2016 Supply Chains to Admire - Report - 26 July 2016

A Ten Year View of Progress on
Supply Chain Excellence
7/26/2016
Lora Cecere
Founder and CEO
Supply Chain Insights LLC
Heather Hart
Research Director
Regina Denman
Client Services Director
Helen King
Research Associate
2016 Supply Chains to Admire

Contents
Research
Disclosure
Executive Summary
Supply Chains to Admire Results
Comparison to the Gartner Top 25
Trends and Insights
What Drives Value?
Recommendations
Conclusion
Appendix
Retail Industries
Process Industries
Discrete Industries
Methodology for the Supply Chains to Admire
Methodology for the Value Calculation for
Cross-Survey and Financial Analysis
Prior Reports in This Series
About Supply Chain Insights LLC
About Lora Cecere
Endnotes
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Research
The 2016 Supply Chains to Admire™ report is based on the Supply Chain Metrics That Matter™
research published throughout the year by Supply Chain Insights LLC. This research starts in the
spring when we can access full-year corporate reporting for the prior year.
This analysis of supply chain excellence is based on data collected from financial balance sheets and
income statements over the period of 2009-2015. In this report we examine how 320 companies
across 31 industries made trade-offs and met the challenges of the industry. We used public reporting
(balance sheet and income statements) to determine which companies performed best on the
delivery of a portfolio of supply chain metrics to drive value.
Within the world of Supply Chain Management each industry is unique. It is for this reason we believe
it is dangerous to list all companies across many different industries in a spreadsheet, compare the
results, and declare a supply chain leader. Instead, we think it is more prudent to evaluate change
over time, with a focus on business results within an industry peer group. That is the goal of this
report.
Consistent with our principles to share research freely and openly, we are transparent about the
calculations and methodologies in our analysis. While our published research is on public domain
data, we also use this methodology to evaluate businesses within a corporation to determine
effectiveness under NDAs with major corporations. Through this analysis, we are constantly learning
and improving the methodology.
We welcome questions, feedback and challenges to our research. We feel that the open discussion in
the public domain will benefit the industry.
Disclosure
Your trust is important to us. As such, we are open and transparent about our financial relationships
and our research processes. This independent research is 100% funded by Supply Chain Insights.
These reports are intended for you to read, share and use to improve your supply chain decisions.
Please share this data freely within your company and across your industry. All we ask for in return is
attribution when you use the materials. We publish under the Creative Commons License Attribution-
Noncommercial-Share Alike 3.0 United States and you will find our citation policy here.

Executive Summary
Supply chain excellence is easier to say than define. To make progress, companies need to clearly
define the journey and the goals. For many this is problematic. The goals are unclear and the
financial metrics are not well-understood. We want to provide research to help supply chain leaders
correct these issues.
Supply chain leaders want to improve results to drive shareholder value, but there is a problem.
There is no industry standard definition of supply chain excellence or clarity on the how actions of the
supply chain team drive shareholder value. In this report we try to help fill in the gaps by giving
definitions to both.
The Supply Chains to Admire analysis is now in its third year. It is a deep analysis of performance,
improvement, and Price to Tangible Book Value (PTBV) of 320 companies across 31 industries for
the period of 2009-2015. The source data for the analysis is public reporting of balance sheets and
income statements. (Our source of balance sheet and income statement data is YChartsi
.)
In the research process, we compare the effectiveness of each company within an industry-specific
peer group. We determine which companies have driven higher levels of improvement and
shareholder value (PTBV) while outperforming their peer group on growth, operating margin,
inventory turns and Return on Invested Capital (ROIC). (Details on the methodology and the industry
tables used in the calculations are included in the Appendix sections of this report).
In the analysis we divide companies into three groups, i.e. winners, finalists and underperformers:
Winners. The winners of this analysis meet all of the criteria of improvement, value and
performance when compared to a like industry peer group. Sixteen companies qualify against this
criterion. This is an elite group representing 5% of companies studied in the analysis.
Finalists. This is the second tier designed to recognize companies driving higher levels of
improvement, and value, and are within 10% of the industry average on three out of four of the
performance factors, and no more than 25% below the mean on any of the four factors of growth,
operating margins, inventory turns and ROIC. Twenty-one companies meet this criterion. In this
analysis, 7% of companies studied are finalists. The combination of finalists and winners equals
12% of companies studied.
Underperformers. Underperforming companies do not meet the three criteria of improvement,
value or performance. In the analysis, we find that 88% of companies are underperforming against
the criteria. By plotting year-over-year trends, we also find that most companies are moving
backwards on the Supply Chain Metrics That Matter™ or making progress on singular metrics

versus driving performance improvement on a balanced portfolio of supply chain metrics that
correlate to market capitalization. This includes industry icons that are often referenced as best-in-
class supply chains: companies like Audi, BMW, Colgate, Glaxo SmithKline, Johnson & Johnson,
McDonald’s, Novartis, Nike, PepsiCo, Procter & Gamble, Samsung, Schneider Electric, Starbucks
and Unilever.
Here we define and celebrate supply chain success.

Supply Chains to Admire Results
The analysis is not limited to a finite number, but we find that some industries are making progress
while others are regressing. The winners and finalists pass tough criteria. Not all industries are equal
to the test.
Nineteen of the 31 industries studied in this research have winners and/or finalists. There are no
winners or finalists in the industries of aerospace & defense (A&D), automotive, automotive suppliers,
conglomerates, consumer durables, ecommerce retail, hospitals, over-the-counter drugs (OTC),
packaging, pharmaceutical, third-party logistics or toy industries. Similarly, industries like beverages,
contract manufacturing, food, oil & gas, restaurants and fast food, and retail apparel have finalists, but
no winners. We find it ironic that the industries with the greatest challenges—high-tech &
electronics—post the greatest progress, while industries with slow market shifts—household
products, food, and beverage—are slowly regressing. Ever-changing and dramatic market variations,
create the need for a guiding coalition and quick corrective action while slow changes make it more
difficult for the supply chain to adapt.
To understand the trends, we grouped the companies by retail, process, and discrete segments. A
segment is a grouping of industries by like processes. In the analysis shown in Figure 1, the discrete
industries of B2B technology, consumer electronics, contact manufacturing, furniture, heavy
equipment, medical device, semiconductor, and tires are strong performers posting seven winners
and ten finalists representing 15% of the total of discrete industries considered. (The discrete
industries also posted the greatest gains on the factors for the Supply Chain Index™—a
measurement of supply chain improvement.) In the retail sector (apparel, grocery retail, mass
merchants, restaurants and fast food, and retail apparel), there are six winners and seven finalists
representing 17% of retail companies evaluated. (While there is a greater percentage of
winners/finalists in the retail segment, the factors for supply chain improvement did not improve as
much as those in the discrete industries.) In contrast, within the process industries of beauty,
beverages, chemical, food, and household products, there are only three winners and four finalists
representing 7% of companies studied in this segment. Many companies in the process industries are
regressing.

Figure 1. Supply Chains to Admire Winners and Finalists for 2009-2015
Companies recognized in the Supply Chains to Admire research (listed in alphabetical order by
industry) are:
Apparel. Carter’s, Inc. is a winner while PVH Corp, Under Armour, Inc and VF Corporation are finalists.
B2B Technologies. Cisco Systems, Inc. is a winner while EMC Corporation and Qualcomm Inc. are
finalists.
Beauty. L'Oréal S.A. is a winner while The Estée Lauder Companies Inc. is a finalist.
Beverages. There are no winners, but The Coca-Cola Company is a finalist.
Chemical. BASF SE is a winner. There are no finalists.
Consumer Electronics. Apple Inc. is a winner while VTech Holdings Ltd is a finalist.
Contract Manufacturing. Celestica Inc. is a finalist. There are no winners.
Food. The Hershey Company is a finalist. There are no winners.
Furniture. Steelcase Inc. is a winner. There are no finalists.
Grocery Retail. Whole Foods Market, Inc. is a winner. There are no finalists.

Heavy Equipment. Cummins Inc. is a winner while Caterpillar Inc. and United Tractors are finalists.
Household Products. The Clorox Company is a winner. There are no finalists.
Mass Merchants. CVS Pharmacy, Dollar Tree, Inc., Target Corporation and Wal-Mart Stores, Inc. are
winners while Lowe's Companies, Inc. is a finalist.
Medical Device. Edwards Lifesciences Corporation is a winner while Becton, Dickinson and Company,
Coloplast A/S and Medtronic, Inc. are finalists.
Oil & Gas. Statoil ASA is a finalist. There are no winners.
Restaurants. Chipotle Mexican Grill, Inc. is a finalist. There are no winners.
Retail Apparel. Lululemon Athletica and The TJX Companies, Inc are finalists. There are no winners.
Semiconductor. Taiwan Semiconductor (TSMC) is a winner and Intel Corporation is a finalist.
Tires. Cooper Tire & Rubber Company is a winner. There are no finalists.
Supply chain leaders are competitive. The relative positioning of companies changes year to year.
Companies receiving recognition in prior Supply Chains to Admire analyses (either 2014 or 2015) and
in 2016 include Apple Inc., BASF SE, Cisco Systems, Inc., The Clorox Company, Coloplast A/S, CVS
Pharmacy, Dollar Tree, Inc., EMC Corporation, The Estée Lauder Companies, Intel Corporation,
L'Oréal S.A., Qualcomm Inc., Taiwan Semiconductor, Wal-Mart Stores, Inc., Whole Foods Market,
Inc., and United Tractors. We believe that supply chain excellence should not be based on the court
of public opinion. As a result, the Supply Chains to Admire methodology is a data-driven analysis
based on financial results. Companies receiving recognition for multiple years form an elite list.
In the analysis the time frame matters. In the research process, initially, we were considering using
the longer time frame of 2006-2015 to declare the list of winners and finalists. However, after closer
evaluation, we decided to limit the analysis to the post-recessionary period of 2009-2015. (As a result,
we have gone back and corrected the prior Supply Chains Metrics That Matter reports for food and
beverage, medical device, and pharmaceutical.) Through the process of studying relative time
periods, we found that companies like iRobot Corporation, Jabil Circuit, Inc., Kellogg Company, Metro
AG, Reckitt Benckiser Group plc, Stryker Corporation, and Packaging Corporation of America were
stronger performers, even leaders, in the pre-recessionary period of 2006-2009, but were unable to
maintain this level of leadership in the post-recessionary period of 2009-2015.

Comparison to the Gartner Top 25
There is no perfect methodology to judge supply chain excellence. Comprehensive analyses and
methodologies are evolving. In this analysis we are attempting to establish an industry-specific and
data-driven approach. We know that it is not perfect. While we would like for this analysis to include
metrics like customer service, we cannot find a good cross-industry data source. As a result, we do
not include it.
Supply Chain Leaders are also good citizens. As a result, we are also closely evaluating a
methodology change for 2017 to take a closer look at Corporate Social Responsibility (CSR) and safe
& secure supply chains. There is no doubt that while Chipotle posted better financial results than the
peer group in the Supply Chains to Admire Methodology that the company struggled with the delivery
of a safe & secure supply chain over the course of 2015 with multiple outbreaks of foodborne illness.
Likewise, Apple’s multiple issues with fair labor complaints in contract manufacturing compromised
supply chain performance over the course of the past decade. Here we present the data while openly
acknowledging the weaknesses of the methodology.
However, we think that it is better than the alterative. Today there are two industry measurements:
The Gartner Top 25 and the Supply Chains to Admire. What are the differences? As shown in Table
1, the Gartner methodology is focused on a three-year historic view of performance, while the Supply
Chains to Admire methodology is focused on a longer-term view of 2009-2015. (We find that it takes
at least four years for supply chain improvement to translate into balance sheet improvement.)
Table 1. Comparison of Gartner Top 25 and the Supply Chains to Admire Methodology

Trends and Insights
When we interview companies making the Supply Chains to Admire list, we find commonalities and
similar patterns. These are shown in Table 2.
Table 2. Characteristics of Supply Chains to Admire Leaders
These companies have longer tenure of their leadership teams with a focus on long-term outcomes.
In addition, there is consistency in direction. There is an avoidance of supply chain fads and multiple
consulting-based projects with a dogged focus on supply chain excellence.
Complexity hampers results. In our analysis, we also find that these companies are more focused on
the management of complexity through the adoption of customer segmentation, cost-to-serve
analysis and item rationalization, horizontal processes and network design of form and function of
inventory.
Over the course of the next six months, we will be sharing case studies of these companies in our
conferences, podcasts, webinars, and writing. We want to raise the level of discussion on supply
chain excellence and get out of the trap of blindly adopting legacy processes as “best practices.”
Why is this an issue? We often see that companies will define processes first without thinking about
the tie of the processes to business strategies. Supply chain challenges have grown in the last
decade, and the evolution of supply chain processes are new and evolving. Today we are redefining
processes to build global processes with increasing complexity. It is clear that the traditional,
functional processes advocated in the 1990’s are no longer relevant. Similarly, we find that leaders
slowly test, learn and adopt new technologies. There is an absence of large IT technology
transformations. Instead, it is a story of culture, leadership and strategy.
As shown in Figure 2, in an ideal state, business process follows business strategy. The design of
supply chain processes in the absence of business strategy is problematic.

Figure 2. The Relationship of Business Strategy to Supply Chain Process Definition
Likewise, we find that leaders in supply chain management have strong horizontal processes: a focus
on revenue management, Sales and Operations Planning (S&OP), new product launch/innovation
(NPI), Corporate Social Responsibility, and Supplier Development. As shown in Figure 3, these
horizontal processes are interlinked and stretch from the customer’s customer to the suppliers’
supplier. A functional or project-based orientation does not drive value.
Figure 3. Definition of Horizontal Processes
We find that the strongest S&OP, NPI and supplier development processes are in the discrete
industries. The gap between horizontal process definition between process-based and discrete
industries has widened in the period of 2006-2015. We feel that this is one of the reasons many
process-based companies are regressing on the Supply Chain Metrics That Matter.

What Drives Value?
As a part of this analysis, we wanted to answer the question for supply chain leaders of what drives
value. In parallel with the Supply Chains to Admire research, we mined our quantitative data to
answer the question, “What steps should companies take to improve PTBV?”
In the analysis of the Supply Chains to Admire, we use PTBV as a proxy metric of value. We believe
that improving the value of shares outstanding in relationship to assets and tangible book value is
within the control of the supply chain leader. The definition of PTBV is:
Price to Tangible Book Value = Market Share Price / Tangible Book Value/Share Outstanding
To help the supply chain leader reading this report, we wanted to use our survey database to
understand the relationship between strategies and process options, and improving PTBV. (We detail
the specifics of this analysis in the Appendix.) Through this analysis, we find that companies who
have a successful Supply Chain Center of Excellence, an S&OP process that is considered to be
effective, and have less business pain with supplier reliability are more likely to be driving PTBV
performance. In the spirit of transparency, the correlations of these factors are included in Figure 4. In
addition, the factors that were considered, but had a correlation less than r=0.30 and greater than -
0.30 are included in the Appendix. Many commonly held factors, like a single instance of ERP, do not
show a pattern of correlation to PTBV.
Figure 4. Drivers of Price to Tangible Book

Recommendations
When benchmarking a supply chain it is important to look at performance and improvement (together)
within a peer group of companies over time. There are trade-offs. Companies operating with higher
levels of performance will struggle with improvement, while companies with a low level of
performance will drive faster rates of improvement.
The award winners of the 2016 Supply Chains to Admire research study are an elite group. Only 5%
of companies meet the criteria outlined in this report to qualify as a winner, and 12% of companies
deliver balance sheet results to qualify as either a winner or a finalist. As companies 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. To
maximize potential, to set goals, organizations should benchmark companies within their industry
sector. Each industry has unique rhythms and cycles. As a result, supply chain excellence analysis
needs to be an industry-specific comparison.
2) Understand Supply Chain Potential and Orchestrate Trade-offs on the Effective Frontier.
Balanced metrics portfolios drive higher levels of value for the company. The metrics are non-linear
and tightly coupled. Managing them as a group in a balanced portfolio requires system thinking.
Companies with higher performance use advanced analytics to plan outcomes and design the
supply chain
3) Drive Horizontal Alignment. We find that those who have the best performance on the Effective
Frontier align teams to focus on supply chain finance and the translation of supply chain processes
and strategies into balance sheet results. This requires holistic organizational thinking which is
quite different than the traditional functional thinking. This can result in a shift in analytics and
reporting. For example, today, while most organizations can easily access functional costs, only
24% of companies can easily access total costs across source, make and deliver together.ii As a
result, it is tough for operational teams to make trade-offs.
4) Make the Supply Chain an Engine for Growth. When we present this data to many supply chain
teams there is a push-back. Many do not understand how their work can drive growth.
Unfortunately, many organizations are stuck in a cost-focused paradigm with significant gaps in
horizontal organizational alignment between operations and commercial teams. Shine a light on the
opportunity and take the steps to drive growth. Each industry has a different set of strategies to
drive growth through the successful implementation of supply chain strategies. This includes
test/learn/adapt strategies in consumer value networks (using channel data and aligning the supply
chain response to maximize value), clinical trials in pharmaceutical industries, the successful

manufacturing of samples and execution of new product launch strategies, agility in responding to
customer requests, and flawless execution of order management to maximize on-time and in-full
orders at the time of shipment.
5) Effectively Manage Complexity. When we interview the leaders in this report, we hear a
consistent theme. Each company has managed product and customer complexity. This includes
customer segmentation, cost-to-serve analysis, item rationalization and ongoing network design
efforts. 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 Walmart and TSMC successfully executed value network strategies.
7) Learn from Other Industries. Use a Steady Hand and Focused Leadership to Drive
Improvement. When we interview the Supply Chain to Admire winners, and ask, “What do you
think drove improvement?” They respond, “The avoidance of fads and a steady focus on supply
chain strategy.” This is not a story of consultants driving change transformation. Instead, it is a story
of supply chain leadership driven by a focused internal team over many years. Companies that did
the best in the analysis have consistency in leadership (same leadership team over the period), a
clear definition of supply chain excellence, disciplined processes, and cross-functional alignment.
Post-recession, retail processes improved, and process industry performance regressed. The
greatest improvement in performance is in the high-tech and discrete industry sectors. These
companies are the strongest in horizontal process alignment, network design and the use of supply
chain planning.
Conclusion
Supply chain excellence does not just “happen.” It is the result of hard work by organizational teams
with a clear definition of supply chain strategy. The goal of this report is to provide feedback to
leadership teams to help them better align supply chain programs with corporate finance efforts to
drive improved value for shareholders. While 88% of companies are going backwards, this report
recognizes the 12% 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 these
achievements.

Appendix
Here we share more data through individual analysis of each industry to help the reader understand
the math behind this report.
Retail Industries
Table A. Apparel

Table B. Retail Apparel
Table C. Grocery Retail

Table D. Mass Merchants

Table E. Restaurants and Fast Food

Process Industries
Table F. Beauty
Table G. Beverage

Table I. Food
Table J. Household Products

Table K. Oil and Gas
Table L. Over-the-Counter Drugs

Table N. Pharmaceutical

Discrete Industries
Table O. Aerospace and Defense
Table P. Automotive

Table Q. Automotive Suppliers
Table R. B2B Technology

Table S. Consumer Durables
Table T. Consumer Electronics

Table U. Contract Manufacturers
Table V. Furniture

Table W. Heavy Equipment
Table X. Medical Device

Table Y. Semiconductor
Table Z. Tires

Methodology for the Supply Chains to Admire
To complete the Supply Chains to Admire analysis, we took public reporting, i.e. balance sheets and
income statements for the prior year, and mined the data for year-over-year patterns. Companies
were grouped into industries using NAICS code designations. In this analysis we divided all public
companies into 31 industry peer groups. We then eliminated outliers—companies with major mergers
and restructuring that will skew the analysis. This left us with 26 industries and 293 companies for
analysis. Companies were then evaluated within industry peer groups for improvement, value, and
performance across two periods: 2006-2015 and 2009-2015. The 2016Supply Chains to Admire
awards were based on the analysis of the period of 2009-2015.
This flow is outlined in Figure A.
Figure A. Supply Chains to Admire Methodology
The detailed calculation for each step in the process is:
 Step One: Calculate the Supply Chain Index. In the first step of the analysis, the Supply Chain
Index is calculated for the industry peer group. A ranking in the top 2/3 of the peer group on the
Supply Chain Indexiii
qualifies a company for further analysis. A company in the lower 1/3 for the
period is eliminated from consideration in the Supply Chains to Admire analysis.

Figure B. Overview of the Supply Chain Index
 Step Two: Calculate Price to Tangible Book Value. This is an analysis of value. To determine
which companies are driving the greatest value, we determine the outliers in the (PTBV)
calculation. After the elimination of outliers from the PTBV mean for the industry peer group, we
only include companies that are at or above the mean PTBV value (allowing for no more than 5%
below the mean for the peer group to account for rounding).
Price to Tangible Book Value = Share Price / Tangible Book Value/Share Outstanding
 Step Three: Analyze the Performance Factors. The performance factors represent the factors
on the Effective Frontier that have the highest correlation to market capitalization. The Effective
Frontier is the representation of organizational potential with a balanced portfolio of supply chain
metrics.

Figure C: The Performance Factors Evaluated on the Effective Frontier
Companies passing the first two tests are then analyzed against the performance factors for 2009-
2015:
o Growth. Year-over-year growth average for the period.
o Profitability/Operating Margin. A ratio of profitability:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑣𝑒𝑛𝑢𝑒
o Cycle/Inventory Turns. Companies want inventory to turn quickly. We use the ratio of cost
of goods sold/ average inventory value. (This measurement is based on the use of total
inventory: finished goods, work-in-process and raw materials.)
o Complexity/Return on Invested Capital (ROIC). ROIC is a measurement of asset
utilization in the face of complexity. We use the formula:
 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒+𝐼𝑛𝑐𝑜𝑚𝑒 𝑇𝑎𝑥 𝑇𝑜𝑡𝑎𝑙
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟′ 𝑠𝐸𝑞𝑢𝑖𝑡𝑦
 Step Four: Determine Winners and Finalists. In the analysis of the performance factors,
companies are divided into two classifications:
o Supply Chains to Admire Winners: Companies meeting the Supply Chain Index and
PTBV criteria (steps one and two), and also scoring at or above the industry peer group
mean (within 5% of the mean to account for rounding) for all four of the performance factors
(growth, operating margin, inventory turns, and Return on Invested Capital) are recognized
as Supply Chains to Admire winners.

o Supply Chains to Admire Finalists: Companies meeting the Supply Chain Index and the
PTBV criteria (steps one and two), and also scoring no more than 10% below the industry
peer group mean for three out of four of the performance factors, and no more than 25%
below the mean on any of the four factors are identified as finalists.
The methodology is not limited to the best company in an industry peer group. Within a peer group,
there can be multiple winners; and likewise, there are many industry peer groups with no winners or
finalists.
Methodology for the Value Calculation for
Cross-Survey and Financial Analysis
In parallel with the Supply Chains to Admire research, we mined our quantitative data to answer the
question, “What steps should companies take to improve PTBV?” To complete this analysis, we
analyzed the data collected in 28 quantitative studies over the past four years (2012-2015). This
included 2147 respondents from manufacturing, retailing, distribution and third-party logistics
companies. Here we share the methodology to complete the analysis as shown in Figure 4:
Survey Data Collection.
Identification. We identified survey questions of interest that appear across enough multiple
studies for deeper analysis (at least 30 responses per question). (See end of section for summary
of questions considered)
Data Combining and Cleaning. The cross-survey data was combined and de-dupe’ d so that each
respondent only appears once in the data set (typically keeping the one where most selected
questions are answered.). Duplicate companies across the studies are allowed in the survey
analysis but not in the financial analysis
Data Analysis. We matched the quantitative survey data to corporate financial data.
Financial Data Collection Methodology
Financial Analysis. We determined which companies from survey data are public and with
available financial data. Companies included were sorted by industry (based on NAICS codes, used
by the US Department of Commerceiv
.)
Time Period Definition. We determined the time period & financial metrics to include in the
analysis. For the 2012-2015 analysis the financial comparison was the period of 2010-2015. The
metrics used in the correlation were revenue growth, operating margin, inventory turns, return on
invested capital, price to tangible book, balance, strength, resiliency.

Financial Correlations and Outlier Definition. We collected financial data for companies in the
quantitative survey database and added other companies in their industry peer group (data from
YCharts) to derive industry-specific comparisons. We then eliminated “MAJOR” financial outliers.v
The analysis calculated Q1 (1st quartile), Q3 (3rd quartile) and IQR (Q3-Q1) for the financial
reporting. A major outlier was identified if the number was LESS than Q1-3(IQR) or MORE than
Q3+3(IQR).
For each company with survey data (not the rest in the peer group), we calculated the “peer group
mean”. This is the mean score of all companies in the peer group EXCLUDING the company in
question (the peer mean is therefore not influenced by the company being measured and will be
different for each company). In the analysis and correlation to PTBV, we excluded major outliers
from peer mean calculation only in cases where the outlier does not belong to the company being
measured; If the outlier exists for a company being measured, use that data point for difference vs.
peer mean calculation for that company only. NOTE: it was decided to only remove outliers for
PTBV because that metric is the most susceptible to outliers and chaos in the market. Outliers for
other metrics were considered more likely to be valid and therefore important to include. For each
company with survey data, we calculated the “% difference between the company and the peer
mean” (FORMULA: (company - peer mean)/peer mean).
Combine Quantitative Survey Responses with Industry-Specific Financial Analysis
Reporting. We identified the survey questions with enough companies with financial data (must be
n=30+) and then evaluated which financial metrics should be correlated with which available survey
data and created a table to compare each company in the analysis, their survey responses and
financial data measures (% difference from peer mean or balance/strength/resiliency score).
We then ran correlations between financial metrics and survey data across all companies included
in the survey-financial analysis. We report correlations of 0.30 or higher OR -0.30 or lower.
Summary of Survey Questions Included in the Analysis
Agility Performance (n=90)
Q: How would you rate the current agility of your company’s supply chain? Please base your
answer on however your company defines agility.
Alignment Importance (n=68), with a focus on the following teams
Q: In your opinion, how important is it for each of the following pairs of teams to be aligned within
your company?
Sales & Marketing
Sales & Operations
Manufacturing and Procurement

Finance and Operations
Operations and IT
Alignment Performance (n=81), with a focus on the same teams as above
Q: How aligned do you believe that these same pairs of teams actually are with your company?
Top Five Elements of Business Pain (n=44-45), with a focus on the following pairs of words
Q: When it comes to doing your job, which of the following are your top 5 elements of business
pain? Please select no more than five.
Ability to use data (access to data, dirty data, data compliance, etc.)
Availability of skilled people to do the job
Cross-functional alignment (metrics, incentives, goals, etc.)
Software Usability
Increasing speed of business
Management of value network relationships (suppliers, clients, customers, etc.)
Increasing regulations and compliance
Clarity of business strategy
Demand and supply volatility
Executive understanding of the supply chain
Supply chain visibility (ability to see and respond to changes in the supply chain)
Innovation (bringing new products and services to market)
Organizational change management
Globalization (clarity on how to make decisions across global and regional teams)
Product quality and supplier reliability
Risk management
Ability of IT to meet line of business needs (n=35)
Q: In general, how well do your IT projects meet the line-of-business leaders’ objectives?
Supply Chain Visibility Importance (n=35), with a focus on the following items
Q: Please think about supply chain visibility. How important is it for your company to have visibility
of the supply chain in each of the following areas?
Transactions and supply chain decisions within your company
1st tier material suppliers
2nd-3rd tier suppliers
Transportation and logistics network
Manufacturing within the company

3rd party manufacturing
Inter-enterprise or extended network order management to customers
Supply Chain Visibility Performance (n=35), with a focus on the same items as above
Q: How well do you think your company performs on having supply chain visibility in each of these
same areas?
Supply Chain Descriptors Today (n=50-63), with a focus on these pairs
Q: For each of the following pairs of words, please pick the one word or phrase that best describes
your company’s supply chain.
Fast - Slow
Global - Local
Outside-in - Inside Out
Pull - Push
Proactive - Reactive
Aligned - Functional Silos
Working well - Room for improvement
Functions that Report into the Supply Chain Organization (n=85-114), with a focus on the
following
Q: Companies define their supply chain organizations in different ways. Please tell us how you
define your company’s supply chain by selecting which function(s) report through the supply chain
organization. Please select all that apply.
Customer service
Deliver (Distribution)
Inventory management
Make (Manufacturing)
Source (Procurement)
Supply chain planning (Demand)
Supply chain planning (Supply)
Transportation & logistics
Supply chain human resources
Contract manufacturing management
Operations finance

Number of Functions Reporting into the Supply Chain Organization (n=107) - determined from
question above about which functions report into supply chain organization
S&OP Effectiveness (n=31)
Q: How would you rate your company overall on the effectiveness of its S&OP process?
SMALL BASE (INTERPRET WITH CAUTION):
Number of ERP Instances (n=26 - small base) - NUMERIC RESPONSE
Q: How many ERP instances does your company currently manage, if any? Your best estimate is
fine.
Supply Chain Center of Excellence Effectiveness (n=26 - small base)
Q: All things considered, how would you rate the effectiveness of your supply chain center of
excellence?

Prior Reports in This Series
Over the course of the last four years our methodology has changed and matured. You can track our
progress and find industry-specific information published by Supply Chain Insights here:
Supply Chain Metrics That Matter: A Focus on Retail August 2012
Supply Chain Metrics That Matter: A Focus on Automotive September 2012
Supply Chain Metrics That Matter: The Cash-to-Cash Cycle November 2012
Supply Chain Metrics That Matter: A Focus on the Consumer Products Industry December 2012
Supply Chain Metrics That Matter: Driving Reliability in Margins January 2013
Supply Chain Metrics That Matter: A Focus on Hospitals January 2013
Supply Chain Metrics That Matter: A Focus on Brick & Mortar Retail February 2013
Supply Chain Metrics That Matter: A Focus on Consumer Products Manufacturers February 2013
Supply Chain Metrics That Matter: A Focus on Consumer Electronics April 2013
Supply Chain Metrics That Matter: A Focus on Apparel May 2013
Supply Chain Metrics That Matter: A Focus on Contract Manufacturing August 2013
Supply Chain Metrics That Matter: A Focus on the Automotive Industry October 2013
Supply Chain Metrics That Matter: A Closer Look at the Cash-To-Cash Cycle (2000-2012) November 2013
Supply Chain Metrics That Matter: Third Party Logistics Providers December 2013
Supply Chain Metrics That Matter: A Critical Look at Operating Margin December 2013
Supply Chain Metrics That Matter: A Closer Look at Consumer Products Companies April 2014
Supply Chain Metrics That Matter: A Closer Look at Chemical Companies May 2014
Supply Chain Metrics That Matter: A Closer Look at Consumer Products Companies June 2014
Supply Chain Metrics That Matter – A Focus on Consumer Products Companies April 2015
Supply Chain Metrics That Matter – A Focus on Chemical Companies – 2015 May 2015
Supply Chain Metrics That Matter: A Focus on Consumer Products Companies-2015 June 2015

Supply Chain Metrics That Matter: A Focus on Consumer Products – 2015 August 2015
Supply Chain Metrics That Matter: A Focus on Automotive August 2015
Supply Chain Metrics That Matter: A Focus on the High-Tech Industry – 2015 January 2016
Supply Chain Metrics That Matter: A Focus on Pharmaceutical Companies – 2016 May 2016
Supply Chain Metrics That Matter: A Focus on Medical Device Companies – 2016 May 2016
Supply Chain Metrics That Matter: A Focus on Food and Beverage Companies-2016 June 2016
Supply Chain Metrics That Matter: A Focus on Chemical, and Oil & Gas Companies – 2016 July 2016
Supply Chain Metrics That Matter: A Focus on Household Products, & Beauty Companies – 2016 July 2016
These reports, and additional information on the Supply Chain Metrics That Matter methodology, are
available at our Supply Chain Insights website and in the Beet Fusion community.

About Supply Chain Insights LLC
Founded in February, 2012 by Lora Cecere, Supply Chain Insights LLC is in its fifth year of
operation. The Company’s mission is to deliver independent, actionable, and objective advice for
supply chain leaders. If you need to know which practices and technologies make the biggest
difference to corporate performance, we want you to turn to us. We are a company dedicated to this
research. Our goal is to help leaders understand supply chain trends, evolving technologies and
which metrics matter.
About Lora Cecere
Lora Cecere (twitter ID @lcecere) is the Founder of Supply Chain Insights LLC and
the author of popular enterprise software blog Supply Chain Shaman currently read
by 5,000 supply chain professionals. She also writes as a Linkedin Influencer and
is a a contributor for Forbes. She has written five books. The first book, Bricks
Matter, (co-authored with Charlie Chase) published in 2012. The second book, The
Shaman’s Journal 2014, published in September 2014; the third book, Supply
Chain Metrics That Matter, published in December 2014; the fourth book, The
Shaman’s Journal 2015, published in September 2015 while the fifth book, The Shaman’s Journal
2016, published in June 2016.
With over 13 years as a research analyst with AMR Research, Altimeter Group, and Gartner Group
and now as the Founder of Supply Chain Insights, Lora understands supply chain. She has worked
with over 600 companies on their supply chain strategy and speaks at over 50 conferences a year on
the evolution of supply chain processes and technologies. Her research is designed for the early
adopter seeking first mover advantage.

Endnotes
i
https://ycharts.com
ii
State of Transportation, Supply Chain Insights, November 2012, http://supplychaininsights.com/the-state-of-transportation-
management/
iii
The Supply Chain Index: Calculating Strength, Balance and Resiliency, May 2014, http://supplychaininsights.com/the-supply-chain-
index/
iv
Us Department of Commerce, July 23, 2016, http://www.census.gov/eos/www/naics/
v
Outlier Calculation, July 23, 2016, http://www.wikihow.com/Calculate-Outliers):

2016 Supply Chains to Admire - Report - 26 July 2016

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2016 Supply Chains to Admire - Report - 26 July 2016