Committed to the Supply Chain Index

By May 5, 2014Uncategorized

When you sit down to breakfast, and stare at the plate, you realize that the chicken contributed to the breakfast menu, but the pig committed. I, like the pig, am committed.

Today, there is no good measure of supply chain excellence. This summer, during the countdown to our Global Summit, we will be releasing the work on the Supply Chain Index. It is new. We know that it is different. It is our hope that it helps to drive actionable, insightful, and meaningful dialogue.

Nine out of ten companies are stuck. Progress was faster in the early years of the millennium. Today, it is a tough slog. Supply chain leaders struggle to speak the language of the balance sheet, and finance leaders judge before they understand that the supply chain is a complex system with complex processes with increasing complexity. Consultants are hired to bridge the gap. We find that this adds confusion, not clarity.

This month we are launching the first elements of the Supply Chain Index. A team of seven people have been hard at work developing the Index. It is core to our mission at Supply Chain Insights. The development was harder than we expected, and we stubbed our toes a couple of times. But, with the help of the operations research team at Arizona State University (ASU), we now think that we have it right. Or, that we’re far enough along to share what we’ve discovered. It is our goal for this methodology to become the measuring stick for supply chain leaders in every industry, independent of company size, to judge supply chain performance.

What Is the Index?
The Supply Chain Index measures a company’s corporate performance  on three dimensions for the period of 2006-2012. Each company will get a ranking on balance, strength and resiliency based on balance sheet and income statement data. The Index will allow companies to compare progress within their peer group and against other companies.

How Do You Learn More?
We will be publishing four reports and holding monthly webinars throughout the summer as a build-up for our annual conference, Imagine, on September 10th-11th. This month, we will launch the methodology and apply it to a couple of industries. In June, we will be stack-ranking the consumer value chain industries (retail, consumer products, food/beverage, consumer electronics and chemical). In July our focus will be on the healthcare sector (hospitals, medical device manufacturers and pharmaceutical companies). Finally, in August, our focus will be on the industrial value network centered on automotive, industrial equipment, communication equipment, semiconductor, metals and mining and contract manufacturing. At our conference we will share our perspective on the companies across industries that have out-performed their peers.

How Is It Different Than Other Methodologies?
Insightful. Supply chain excellence happens over many years. As a result, the Index looks at progression over the period of 2006-2012. It is not based on averages of a short-term view.

We wanted it to be applicable to all companies. As a result, the Index will eventually rank all public companies in all industries. There will be a ranking for companies big and small around the world.

90% of the ranking is based on supply chain financial ratios. Only 10% of the ranking is based on peer feedback. We don’t feel that companies have time for a beauty contest.

We don’t think that it is worthwhile to put all companies into a spreadsheet and shake it up. As a result, the Supply Chain Index is very industry specific.

The relationships between supply chain financial ratios are non-linear and complex. We have spent two years understanding the patterns and doing the hard work with great minds in operations research.

Author Lora cecere

Lora Cecere is the Founder of Supply Chain Insights. The research firm Supply Chain Insights is paving new directions in building thought-leading supply chain research. She is also the author of enterprise software blog “Supply Chain Shaman. The blog focuses on the use of enterprise applications to drive supply chain excellence. Her book, Bricks Matter, will be published in August 2012. As an enterprise strategist, Lora focuses on the changing face of enterprise technologies. Her research is designed for the early adopter seeking first mover advantage. Current research topics include the digital consumer, supply chain sensing, demand shaping and revenue management, market-driven value networks, accelerating innovation through open design networks, the evolution of predictive analytics, emerging business intelligence solutions, and technologies to improve safe and secure product delivery. She comes to the stage with over forty years of diverse supply chain experience. She has spent nine years as an industry analyst with Gartner Group, AMR Research, Altimeter Group and is now the founder of her own firm Supply Chain Insights. Prior to becoming a supply chain analyst she spent fifteen years as a leader in the building of supply chain software at Manugistics and Descartes Systems Group, and twenty years as a supply chain practitioner at Procter & Gamble, Kraft/General Foods, Clorox, and Dreyers Grand Ice Cream (now a division of Nestle).

More posts by Lora cecere

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