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2014
If it seems like the Supply Chain Index work has been going on forever, that's because it has been. This is a brand new realm of research and we have had many stops and starts over the past two years as we aim to connect the worlds of supply chain and finance. Long time readers will remember the Supply Chain Index work that spanned last summer as we began to study the relationship between supply chain excellence and market capitalization. The goal was to create a simple equation connecting supply chain ratios as independent variables helping to explain stock market performance.

After a brief respite, we are back at it and have enlisted the assistance of Dr. George Runger of Arizona State University along with PhD student Bahar Azarnoush. I spent a bit of time speaking with Dr. Runger last week as he explained his background and summarized the newest work on the Supply Chain Index.
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Abby: Hi Dr. Runger, let's start with the basics. Tell us a bit about yourself.

Dr. Runger: Sure, I am a Professor in the School of Computing, Informatics and Decision Systems Engineering at Arizona State University. My research is on real-time monitoring and machine learning methods with a focus on large, complex data sets with applications. I hold degrees in industrial engineering and statistics. In addition to academic work, I was a senior engineer at IBM.

Abby: Great. Can you briefly summarize the work we are doing so that it is accessible to the general supply chain audience?

Dr. Runger: The first task is to understand how consistently a supply chain operates over time. A scatter plot of operating margins and inventory turns quarterly (or yearly) for some companies is quite compact, while for others it is not. Compactness indicates that the supply chain is more consistent or stable over time. In order to compare companies and industries, a measure of compactness is useful. Several measures were considered and evaluated.  The total of the distances between all pairs of points in the scatterplot of a company was selected as a simple, but effective measure. The following work is to compare this measure between companies, between industries, and over time to detect trends in the stability of the corresponding supply chains.

Abby: That's right. We're trying to understand the compactness of the pattern of inventory turns and operating margin. Many folks will be familiar with what we call orbit charts that look like the one below.
http://supplychainindex.com/wp-content/uploads/2014/02/Picture1.png
In this chart, we're looking at two companies, CVS & Walgreen, and their performance on inventory turns and operating margin over the past decade. As you'll see, the Walgreen pattern (orange) is much tighter than CVS which has jumped around a lot over the past decade. We have done a lot of manual pattern recognition, but are now moving to the next level and looking for a numerical way to measure and rank those patterns based upon tightness.

Abby: So, Dr. Runger, we've been looking at this together for just about a month now. What has surprised you the most in our work together?

Dr. Runger: After Supply Chain Insights described their thoughts on supply chain stability, and the related measures of compactness, there was a lot of interest on everyone’s part to calculate the measures, summarize the measures, and generate ideas for additional analyses.

Abby: Yes, this is definitely exploratory work. For every question we answer, we come up with what seems like five new avenues of discovery. Finally, what do you find most important to remember when doing new research projects?

Dr. Runger: Communications are always important. Questions and particularly results need to be communicated clearly. As groups work together, they learn the most important elements and results from an analysis, and that is already occurring, but this always involves good communications.

Abby: Awesome. I agree that communication is key and it can be especially challenging (and thus critical) when combining people with different backgrounds and skills sets. We're glad to be partnered with you and be able to use your expertise to continue our work on the Supply Chain Index.
Readers, what other questions do you have for Dr. Runger? I'll be sure to pass them along and keep you updated as our work continues on the Supply Chain Index.

Two years ago, I submitted a question to Lora Cecere's Supply Chain Shaman blog as I was in the middle of my graduate studies. That question turned into a blog post and then a correspondence, a part time internship and finally a full time job and career path. It's still incredible to look back at that journey that started as a question from me (a grad student in England) to Lora (an analyst in the U.S.). Throughout the past two years, I have repeatedly found great value in asking questions.

 

I currently work in an interesting space at the intersection of supply chain and finance. In most organizations, there is a wide disconnect between these two functions exacerbated by the fact that they speak different languages. This gives me an opportunity to do a lot of education. Sometimes I am speaking to financial professionals about what metrics matter for supply chain. Other times, I am educating supply chain leaders on the basics of financial metrics. As a result, I get a lot of questions. I love them!

 

Because I spend all day in this world, I have sometimes made the mistake of assuming others are equally fluent in the world of supply chain metrics. Questions from clients help me to adjust my message for their understanding level. If my job description is to help clients formulate supply chain strategy based in part on results of financial benchmarking, we have to nail the basics. If there's uncertainty around the components of the cash-to-cash cycle or why we want high inventory turns and low days of inventory, we need to address that before we can get to upper level strategy discussions.

 

I'm reminded of a Toastmaster's rule that you have to adjust your message based on your audience. This is not only true in a formal speech setting, but true in all of life. It's not about patronizing people or dumbing down your speech. It's simply about being a good communicator and having accessible language. Questions are a valuable guiding post along the way. If I'm not getting questions, I'm worried. Either people aren't engaged or aren't understanding the content well enough to have questions.

 

So today I would encourage you to ask a question. Sometimes it's asking for clarification on a project, sometimes it's asking for a better definition of an overused acronym, sometimes it's questioning an assumption that needs to be questioned. Keep the questions coming!

The Supply Chain Insights team spent last week huddled around a kitchen table in Baltimore, Maryland outlining the goals large and small for the year. The company is now 2 years old and one of the advantages of working for a young, small company is getting to participate in conversations that might take place solely within a marketing or strategy discussion within a larger organization. Seeing how all the pieces fit together into a single company has been a highly educational and exciting part of my time at the company.

 

A lot of our work this year is focused on refining who we are and what we offer to our clients. I thought I'd start that discussion with a brief outline of what Supply Chain Insights is and the key pieces, events and offerings.

 

*Supply Chain Insights is the name of the company founded in February of 2012 by Lora Cecere. The company website hosts current research reports and open surveys as well as information about training events and the Global Summit in September 2014. (www.supplychaininsights.com)

 

*Supply Chain Shaman is the personal website of Lora Cecere where she has written for over 4 years about the supply chain technology, insights from ongoing advisory work and more recently qualitative and financial research completed through Supply Chain Insights. (www.supplychainshaman.com)

 

*This blog, Supply Chain Index, is written by me, Abby Mayer. It is focused primarily on exploring the connection between supply chain excellence and corporate financial performance. Of course, there is a lot of other stuff sprinkled in, everything from my experience as a young supply chain professional to interesting research we are conducting on talent, research scorecards, S&OP or anything else that strikes my fancy. (www.supplychainindex.com)

 

*Supply Chain Insights Global Summit is the event we put on each September to allow global supply chain leaders to meet and network in person. The theme of this year's event is Imagine and registration is now open for the 2 day event (September 10 & 11, 2014). (www.supplychaininsightsglobalsummit.com)

 

This is not an exhaustive list. We do training events, host a supply chain related Wiki and online Community, provide advisory services and custom research. I hope this gives you a better sense of what this blog does and how it fits into the larger Supply Chain Insights ecosystem.

 

In Supply Chain Index related news, we have paired up with a professor and student at Arizona State University (ASU) to help us with the mathematical analysis on the Index and I am excited to get preliminary results back later this week. I will keep you posted.