What makes a supply chain ‘best in class’?

25 October 2013

The Gartner Supply Chain Top 25 has Unilever achieving first place in Europe and Apple coming top worldwide.

Interestingly in the same week, Unilever issued a profit warning because of a slowdown in sales in emerging markets that sent its share price sharply downwards. This was largely due to currency swings, which have undermined the competitiveness of their products in important new markets. At a first glance, these two pieces of news seem contradictory, but on closer inspection that might not be the case. The key question is how the Gartner report measures what makes a best in class supply chain. The Gartner ranking is made up of five elements, two subjective and three data driven. These are: peer opinion (25 per cent); Gartner opinion (25 per cent); return on assets (25 per cent); inventory turns (15 per cent) and revenue growth (10 per cent). Unilever is a strong performer across all the data driven measures but based on these alone would probably not have the top spot in Europe. It performed strongly on the two subjective measures, being recognised for having implemented a range of end-to-end supply chain initiatives, including segmentation, advanced cost to serve and logistics control towers. The focus on the end-to-end supply chain is likely to have allowed them to predict the impact of currency changes earlier than other companies, so perhaps these two pieces of news are linked rather than being contradictory. The themes the report identifies as being the most important for a high peer or Gartner option are: ● Clear supply chain vision with demonstrable improvement achieved ● The connection of demand sensing capabilities to supply chain planning ● Segmentation to align supply chain design to customer requirements ● Making sustainability a part of both day-to-day operations and long-term strategy ● Established processes to make trade-offs across the end-to-end supply chain. So what can we learn from this report about improving our supply chains? First, ensure we have measures to understand the key drivers. These are likely to include the three used by Gartner (return on assets, inventory turns and growth) but must also include those that underpin the customer value proposition. Second, look at the five themes highlighted above and establish if there is more we should be doing in those areas. And finally, conduct some benchmarking with other companies to find out what our peers are doing and discover what we should be doing, too! ☛ Tom Woodham is director at Crimson & Co
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