012 company results to industry equation Step 6: Analysis of peer group companies over the last decade Step 7: Correlations to supply chain practices, technologies and organizational design #sciwebinar
30. Step 1: Located Data Sources Market capitalization data of public companies (Ycharts.com) Industry peer groups defined by Morningstar Sector (36) Financial ratios built from balance sheet and income statement data collected from OneSource Analysis of quarterly data using R (frequency 2006Q1 to 2012Q4) #sciwebinar
31. Step 2: Selected 14 Core Supply Chain Ratios to Study Source: Supply Chain Insights LLC #sciwebinar
32. Step 3: Identified Industry Metrics Market Capitalization vs. Revenue Growth Insight: For example, growth did not correlate for chemical companies. #sciwebinar
33. Step 3: Identified Industry Metrics Source: Supply Chain Insights LLC #sciwebinar
34. Step 4: Mass Retail Equation Mass Retail Industry Equation Ln(market cap) = 10.41 + 52.67(OM) -34.72(WC) - 16.02(ROIC) – 0.09(DPODSO) + 0.02(DOI) Correlation Strength NOTE: Full equation is Ln(market capitalization) = 10.40934 + 52.66784(operating margin) -34.7248(working capital ratio) – 16.0211(return on invested capital) – 0.09183(dpo/dso) + 0.017478(days of inventory). We utilized adjusted which accounts for the occurrence of large p values. Outlier values were defined and excluded as those 5 times larger than IQR. #sciwebinar
35. Step 5: Determined Rankings by IndustryMassRetail Industry (2012) #sciwebinar
36. Top Ranked Mass Retail Industry (2012) #sciwebinar
37. Step 3: Identified Industry Metrics Source: Supply Chain Insights LLC #sciwebinar
38. Step 4: Consumer Packaged Goods (CPG) Equation CPG Industry Equation Ln(market cap) = 3.37 + 2.11(OM) + 1.62(FCF) – 1.29(ROIC) – 1.17ln(CR) + 0.25(SGAC) + 0.02(DPO) – 0.01(DOI) Correlation Strength NOTE: Full equation is Ln(market capitalization) = 3.368152 + 2.107516(operating margin) + 1.624277(free cash flow ratio) – 1.2891(return on invested capital) – 1.16775*ln(current ratio) + 0.2455(sga to cogs ratio) + 0.016078(days of payables outstanding) – 0.00655(days of inventory). We utilized adjusted which accounts for the occurrence of large p values. Outlier values were defined and excluded as those 5 times larger than IQR. #sciwebinar
39. Step 5: Determined Rankings by IndustryCPG Industry (2012) #sciwebinar
40. Top Ranked CPG Industry (2012) #sciwebinar
41. Step 3: Identified Industry Metrics Source: Supply Chain Insights LLC #sciwebinar
42. Step 4: Chemical Industry Equation Chemical Industry Equation Ln(market cap) = 7.85(OM) – 4.84(ROA) + 1.81ln(DPO) + 0.01(DOI) Correlation Strength NOTE: Full equation is Ln(market capitalization) = 7.850179(operating margin) – 4.83507(return on assets) + 1.806959* ln(days of payables outstanding) + 0.008524(days of inventory). We utilized adjusted which accounts for the occurrence of large p values. Outliers values were defined and excluded as those 3 times larger than IQR. #sciwebinar
43. Step 5: Determined Rankings by IndustryChemical Industry (2012) #sciwebinar
44. Top Ranked Chemical Industry (2012) #sciwebinar
45. In ProgressFood Industry Food Industry Equation Ln(market cap) = 5.57 +15.56(OM) – 7.50(ROIC) – 4.13(ROA) + 2.74(RONA) + 0.61(Z) + 0.04(DPO) – 0.04(DSO) Correlation Strength NOTE: Full equation is Ln(market capitalization) = 5.567785 + 15.56315(operating margin) -7.49664 (return on invested capital) – 4.12637(return on assets) + 2.743363(return on net assets) + 0.605805(altman z) + 0.040756(days of payables outstanding) – 0.03914(days of sales outstanding). We utilized adjusted which accounts for the occurrence of large p values. Outliers values were defined and excluded as those 5 times larger than IQR. #sciwebinar
46. Agenda What Is Supply Chain Excellence? Understanding Supply Chain as a Complex System Which Companies Have Maximized Market Valuation Through Supply Chain Excellence? Using the Insights #sciwebinar
47. Value Chain Relationships Retail (Mass Merchant) CPG Chemical True collaboration only happens when there is a sustaining win-win value proposition.
48. Our Next Steps: Supply Chain Index Methodology Step 1: Located data sources Step 2: Selected core supply chain ratios from over 50 financial metrics Step 3: Identified meaningful metrics per industry using regression analysis among selected ratios Step 4: Constructed industry equation based on correlation of industry metrics to market capitalization values Step 5: Determined company rankings within industry by applying 2012 company results to industry equation Step 6: Analysis of peer group companies over the last decade Step 7: Correlations to supply chain practices, technologies and organizational design #sciwebinar
49. Summary What drives value in each industry is different. Public markets reward supply chain balance and alignment. The supply chain is a complex system. Supply chain excellence must be carefully defined. Trading relationships should recognize the differences between the definitions of value within an industry to define win-win relationships. There is no substitute for leadership. Supply chain excellence matters. #sciwebinar
50. What You Can Do Join the Supply Chain Index Group in the Supply Chain Insights Community for Peer Review and Discussion: www.scicommunity.com Gain Insights from Supply Chain Leaders at the Global Summit www.supplychaininsightsglobalsummit.com Build the Next Generation of Supply Chain Research Using the Index Leverage the Index to Connect Supply Chain Processes, People and Technology Decisions to Balance Sheet Results #sciwebinar
51. Webinars PAST SUPPLY CHAIN INDEX WEBINARS: AVAILABLE ON DEMAND From September 24, 2012: The Supply Chain Index, 20 Years in the Making: A Focus on Process Industries From October 26, 2012: The Supply Chain Index, 20 Years in the Making: A Focus on Discrete Industries www.supplychaininsights.com/upcoming-webinars UPCOMING WEBINARS May 9th: How Do We Heal the Healthcare Value Chain? Part II June 13th: Sales and Operations Planning: State of the Union July 11th: BigData Supply Chains and the Future of Analytics August 15th: State of Supply Chain Talent: Missing Link in the Supply Chain August 29th: Digital Manufacturing #sciwebinar
52. Private Networking CIO’s Corner Chief Supply Chain Officer Chief Information Officer #sciwebinar
53. Superheroes 2013:Coming Soon #sciwebinar
54. Supply Chain Insights Community #sciwebinar
55. Who Is Lora? Founder of Supply Chain Insights Partner at Altimeter Group (leader in open research) 7 years of Management Experience leading Analyst Teams at Gartner and AMR Research 8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA) 15 Years Leading teams in Manufacturing and Distribution operations for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble. #sciwebinar
56. Where Do You Find Lora? Contact Information: lora.cecere@supplychaininsights.com Blog: www.supplychainshaman.com (4000 pageviews/month) Twitter: lcecere 3850 followers. Rated as a top rated supply chain social network user. LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (3750 in the network) #sciwebinar
57. Where Do You Find Abby? Contact Information: abby.mayer@supplychaininsights.com Blog: www.supplychainindex.com (2500 pageviews/month) Twitter: @indexgirl LinkedIn: www.linkedin.com/pub/abby-mayer/40/941/972 #sciwebinar