From SCDigest's On-Target E-Magazine
Aug. 17, 2011
Supply Chain News: Gartner Names Top 10 Industrial Supply Chains
Emerson Electric Comes Out on Top, but Industrial Companies Score Fairly Low Overall; Do Industry Dynamics Mean its Supply Chains aren't as Good?
SCDigest Editorial Staff
AMR Research began announcing a Top 25 supply chains list a number of years ago, a practice continued and expanded under Gartner after the company acquired the Boston-based AMR is early 2010.
That has included developing extensions to the core top 25 list by announcing top supply chains in specific sectors, such as consumer goods.
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The reason industrial companies may rank low overall may just have to do with the nature of this sector, which could for example require lots of assets and space parts, which would impact their ROA and inventory turns numbers.
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What Do You Say?
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Last week, Gartner extended the concept further with its announcement of what it sees as the Top 10 industrial company supply chains. Though not providing a clear definition of what "industrial" means, the names on this year's list are characterized by what are generally viewed as discrete industrial products companies, including several conglomerates that operate across multiple industries.
The companies were rated based on a series of financial metrics (meaning private companies were not considered for the list). Those metrics are return on assets, inventory turns, and revenue growth, based on 2010 fiscal year results. Also factored in the formula that leads to a composite score that determines the final rankings is "peer opinion," which presumably includes some subjective ratings from Gartner analysts, though this is not really explained in the report.
The final composite score is thus determined by this formula:
Composite Score = (peer opinion * 25%) + (Gartner opinion * 25%) + (ROA * 25%) + (inventory turns * 15%) + (revenue growth * 10%)
Emerson Comes Out on Top
Based on this analysis, St. Louis-based Emerson, a $21 billion maker of a wide variety of electrical and power equipment, and generally very well-respected as a company overall, came out on top. Emerson was followed by Hyundai Heavy Industries (a ship builder), Caterpillar, and John Deere, as shown in the table below.
Interestingly, as seen in the table, these top industrial supply chains were rated relatively low in terms of the overall top rankings. For example, top ranked Emerson came out only number 34 across all companies, well out of the top 25.
Source: Gartner
But this can simply be a reflection of industry dynamics, notes SCDigest editor Dan Gilmore, who worked at analyst firm META Group in the late 1990s (META itself was later acquired by Gartner).
"I applaud Gartner for both calling out industrial supply chains, which tend to not get much exposure, and also for using a mostly objective methodology in determining the top performers," Gilmore said."But the reason industrial companies may rank low overall may just have to do with the nature of this sector, which could for example require lots of assets and space parts, which would impact their ROA and inventory turns numbers. A sector's revenue growth also comes in to play. Does this mean their supply chains are not as good as say a company in consumer packaged goods? Not necessarily."
(Manufacturing article continued below)
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