what is supply chain excellence? a closer look at industry performance
DESCRIPTION
Analysis of industry progress on three intersections of the Effective Frontier: Revenue/Employee versus Inventory Turns Inventory Turns versus Cash-To-Cash Inventory Turns versus Operating MarginTRANSCRIPT
Defining Supply Chain Excellence
Supply Chain Insights LLC Copyright © 2013, p. 2
Understanding Supply Chain Excellence
The Fundamentals
Progress by Industry
Comparison of Companies within a Peer Group
Recommendations
Wrap-up
Supply Chain Insights LLC Copyright © 2013, p. 3
The Supply Chain
is a Complex System
with Complex Processes
with Increasing Complexity
Supply Chain Insights LLC Copyright © 2013, p. 4
The Supply Chain Effective Frontier
Supply Chain Insights LLC Copyright © 2013, p. 5
Methodology: Mining 20 Years of Financial Data to Understand the Patterns
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
Supply Chain Insights LLC Copyright © 2013, p. 6
Operating Margins versus Cycles
Supply Chain Insights LLC Copyright © 2013, p. 7
The Change Management Journey
Supply Chain Insights LLC Copyright © 2013, p. 8
As companies mature progress is seen in:• Strength: Year-over-year improvement in metrics.• Balance: Balance in growth, profitability, cycles and
profitability.• Resiliency: A tight, predictable pattern in results at
the intersection of operating margin and inventory turns irrespective of what is happening in buy or sell-side markets.
What Does Good Look Like?
Supply Chain Insights LLC Copyright © 2013, p. 9
Most Interesting Patterns
• Cash-to-Cash Cycle vs. Inventory Turns
• Inventory Turns vs. Operating Margin
• Inventory Turns vs. Revenue per Employee
Supply Chain Insights LLC Copyright © 2013, p. 10
What Have We Learned?
• Each industry has a different pattern of trade-offs of balancing growth, profitability, cycles and complexity.
• Companies that are supply chain leaders have very small movement with a balanced portfolio of metrics.
• It is about MUCH more than Return on Assets (ROA), growth and inventory.
Supply Chain Insights LLC Copyright © 2013, p. 11
Understanding Supply Chain Excellence
The Fundamentals
Progress by Industry
Comparison of Companies within a Peer Group
Recommendations
Wrap-up
Supply Chain Insights LLC Copyright © 2013, p. 12
Where Are We by Industry?
Supply Chain Insights LLC Copyright © 2013, p. 13
Progress in Manufacturing Productivity
Supply Chain Insights LLC Copyright © 2013, p. 14
Productivity in Retail
Supply Chain Insights LLC Copyright © 2013, p. 15
Progress in Inventory Turns and Operating Margin
Supply Chain Insights LLC Copyright © 2013, p. 16
Impact of A Recession
Supply Chain Insights LLC Copyright © 2013, p. 17
• Nine out of ten industries are stuck: unable to power improvements in inventory turns and profitability.
• Manufacturers have outperformed retailers on productivity.
• The more steps back in the supply chain that a company is, the more important the principles of supply chain management are.
Where Are We?
Supply Chain Insights LLC Copyright © 2013, p. 18
Understanding Supply Chain Excellence
The Fundamentals
Progress by Industry
Comparison of Companies within a Peer Group
Recommendations
Wrap-up
Supply Chain Insights LLC Copyright © 2013, p. 19
0 250 500 750 1,000 1,2500
3
6
9
12
15
2002 2012
The Dow Chemical Company
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
Visualizing the Patterns
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source
Best Scenario
DOW999, 6.7
Trace the line from 2002 point to 2012 point to follow the performance over time.
The diamond shows the company’s average over the period. Ex: The Dow Chemical Company (DOW) has an average of 999 K$ for revenue per employee and 6.7 for inventory turns.
Ideally, companies are increasing inventory turns and revenue per employee, moving towards the upper right corner of the graph over time.
Here, we plot inventory turns (y-axis) vs. revenue per employee (x-axis).
Average (Revenue per Employee, Inventory Turns)
Supply Chain Insights LLC Copyright © 2013, p. 20
Understanding the Patterns
Consumer Packaged Goods
Supply Chain Insights LLC Copyright © 2013, p. 22
Corporate Summary
Company
Stock
Exchange:
Ticker
Symbol
2012
Revenue
(billions
USD)
2012 Global
Employees
(thousands)
Country
Where
Based
Colgate-Palmolive
CompanyNYSE: CL 17.1 37.7 USA
(New York)
Kimberly-Clark
CorporationNYSE: KMB 21.1 58.0 USA
(Texas)
The Procter & Gamble
CompanyNYSE: PG 83.7 126.0 USA
(Ohio)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2012
Supply Chain Insights LLC Copyright © 2013, p. 23
Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
4 5 6 70
10
20
30
40
50
60
70
80
90
2000
2012
2000
2012
2000
2012
Colgate-Palmolive Company Kimberly-Clark CorporationThe Procter & Gamble Company
Inventory Turns
Ca
sh
-to
-Ca
sh
Cy
cle
Best Scenario
CL5.7, 43
KMB5.9, 67
Average (Inventory Turns, Cash-to-Cash Cycle)
PG5.6, 39
Supply Chain Insights LLC Copyright © 2013, p. 24
Inventory Turns vs. Operating Margin (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
0.10 0.15 0.20 0.254
5
6
7
2000
2012
20002012 2000
2012
Colgate-Palmolive Company Kimberly-Clark CorporationThe Procter & Gamble Company
Operating Margin
Inv
en
tory
Tu
rns
CL0.21, 5.7
KMB0.15, 5.7
Average (Operating Margin, Inventory Turns)
PG0.18, 5.6
Best Scenario
Supply Chain Insights LLC Copyright © 2013, p. 25
Inventory Turns vs. Revenue per Employee (2002-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012
200 300 400 500 600 7002
4
6
8
20122002
2002
20122002
2012
Colgate-Palmolive Company Kimberly-Clark CorporationThe Procter & Gamble Company
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
Best Scenario
CL361, 5.5
KMB309, 5.9
Average (Revenue per Employee, Inventory Turns)
PG536, 5.6
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
Colgate-Palmolive Company 59 62 46
Kimberly-Clark Corporation 61 35 51
The Procter & Gamble Company 61 40 27
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
Colgate-Palmolive Company 67 67 44
Kimberly-Clark Corporation 63 38 50
The Procter & Gamble Company 69 55 31
Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
Colgate-Palmolive Company 68 64 38
Kimberly-Clark Corporation 63 54 47
The Procter & Gamble Company 68 66 28
Company (2012) Days of Inventory Days of Payables Days of Receivables
Colgate-Palmolive Company 70 66 36
Kimberly-Clark Corporation 60 63 39
The Procter & Gamble Company 58 68 26
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Supply Chain Insights LLC Copyright © 2013, p. 27
Consumer packaged goods companies have strength and resilience in their metrics performance, but have lost balance in the last three years. New techniques in supply chain management are needed to power the next level of improvement.
Summary
Retail
Supply Chain Insights LLC Copyright © 2013, p. 29
Corporate Summary
Supply Chain Insights LLC Copyright © 2013, p. 30
Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
4 5 6 7 8 9 100
25
50
75
2001
2012
2000
2012
CVS Caremark Corporation Walgreen Company
Inventory Turns
Ca
sh
-to
-Ca
sh
Cy
cle
Best Scenario
CVS6.07, 58
WAG6.00, 39
Average (Inventory Turns, Cash-to-Cash Cycle)
Supply Chain Insights LLC Copyright © 2013, p. 31
Inventory Turns vs. Operating Margin (2000-2012)
Supply Chain Insights LLC Copyright © 2013, p. 32
Inventory Turns vs. Revenue per Employee (2002-2012)
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
CVS Caremark Corporation 83 33 16
Walgreen Company N/A N/A N/A
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
CVS Caremark Corporation 73 30 20
Walgreen Company 65 37 14
Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
CVS Caremark Corporation 48 19 21
Walgreen Company 57 35 14
Company (2012) Days of Inventory Days of Payables Days of Receivables
CVS Caremark Corporation 39 18 19
Walgreen Company 50 31 11
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Cash-to-Cash Cycle Components
Supply Chain Insights LLC Copyright © 2013, p. 34
Corporate Summary
Supply Chain Insights LLC Copyright © 2013, p. 35
Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
5 6 7 8 9 100
20
40
60
2000
2012
2000
2012
Target Corporation Wal-Mart Stores, Inc.
Inventory Turns
Ca
sh
-to
-Ca
sh
Cy
cle
Best Scenario
TGT6.2, 39.6
WMT7.8, 13.5
Average (Inventory Turns, Cash-to-Cash Cycle)
Supply Chain Insights LLC Copyright © 2013, p. 36
Inventory Turns vs. Operating Margin (2000-2012)
Supply Chain Insights LLC Copyright © 2013, p. 37
Inventory Turns vs. Revenue per Employee (2003-2012)
Supply Chain Insights LLC Copyright © 2013, p. 38
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
Target Corporation 62 57 32
Wal-Mart Stores, Inc. 52 36 3
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
Target Corporation 58 63 39
Wal-Mart Stores, Inc. 49 38 2
Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
Target Corporation 57 51 41
Wal-Mart Stores, Inc. 42 37 4
Company (2012) Days of Inventory Days of Payables Days of Receivables
Target Corporation 60 47 31
Wal-Mart Stores, Inc. 44 40 5
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Cash-to-Cash Cycle Components
Supply Chain Insights LLC Copyright © 2013, p. 39
Corporate Summary
Company
Stock
Exchange:
Ticker
Symbol
2012
Revenue
(billions
USD)
2012 Global
Employees
(thousands)
Country
Where
Based
Safeway Inc. NYSE: SWY 41.1 178.0 USA (Idaho)
The Kroger Co. NYSE: KR 82.2 338.0 USA(Ohio)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2012
Supply Chain Insights LLC Copyright © 2013, p. 40
Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
7 8 9 10 11 12 13 14 150
5
10
15
20
25
2000
2012
2000
2012
Safeway Inc. The Kroger Co.
Inventory Turns
Ca
sh
-to
-Ca
sh
Cy
cle
Best Scenario
Average (Inventory Turns, Cash-to-Cash Cycle)
SWY10.5, 10.3
KR10.6, 11.9
Supply Chain Insights LLC Copyright © 2013, p. 41
Inventory Turns vs. Operating Margin (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
-0.02 0 0.02 0.04 0.06 0.08 0.17
8
9
10
11
12
13
14
15
2000
2012
2000
2012
Safeway Inc. The Kroger Co.
Operating Margin
Inv
en
tory
Tu
rns
Best Scenario
SWY0.04, 10.5
KR0.03, 10.6
Average (Operating Margin, Inventory Turns)
Supply Chain Insights LLC Copyright © 2013, p. 42
Inventory Turns vs. Revenue per Employee (2002-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012
150 200 250 3007
8
9
10
11
12
13
14
15
2012
2003
2012
2002
Safeway Inc. The Kroger Co.
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
Best Scenario
SWY211, 10.7
KR218, 11.1
Average (Revenue per Employee, Inventory Turns)
Supply Chain Insights LLC Copyright © 2013, p. 43
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
Safeway Inc. N/A N/A N/A
The Kroger Co. 42 31 5
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
Safeway Inc. 37 28 4
The Kroger Co. 36 30 4
Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
Safeway Inc. N/A N/A N/A
The Kroger Co. 31 25 4
Company (2012) Days of Inventory Days of Payables Days of Receivables
Safeway Inc. 29 35 7
The Kroger Co. 26 22 4
Cash-to-Cash Cycle Components
Supply Chain Insights LLC Copyright © 2013, p. 44
• Retailers have not been able to power the levels of productivity (revenue/employee) of consumer packaged goods, and mass merchants are doing better on performance improvements than grocery retailers.
• Wal-Mart is the leader in driving The Effective Frontier.
Retail Comments
Chemical
Supply Chain Insights LLC Copyright © 2013, p. 46
Corporate Summary
Supply Chain Insights LLC Copyright © 2013, p. 47
Cash-to-Cash Cycle vs. Inventory Turns(2000-2012)
Supply Chain Insights LLC Copyright © 2013, p. 48
Inventory Turns vs. Operating Margin(2000-2012)
Supply Chain Insights LLC Copyright © 2013, p. 49
Inventory Turns vs. Revenue per Employee (2002-2012)
Supply Chain Insights LLC Copyright © 2013, p. 50
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
BASF SE 82 50 72
E. I. du Pont de Nemours and Co. 95 51 44
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
BASF SE 66 38 61
E. I. du Pont de Nemours and Co. 86 49 53
Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
BASF SE 64 30 54
E. I. du Pont de Nemours and Co. 100 66 49
Company (2012) Days of Inventory Days of Payables Days of Receivables
BASF SE 64 30 50
E. I. du Pont de Nemours and Co. 106 69 42
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Cash-to-Cash Cycle Components
Supply Chain Insights LLC Copyright © 2013, p. 51
• BASF has outperformed DuPont.• Chemical companies have less resilience
than CPG.
Chemical Comments
Food and Beverage
Supply Chain Insights LLC Copyright © 2013, p. 53
Corporate Summary
Supply Chain Insights LLC Copyright © 2013, p. 54
Cash-To-Cash Cycle vs. Inventory Turns(2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
4 5 6 7 8 9
-30
-10
10
30
50
70
2000
2012
2000
2012
PepsiCo Inc. The Coca-Cola Company
Inventory Turns
Ca
sh
-To
-Ca
sh
Cy
cle
Best Scenario
PEP8.3, 30
KO5.4, 48
Average (Inventory Turns, Cash-To-Cash Cycle)
Supply Chain Insights LLC Copyright © 2013, p. 55
Inventory Turns vs. Operating Margin(2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
0.10 0.20 0.30 0.404
5
6
7
8
9
2000 2012
2000
2012
PepsiCo Inc. The Coca-Cola Company
Operating Margin
Inv
en
tory
Tu
rns
Best Scenario
PEP0.17, 8.3
KO0.27, 5.4
Average (Operating Margin, Inventory Turns)
Supply Chain Insights LLC Copyright © 2013, p. 56
Inventory Turns vs. Revenue per Employee (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012
0 100 200 300 400 5004
5
6
7
8
9
10
2002
2012
20022012
PepsiCo Inc. The Coca-Cola Company
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
Best Scenario
PEP207, 8.2
KO351, 5.4
Average (Revenue per Employee, Inventory Turns)
Supply Chain Insights LLC Copyright © 2013, p. 57
Cash-to-Cash Cycle Components
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
PepsiCo Inc. 43 46 36
The Coca-Cola Company 63 N/A 38
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
PepsiCo Inc. 45 49 37
The Coca-Cola Company 70 N/A 39
Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
PepsiCo Inc. 46 51 33
The Coca-Cola Company 71 46 41
Company (2012) Days of Inventory Days of Payables Days of Receivables
PepsiCo Inc. 42 52 34
The Coca-Cola Company 63 35 36
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Supply Chain Insights LLC Copyright © 2013, p. 58
Corporate Summary
Supply Chain Insights LLC Copyright © 2013, p. 59
Cash-to-Cash Cycle vs Inventory Turns (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
4 5 6 7 8 90
10
20
30
40
50
2000
2012
2000
2012
General Mills, Inc. Kellogg Company
Inventory Turns
Ca
sh
-to
-Ca
sh
Cy
cle
Best Scenario
GIS6.2, 37.5
K7.4, 26.5
Average (Inventory Turns, Cash-to-Cash Cycle)
Supply Chain Insights LLC Copyright © 2013, p. 60
Inventory Turns vs. Operating Margin (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
0.10 0.15 0.20 0.254
5
6
7
8
9
2000
2012
2000
2012
General Mills, Inc. Kellogg Company
Operating Margin
Inv
en
tory
Tu
rns
Best Scenario
GIS0.18, 6.2
K0.16, 7.4
Average (Operating Margin, Inventory Turns)
Supply Chain Insights LLC Copyright © 2013, p. 61
Inventory Turns vs. Revenue per Employee (2002-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012
300 350 400 450 5004
5
6
7
8
9
2002
2012
2003
2012
General Mills, Inc. Kellogg Company
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
Best Scenario
GIS424, 6.6
K398, 7.4
Average (Revenue per Employee, Operating Margin)
Cash-to-Cash Cycle Components
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
General Mills, Inc. 71 85 40
Kellogg Company 49 48 32
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
General Mills, Inc. 54 47 31
Kellogg Company 49 56 28
General Mills, Inc.Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
General Mills, Inc. 57 36 27
Kellogg Company 50 56 31
Company (2012) Days of Inventory Days of Payables Days of Receivables
General Mills, Inc. 51 39 29
Kellogg Company 57 58 37
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Supply Chain Insights LLC Copyright © 2013, p. 63
• General Mills has outperformed Kellogg. PepsiCo has outperformed Coke.
• With rising commodity volatility, the focus on balanced portfolio metrics is critical.
Food and Beverage
Pharmaceuticals
Supply Chain Insights LLC Copyright © 2013, p. 65
Corporate Summary
Supply Chain Insights LLC Copyright © 2013, p. 66
Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
0 1 2 3 4 5
-50
0
50
100
150
200
250
300
350
2001
2012
2000
2012
Bristol-Myers Squibb Co. Merck & Co., Inc.
Inventory Turns
Ca
sh
-to
-Ca
sh
Cy
cle
Best Scenario
MRK2.4, 175
Average (Inventory Turns, Cash-to-Cash Cycle)
BMY3.2, 57
Supply Chain Insights LLC Copyright © 2013, p. 67
Inventory Turns vs. Operating Margin (2000-2012)
0.0 0.1 0.2 0.3 0.4 0.5 0.60
1
2
3
4
5
6
7
82000
2012 2000
2012
Bristol-Myers Squibb Co. Merck & Co., Inc.
Operating Margin
Inv
en
tory
Tu
rns
BMY0.22, 3.2 MRK
0.31, 2.8
Best Scenario
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Average (Operating Margin, Inventory Turns)
Supply Chain Insights LLC Copyright © 2013, p. 68
Inventory Turns vs. Revenue per Employee (2002-2012)
200 300 400 500 600 700 8000
1
2
3
4
5
2002
2012
2002
2012
Bristol-Myers Squibb Co. Merck & Co., Inc.
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
Best Scenario
BMY526, 3.3
MRK412, 2.5
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012
Average (Revenue per Employee, Inventory Turns)
Cash-to-Cash Cycle Components
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
Bristol-Myers Squibb Co. 109 110 72
Merck & Co., Inc. 222 N/A 74
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
Bristol-Myers Squibb Co. 136 105 69
Merck & Co., Inc. 119 33 53
General Mills, Inc.Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
Bristol-Myers Squibb Co. 99 133 45
Merck & Co., Inc. 179 55 68
Company (2012) Days of Inventory Days of Payables Days of Receivables
Bristol-Myers Squibb Co. 131 174 35
Merck & Co., Inc. 145 39 62
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Supply Chain Insights LLC Copyright © 2013, p. 70
Healthcare Value Chain Financial Metrics
Supply Chain Insights LLC Copyright © 2013, p. 71
• Pharmaceutical companies lack supply chain muscle.
• The industry lacks balance and resiliency.
Pharmaceutical Companies
Automotive Suppliers
Supply Chain Insights LLC Copyright © 2013, p. 73
Corporate Summary
Supply Chain Insights LLC Copyright © 2013, p. 74
Cash-to-Cash Cycle vs. Inventory Turns(2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
0 5 10 15 20 25 300
25
50
75
100
2000
2012
2000
2012
Danaher Corporation Johnson Controls, Inc.
Inventory Turns
Ca
sh
-to
-Ca
sh
Cy
cle
Best Scenario
DHR5.4, 73.1
Average (Inventory Turns, Cash-to-Cash Cycle)
JCI20.1, 19.5
Supply Chain Insights LLC Copyright © 2013, p. 75
Inventory Turns vs. Operating Margin(2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
-0.05 0.00 0.05 0.10 0.15 0.200
5
10
15
20
25
30
2000
2012
2000 2012
Danaher Corporation Johnson Controls, Inc.
Operating Margin
Inv
en
tory
Tu
rns
Best Scenario
DHR0.15, 5.4
JCI0.04, 20.1
Average (Operating Margin, Inventory Turns)
Supply Chain Insights LLC Copyright © 2013, p. 76
Inventory Turns vs. Revenue per Employee (2002-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012
150 200 250 3000
5
10
15
20
25
30
2002
2012
2002 2012
Danaher Corporation Johnson Controls, Inc.
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
DHR224, 5.4
JCI234, 18.9
Average (Revenue per Employee, Inventory Turns)
Best Scenario
Cash-to-Cash Cycle Components
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
Danaher Corporation 65 45 61
Johnson Controls, Inc. 15 60 55
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
Danaher Corporation 68 63 65
Johnson Controls, Inc. 19 60 64
Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
Danaher Corporation 70 66 63
Johnson Controls, Inc. 23 64 65
Company (2012) Days of Inventory Days of Payables Days of Receivables
Danaher Corporation 75 64 65
Johnson Controls, Inc. 23 62 64
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Supply Chain Insights LLC Copyright © 2013, p. 78
• The automotive supplier has more resiliency than pharmaceutical or chemical companies, but is going backwards, not forwards in driving improvement in results.
Automotive Industry
Consumer Electronics
Supply Chain Insights LLC Copyright © 2013, p. 80
Corporate Summary
Supply Chain Insights LLC Copyright © 2013, p. 81
Cash-to-Cash Cycle vs. Inventory Turns(2000-2012)
Supply Chain Insights LLC Copyright © 2013, p. 82
Inventory Turns vs. Operating Margin(2000-2012)
Supply Chain Insights LLC Copyright © 2013, p. 83
Inventory Turns vs. Revenue per Employee (2002-2012)
Supply Chain Insights LLC Copyright © 2013, p. 84
Cash-to-Cash Cycle Components
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
LG Electronics 62 61 49
Samsung Electronics Co., Ltd. 48 47 38
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
LG Electronics 62 41 37
Samsung Electronics Co., Ltd. 46 30 38
General Mills, Inc.Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
LG Electronics 47 44 45
Samsung Electronics Co., Ltd. 48 30 44
Company (2012) Days of Inventory Days of Payables Days of Receivables
LG Electronics 47 52 50
Samsung Electronics Co., Ltd. 59 29 46
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Supply Chain Insights LLC Copyright © 2013, p. 85
• Samsung has outperformed LG.• Demand and price volatility has impacted
strength, balance and resiliency of performance.
Consumer Electronics
Packaging
Supply Chain Insights LLC Copyright © 2013, p. 87
Corporate Summary
Supply Chain Insights LLC Copyright © 2013, p. 88
Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
3 5 7 9 110
20
40
60
80
100
2000
2012
2000
2012
Owens-Illinois Inc. Sonoco Products Company
Inventory Turns
Ca
sh
-to
-Ca
sh
Cy
cle
Best Scenario
OI5.2, 67.9
SON9.2, 42.6
Average (Inventory Turns, Cash-to-Cash Cycle)
Supply Chain Insights LLC Copyright © 2013, p. 89
Inventory Turns vs. Operating Margin (2000-2012)
Supply Chain Insights LLC Copyright © 2013, p. 90
Inventory Turns vs. Revenue per Employee (2002-2012)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012
100 150 200 250 300 3503
5
7
9
11
2002
2012
2002
2012
Owens-Illinois Inc. Sonoco Products Company
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
Best Scenario
OI258, 5.3
SON210, 9.5
Average (Revenue per Employee, Inventory Turns)
Cash-to-Cash Cycle Components
Company (2000-2003) Days of Inventory Days of Payables Days of Receivables
Owens-Illinois Inc. 79 45 49
Sonoco Products Company 44 40 43
Company (2004-2007) Days of Inventory Days of Payables Days of Receivables
Owens-Illinois Inc. 70 60 55
Sonoco Products Company 40 41 44
General Mills, Inc.Company (2008-2011) Days of Inventory Days of Payables Days of Receivables
Owens-Illinois Inc. 63 58 55
Sonoco Products Company 37 44 43
Company (2012) Days of Inventory Days of Payables Days of Receivables
Owens-Illinois Inc. 74 67 50
Sonoco Products Company 35 40 47
Source: Supply Chain Insights LLC, Corporate Annual Reports 2000-2012
Supply Chain Insights LLC Copyright © 2013, p. 92
• Sonoco Products has outperformed Owens Illinois in strength, resiliency and balance.
• The more steps back that a company is in the supply chain, the greater the importance of supply chain principles.
Packaging
Supply Chain Insights LLC Copyright © 2013, p. 93
• Nine out of ten industries are stuck in their ability to power The Effective Frontier. The potential and pattern of each industry is different.
• It is a trade-off of strength, balance and resiliency.• The larger the company, and the more steps back in the
supply chain, the more important the principles of supply chain management.
• For leaders, progress is made in small increments based on strategy.
Summary