pharmaceutical versus consumer products: the race for supply chain excellence
DESCRIPTION
A comparison of progress of two different industries over the course of the last decade.TRANSCRIPT
In Search of Supply Chain Excellence
Lora Cecere of Supply Chain Insights
Supply Chain Insights LLC Copyright © 2013, p. 2
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.
About Us
Supply Chain Insights LLC Copyright © 2013, p. 3
Over 30 Reports Planned for 2013
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 4
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
Second Printing of Bricks Matter: 16 Five-Star Reviews on Amazon
Book can be ordered from Amazon.com in Hardcopy or Digital Format
Supply Chain Insights LLC Copyright © 2013, p. 5
March 2014 Publication
2013 Publications
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 6
A Look at History: Progress in Productivity
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 7
A Look at Retail
Supply Chain Insights LLC Copyright © 2013, p. 8
Current State: Corporate Social Responsibility
Supply Chain Insights LLC Copyright © 2013, p. 9
Source: Supply Chain Insights, Corporate Annual Reports 2000-2011
Inventory Performance
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consumer Packaged Goods
59 57 62 64 67 67 68 70 70 64 64 67
Chemical
71.5 71.9 78.2 75.1 62 70.3 68.1 64.3 64.3 78.6 72.9 72.8
Pharma
122.236691097
869
133.699100562
175
190.147616165
968
170.986522478
989
184.342617399
859
175.550260476
877
167.799951139
247
149.815153981
283
154.915781882
591
198.663134119
976
154.313480863
244
131.819794240
294
High Tech
93.1 57.6 46.5 48.5 35.9 37.3 43.8 36.8 34.6 41.3 34.8 30.4
Average
86.4591727744
674
80.0497751405
437
94.2119040414
919
89.6466306197
472
87.3106543499
647
87.5375651192
192
86.9249877848
117
80.2287884953
207
80.9539454706
477
95.6407835299
941
81.5033702158
11
75.5049485600
736
25.0
75.0
125.0
175.0
225.0
Da
ys
o
f In
ve
nto
ry
Supply Chain Insights LLC Copyright © 2013, p. 10
Current State: Sales and Operations Planning
Supply Chain Insights LLC Copyright © 2013, p. 11
A Supply Chain
is a Complex System
with Complex Processes
with Increasing Complexity
Supply Chain Insights LLC Copyright © 2013, p. 12
Trying to Reach Balance
Supply Chain Insights LLC Copyright © 2013, p. 13
Cross Industry View: (2000-2011)
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 14
Industry Averages
Supply Chain Insights LLC Copyright © 2013, p. 15
Consumer Packaged Goods Industry Performance
Supply Chain Insights LLC Copyright © 2013, p. 16
Three Different Strategies
Supply Chain Insights LLC Copyright © 2013, p. 17
CPG: An Industry with Leaders
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 18
Pharmaceutical
Supply Chain Insights LLC Copyright © 2013, p. 19
Drug Manufacturers- Major (1)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source
200 300 400 500 600 700 8000
1
2
3
4
5
20022012
2002
2012
2002
2012
Bristol-Myers Squibb Co. Eli Lilly & Co. Pfizer Inc.
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
Best Scenario
BMY526, 3.3
PFE500, 1.5
LLY445, 1.7
Average (Revenue per Employee, Inventory Turns)
Supply Chain Insights LLC Copyright © 2013, p. 20
Healthcare Value Chain Financial Metrics
Supply Chain Insights LLC Copyright © 2013, p. 21
Industry Progress
Supply Chain Insights LLC Copyright © 2013, p. 22
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
Supply Chain Insights LLC Copyright © 2013, p. 23
Selected 14 Core Supply Chain Ratios to Study
Financial Metrics
Growth Profitability Cycle ComplexityCommon Shares Cash Cash-to-Cash Cycle Altman Z
Employee Growth Cash Change in Period Days of Finished Goods Capital Turnover
Employees Cash on Hand Days of Inventory Current Ratio
Market Capitalization Cash Ratio TTM Days of Payables Outstanding Quick Ratio
R&D Margin Cash Ratio Quarter Days of Raw Materials Return on Assets
R&D Ratio Cash Ratio Year Days of Sales Outstanding Return on Equity
R&D to COGS Ratio Cost of Goods Sold Days of Work in Progress Return on Invested Capital
Revenue EBITDA DPO/DSO Return on Net Assets
Revenue Growth Free Cash Flow Ratio Finished Goods Inventory Revenue per Employee
Revenue Growth TTM Gross Margin Inventory Working Capital Ratio
Revenue TTM Gross Profit Inventory Turns
SG&A Margin Net Profit Margin Receivables Turns
SG&A Ratio Operating Cash Flow Ratio Raw Materials Inventory
SG&A to COGS Ratio Operating Margin Work in Progress Inventory
OPEX Ratio
Pretax Margin
Source: Supply Chain Insights LLC
#sciwebinar
Selected Ratios
Summary of Progress
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 25
Patterns
Supply Chain Insights LLC Copyright © 2013, p. 26
Healthcare Value Chain
Source: Supply Chain Insights LLC
Metrics That Matter by Industry
Medical Care Industry Medical Distribution Pharmaceutical Major
Free Cash Flow Ratio Operating Margin Free Cash Flow Ratio
Working Capital Ratio Return on Invested Capital Return on Invested Capital
Operating Margin Free Cash Flow Ratio Current Ratio
SG&A to COGS Ratio Working Capital RatioDays of Payables
Outstanding
YoY Revenue Growth Return on Net Assets
Current Ratio DPO/DSO Ratio
Days of Sales Outstanding Current Ratio
Days of Inventory Days of Inventory
Days of Payables Outstanding
0.73 0.84 78
Supply Chain Insights LLC Copyright © 2013, p. 27
Medical Distribution Equation
Ln(market cap) = 6.04 + 33.39(OM) – 24.69(ROIC) + 15.23(FCF) – 11.11(WC) + 1.49(RONA) + 1.37(DPODSO) +
0.83(CR) + 0.02(DOI)
Correlation Strength
NOTE: Full equation is Ln(market capitalization) =6.036327 + 33.38703(operating margin) -24.6924(return on invested capital) + 15.23431(free cash flow ratio) -11.1125(working capital ratio) + 1.488203(return on net assets) + 1.371671(dpo/dso ratio) + 0.83093(current ratio) + 0.018224(days of inventory)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.
Medical Distribution Equation
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 28
Medical Distribution Ranking (2012)
Medical Distribution Ranking (2012)
Rank Company
1 McKesson Corporation
2 Cardinal Health, Inc.
3 Henry Schein Inc.
4 Patterson Companies Inc.
5 Owens & Minor, Inc.
6 MWI Veterinary Supply, Inc.
Source: Supply Chain Insights LLCMorningstar peer group used as basis for equation included, AmerisourceBergen Corp., ALR Technologies Inc. and Chindex International, Inc. for which 2012 results were not available as of 5/15/2013.
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 29
Medical Distribution Performance Ranking (2012)
Medical Distribution Ranking (2012)
Rank Company CR DOI DPODSO FCF OM ROIC RONA WC Equation Output
1 McKesson Corporation 1.09 31.66 1.91 0.021 0.017 0.065 0.474 0.016
2 Cardinal Health, Inc. 1.24 27.86 1.85 0.008 0.017 0.074 0.210 0.031
3 Henry Schein Inc. 1.84 68.10 0.78 0.040 0.069 0.116 0.259 0.137
4 Patterson Companies Inc.
2.65 49.08 0.45 0.082 0.101 0.131 0.200 0.246
5 Owens & Minor, Inc. 1.76 34.92 1.09 0.020 0.022 0.089 0.122 0.079
Source: Supply Chain Insights LLC, Corporate Annual Reports 2012 from One SourceRankings only include companies that had annual data available through One Source at time of calculation (May 2013).
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 30
Drug Manufacturers:Major Equation
Ln(market cap) = 9.13 + 10.25(FCF) + 2.88(OM) – 1.20(WC) – 0.71(CR) + 0.01(DOI)
Correlation Strength
NOTE: Full equation is Ln(Market Cap) = 9.129101 + 10.247215 (Free Cash Flow Ratio) + 2.878945 (Operating Margin) – 1.201200 (Working Capital Ratio) – 0.707560 (Current Ratio) + 0.008198 (Days of Inventory)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.
Drug Manufacturers - Major Equation
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 31
Major Pharma: 2012
Supply Chain Insights LLC Copyright © 2013, p. 32
Major Pharma: 2011
Supply Chain Insights LLC Copyright © 2013, p. 33
Major Pharma: 2010
Supply Chain Insights LLC Copyright © 2013, p. 34
Major Pharma: 2009
Supply Chain Insights LLC Copyright © 2013, p. 35
Major Pharma: 2008
Supply Chain Insights LLC Copyright © 2013, p. 36
• Outside-in• End-to-End Orchestration• Supply Chain Matters
Path Forward
Supply Chain Insights LLC Copyright © 2013, p. 37
Join Us!
www.supplychaininsightsglobalsummit.com
#sciwebinar
Supply Chain Insights LLC Copyright © 2013, p. 38
• July 11th: Big Data Supply Chains and the Future of Analytics• August 15th: State of Supply Chain Talent. Missing Link in the
Supply Chain
Upcoming Webinars
Each webinar is based on new and relevant research and will feature two-three industry leaders
Supply Chain Insights LLC Copyright © 2013, p. 39
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.
Supply Chain Insights LLC Copyright © 2013, p. 40
Where Do You Find Lora?
Contact Information: [email protected]
Blog: www.supplychainshaman.com (4000 pageviews/month)
Twitter: lcecere 4200 followers.
LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (3850 in the network)