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  - May 29, 2014 -  

Gartner Releases Top 25 Supply Chain List for 2014

 

Apple Comes in a Number 1 for Fourth Year in a Row, as Top 4 Remain the Same as 2014; Ford and Dell Out, Kimberly-Clark and Seagate In
 
     
     
  by SCDigest Editorial Staff  
     
 

At its recent supply chain executive conference in Scottsdale, AZ, analyst firm Gartner released its list of the top 25 supply chains for 2014, continuing the tradition of AMR, which Gartner acquired in 2010. It is the 10th such list.

SCDigest Says:
As always, the Gartner supply chain top 25 isn't perfect - but it's the best we have right now.

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For the fourth year in a row, Apple topped the rankings, while McDondald's, Amazon.com, and Unilever remained in spots 2-4, respectively. Procter & Gamble rounds out the top 5, replacing Intel, moving up from the number 6 spot in 2013

The rankings were very stable this year, as the top 5 indicates. Just two companies are new to the top 25 in 2014 storage system maker Seagate Technology and consumer packaged goods giant Kimberly-Clark. Dropping off the list were Ford and Dell, the latter because it went private (only public companies are eligible).

Many supply chain professionals see the list, but have no idea how it is actually constructed. As we explain below, the results are based on a combination of both objective and subjective inputs.

On the objective side, Gartner uses three pieces of financial data: Return on Assets (ROA), inventory turns, and revenue growth. ROA and revenue are based on three-year averages. The total weighting for the three financial areas are 25%, 15%, and 10% respectively, or 50% of the total score between them.

Of course, this approach does not really consider that different characteristics of various industry sectors, where metrics such as inventory turns and return on assets can vary dramatically.

Revenue growth, it could certainly be argued, is more dependent on secular trends and product portfolios rather than supply chain, but as always, the question is, what would be a better approach?

Apple, for example, clearly benefitted in the rankings from its three-year average annual revenue growth of more than 31%, as does McDonald's with its 153 inventory turns per year.

25% is then based on the opinion of Gartner's own analysts, and another 25% is based on "peer" opinions, coming from a survey of supply chain professionals. This year, 188 such peer responses were received, a bit above the total for 2013.

The top 25 list for 2014, along with how each company ranked in 2013, is shown below.

Gartner's Top 25 Supply Chains for 2014

 

2014 Rank Company

2013
Rank
1 Apple 1
2 McDonald's 2
3

Amazon

 3
4 Unilever 4
5 Procter & Gamble 6
6 Samsung 8
7 Cisco Systems 7
8 Intel 5
9 Colgate-Palmolive 10
10 Coca-Cola Co. 9
11 Inditex (Zara) 12
12 Nike 14
13 H&M 17
14 Walmart 13
15 Pepsico 16
16 Lenovo Group 20
17 Starbucks 15
18 3M 19
19 Qualcomm 24
20 Seagate Technology Not on List
21 Kimberly-Clark Not on List
22 Johnson & Johnson 25
23 Caterpillar 18
24 Cummins 23
25 Nestle 21


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Gartner analysts highlighted three key trends for supply chain leaders this year:

Understanding and Supporting the Fully Contextualized Customer

Gartner says that as it talked to supply chain leaders, "We heard them expand the demand-driven concept in terms of how they relate to their customers. It is now about understanding customers in a deeper way and blending seamlessly into their daily routines."

Gartner notes that over the past few years, there has been a lot of press on the insights to be gleaned from big data sourced from point of sale (POS) transactions, online searches, ordering activities and assets in service. It says that leading companies "go beyond just tracing correlations in operational data, however. They study the environments this activity occurs in to parse out the contextual reasons behind local behaviors that appear "quirky" when viewed from a distance."

 

A Convergence of Digital and Physical Supply Chains Delivering Total Customer Solutions

Gartner says that leading companies have moved past only selling discrete products or services to their customers and are now focused on delivering solutions.

For example, "In high tech, this might mean selling a coordinated collection of hardware, software and services to stand up a data center for a business customer. In consumer markets, this same company might sell a hardware device for near break-even, recognizing that the profit of the solution will come later through the metered delivery of software applications and content."

 

A number of leading industrial companies, for example, have instituted suggested order replenishment systems with their dealer networks, based on a superior ability of the manufacturer to forecast demand for their dealer. Some are going even further and are now acting as virtual consultants to their customers' planning organizations.

 

"They recognize that helping improve customers' internal capabilities is part of a total solution, making them more competitive suppliers," Gartner says.

Supply Chain as Trusted and Integrated Partner

As company CEOs focus on growth, supply chain leaders are becoming trusted and integrated partners to business groups.

"Their focus on profitable growth often leads to smarter, more conscious decision making, saving business groups from spiraling out of control in the drive to maximize revenue," Gartner adds. "Supply chain's influence over which products will be sold and what customer service levels will be supported is akin to the checks and balances built between the branches of a democratic government."

 

Gartner also says that "The most advanced companies on our ranking are not afraid to rethink the design of their global supply networks, if that is required, for success. In some cases, this has led to increased vertical integration where leaders are getting into their customers' and their suppliers' businesses in an attempt to dominate value chains, redrawing the lines of competition in the process."

 

As always, the Gartner supply chain top 25 isn't perfect - but it's the best we have right now, and always the spurce of interesting discussion and debate.

Any reaction to this year's top 25 list? Who should be on that isn't, or who is on that should be off? How if at all could the methodology be improved? Let us know your thoughts at the Feedback section below.


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