Today, was a day of firsts. My first book is edited. Today, the book Bricks Matter went to the printers. We have completed the editing of the first press run of Bricks Matter. Oh my, what a job! With the help of my asssitant, Jill, we have now read 411 pages and checked 72 graphics over 25 times. The book is scheduled to publish the beginning of December. <Let me know if you want a signed copy for the holiday season.> Our first Supply Chain Insights webinar is completed. Over 150 people signed-up for the webinar. We were pleased with the strong showing. The topic was Analyzing Twenty Years of Supply Chain Financial Data. I started this research project as part of the effort to write the book, and I have found that it is far more complex and interesting than I expected. I expect that the completion of this analysis will actually culminate in the writing of a second book, because supply chains are complex systems with increasing complexity that I think need more in-depth analysis. So far, I am nine months into the analysis, and I can see early patterns, but there is much more to learn. We presented data on process industries today. Next month, we will do discrete. The high level summary of the presentation today is:
- Consumer Packaged Goods Companies have Stronger Supply Chains than Other Process Industries (e.g., CPG when compared to Food and Beverage, Chemical or Pharmaceutical manufacturers show greater year-over year improvement.) Why? The supply chains were more resilient through the economic recovery of the Great Recession and they showed less gyration in year-over-year results. The audience could only pick a supply chain winner in the area of consumer packaged goods. While they crowned P&G the winner of the global CPG companies of Colgate, Kimberly Clark, Kraft, P&G, and Unilever, they could not determine the leader for the chemical (BASF, DuPont or Dow Chemical) sector or global pharmaceutical companies (Abbott, Merck and Pfizer).
- The Companies with the Best Scores on Gross Margin were Less Reslient Through the Economic Downturn of 2007-2009. These companies tend to "Sweat Assets" and throw their supply chains out of balance. In our analysis of five process sectors, only Colgate has been able to remain resilient with best-in-class gross margin (no substantial change in inventory or cash-to-cash cycles).
- Inventory Everywhere. Only high-tech and electronics companies have made TRUE progress on managing inventory (improved inventory turns). For the rest, progress on cash-to-cash cycles has been largely driven by squeezing the procurement relationship and improving the Days of Payables Outstanding (DPO). We have rewarded supply chain leaders in the last decade for pushing costs back in the value chain. When DPO is squeezed too hard, there is an adverse effect on Gross Margin. With the rise of Corporate Social Responsibility (CSR), I predict that this will be less prevalent.
- Flat Growth. The last decade was a race for global expansion and new product innovation. With flattening growth, and declining margins, supply chain excellence will matter more than ever. I think that the next decade will see the rise of the "T-shaped Manager" to lead horizontal end-to-end processes, and that superiority in supply chain leadership will transfigure relationships to drive new business models and allow companies to improve the Supply Chain Effective Frontier. Over the past decade, we have seen that the fastest progress in supply chain management happens when margins are tight, product cycles are short, and metrics are aligned across the organization to balance the supply chain holistically (growth, profits, working capital, customer service, and forecast accuracy) as a complex system.
This analysis is hard work, but it is fun. And it is rewarding. After getting the supply chain ratios, we are mining the data and completing the analysis at the intersection of supply chain ratios for growth, profitability, cycles and business complexity; we are just beginning the work. It will take us many years to complete. Over the course of the next year, it is our goal to tie this work to the quantitative surveys that we are completing so that everyone can understand which supply chain practices drive the largest value for each industry. (All survey data is held confidential and reported in aggregate.) You can help by submitting a request for us to do a custom analysis for you. Just submit the request via the SCI Community, and @indexgirl will deliver your own personal cuts of the data. We will get to learn from you as we interpret the data together. After doing this day-after-day for many companies over the year, we believe that we will see patterns emerge through the guided data analysis that we would not see otherwise. We will be doing monthly webinars for supply chain leaders over the course of the next year. The slide deck from the webinar is posted on SlideShare, and the full webinar is available (with the slide deck) at the SCI Community site here. And you can view the webinar at our On-Demand Webinars page at Supply Chain Insights. Please continue the discussion that we started today there. We are committed to helping supply chain leaders through open research.