One of the core beliefs backing the new Supply Chain Index is that companies face wildly different operating environments and should be compared only against peers in similar situations. Safeway Inc.'s supply chain is so structurally and strategically different from American Apparel Inc that any comparison is almost entirely meaningless. Of course, there are lessons to be learned from one industry and implemented into another, but it is rarely as simple as copy-and-paste. For that reason, we like to conduct our Supply Chain Index analysis along strict industry lines.
Every once in a while though, we branch out and compare different industries. Usually, this comparison is based upon the idea of a value chain or value network. Industries that cooperate and collaborate to bring products to consumers may not be apples-to-apples comparable, but it can be insightful to gain a longer value chain perspective stretching across different industries. The table below illustrates some preliminary work we have conducted on the consumer value network encompassing retail, consumer packaged goods, food & beverage and chemical companies.
The three metrics: balance, strength and resiliency are objective measures based upon financial performance. The best companies or industries will have high values for balance and strength, but low values for resiliency. Resiliency, the calculation of tightness of the pattern at the intersection of inventory turns and operating margin, is best when the value is low and the pattern is tight.
In the table above, based upon a rather selective number of companies you can see that the food & beverage industry has the best performance on balance and strength, while consumer packaged goods leads the way on resiliency. Fluctuating commodity costs make resiliency a different task in the food & beverage world.
The chemical industry turns in negative performance on both balance and strength, meaning the industry as a whole has lost ground since 2006. The Great Recession created significant challenges for chemical manufacturers and that is reflected in their results.
What else do you see in the results? Do the results for this value chain or value network surprise you? We'll be profiling these four industries in greater detail in a June research report. In the meantime, you can check out our latest Index methodology report here and take a listen to a podcast over here.