The Top 25 Supply Chains of 2008

[David Blanchard]

Every year at this time I pay particularly close attention to two lists that have particular relevance to me: the Major League All-Star Team, which I’ve voted on every year for several decades now, and the AMR Research (http://www.amrresearch.com)list of the top 25 supply chains, which I voted on this year for the first time. The one thing both lists have in common is that nobody will ever agree with all of the choices, as these sorts of lists tend to be based at least as much on reputation as they do current accomplishments. For instance, is Jason Varitek of the Red Sox really the best catcher in the American League, as current balloting would suggest, or is he merely popular because the Red Sox won the World Series last year and their fans have proven remarkably adept at stuffing the ballot box, a skill that apparently isn’t taught here in Cleveland schools or else Victor Martinez would clearly be the leading vote-getter.

So it is with supply chain “best of” lists. The top two finishers in 2008, just as in 2007, were Apple and Nokia (the companies merely switching places this year). Apple, however, was not the leading vote-getter (that would be Toyota), nor even the consensus choice among AMR’s staff (that would be Procter & Gamble. Neither Apple nor Nokia were the best in return-on-asset (that would be Texas Instruments). What did the trick for Apple was its inventory turns performance (cost of goods sold / year-end inventory), as well as revenue growth (24.3%), which both were best among the Top 25.

The real question, though, is how much Apple’s performance can be attributed to its supply chain. What’s the “supply chain,” for instance, of an iTune? Apple sells more than 1 billion songs per year off iTunes, with no perceptible supply chain to speak of, at least in terms of a physical product changing hands. That’s one of the reasons why I (and actually, the majority of voters) opted to go with Toyota as having the best traditional supply chain.

For the first time, AMR is including what it calls “entertainment companies” in the mix, with Walt Disney joining the Top 25. Here, too, there’s a distinct blurring of what exactly constitutes a supply chain; clearly Disney manufactures toys, apparel, books and other physical products, but its revenues are also derived from its ownership of the ABC TV network and other media properties. What’s the supply chain of managing Barbara Walters’ hair? Hard to say. In any event, Disney debuts at # 17 this year.

After missing the list completely in 2007 (because its financials were in reinstatement), Dell vaulted up to # 3, which some would explain as the Cal Ripken effect, i.e., they were so good for so long that people just automatically vote them in year after year. Dell, however, really only could boast of its high inventory turns, as neither the voters nor the AMR panel voted them particularly high.

The company experiencing the most precipitous fall was Motorola, which placed at # 12 in 2007, but fell off the list completely in 2008.

Here's the full list of the Top 25 Supply Chains of 2008 (in reverse order):

25. Publix Super Markets
24. Royal Ahold
23. Johnson Controls
22. Lockheed Martin
21. Texas Instruments
20. Schlumberger
19. Johnson & Johnson
18. Hewlett-Packard
17. Walt Disney
16. SonyEricsson
15. Nike
14. Best Buy
13. Coca-Cola
12. Tesco
11. PepsiCo
10. Anheuser-Busch
9. Samsung Electronics
8. Cisco Systems
7. Toyota Motor
6. Wal-Mart Stores
5. IBM
4. Procter & Gamble
3. Dell
2. Nokia
1. Apple

If you want to see last year’s Top 25, click here (http://forums.industryweek.com/showthread.php?t=1163). And if you want to vote for this year’s MLB All-Star Team, click here (http://www.mlb.com).

[ChrisSciacca]

While I agree it's hard to compare services vs. traditional supply chains, they have more similarities then you might think. The deal with inventory, fulfillment, logistics, procurement, it's just virtual or not tangible in many cases. Actually IW editor Patricia Panchak wrote an article on it back in 2005 here. (http://www.industryweek.com/ReadArticle.aspx?ArticleID=10061)

I agree with you 1000% about Dell. For sure their rep in the late 90s carried them into the top 5 this year. I don't understand Apple being #1. I was in NY weeks ago and the iPhone was sold out everywhere. That shouldn't happen with a proper demand forecasting tool. And you could make a case for supply chain security as well with iPhone's being used in parts of Africa. Not to mention a pending lawsuit they are dealing with regarding laptop batteries.

It might be interesting to see the bottom 25 supply chains. Companies with supply chains that are just so backwards it makes you laugh. Could IW sponsor this?

[Milo3]

"The real question, though, is how much Apple’s performance can be attributed to its supply chain. What’s the “supply chain,” for instance, of an iTune? Apple sells more than 1 billion songs per year off iTunes, with no perceptible supply chain to speak of, at least in terms of a physical product changing hands. "
is a better achievement than having a complex one operating beyond its capability because of heroics.

At the end of the day all of these "enterprises" are converting something into cash by some "means," and Apple's "means" sure looks pretty effective.

Designing a simple system is certainly worthy of merit.

I was taught that the difference between leadership and management is "Anticipation." Hey, anybody can 'cope' with whats handed to them.
Anticipating (IE building an extremely lean network of "providers") is leadership.

Apple stays. As a Clevelander, you're just wedded to movin' iron.

RE: DELL--if inventory turns are the measure of supply chain efficacy, then they ain't Cal Ripken. They earned it fair and square. If Inventory turns are NOT the measure of Supply chain performance, then, please, Pray tell what is?

Either the numbers speak or they don't.
milo3

[David Blanchard]

At the end of the day all of these "enterprises" are converting something into cash by some "means," and Apple's "means" sure looks pretty effective.

No question about that; my point wasn't about effectiveness, but rather about the nature of Apple's iTunes supply chain. If AMR (and remember, the M stands for "manufacturing") is going to honor non-traditional supply chains, then why not include, say, Amazon's supply chain? Or why not Google's supply chain? They sure deliver a lot of "products" (i.e., search results), and they make a lot of money doing it.

As a Clevelander, you're just wedded to movin' iron.

Heh heh, I think there's a joke in there somewhere. Anyways, I just live in Cleveland; I'm actually from Illinois (where they also move a lot of iron, just different kinds).

RE: DELL--if inventory turns are the measure of supply chain efficacy, then they ain't Cal Ripken. They earned it fair and square. If Inventory turns are NOT the measure of Supply chain performance, then, please, Pray tell what is?

Ripken earned his Hall of Fame status fair and square, too, but looking purely at his stats every year, it wasn't always obvious as to why the voters thought he should automatically be the starting All-Star shortstop / third baseman. Same deal with Dell. If the thinking is that this is an annual award, based on performance from the previous year, then I would think voters might have remembered a story like this from the Wall Street Journal late last summer [click here (http://online.wsj.com/article/SB118774026844404667.html?mod=technology_main_what s_news) to read full article, if you're a WSJ subscriber]:

"Persistent delays in laptop shipments caused by paint problems and supply constraints have put a crimp in the company's turnaround efforts. Since late July, it has delayed shipments of some colorful models of its latest notebook computers, the XPS M1330 and its new Inspiron PCs. This latest incident -- hitting right in the crucial back-to-school selling season -- marks a significant setback in its push to rebuild its brand and business."

Hence, my reference to Ripken, who in most people's eyes in the 1980s and '90s was the shortstop's shortstop, just as Dell represents the supply chain's supply chain, apparently even in years when it had more than its share of errors.

[Stephen]

It seems that answering this means first defining what characterizes a “top” supply chain. What is its basic purpose? I would suggest it is to consistently create customer and corporate value, turning out what the customer wants even as this continues to change over time. Top supply chains, therefore, should be able to dampen the disruption that naturally occurs when sudden change strikes. In essence, this means thriving in today’s environment—sustaining profitability, customer satisfaction, and loyalty during times of uncertainty, change, and even crisis.

Which firms are able to do this? My analysis indicates that, based on this definition, a number of the firms listed (like Toyota and Wal-Mart) deserve their high rankings, some are missing, and others I would question...

[JimWisc]

I think one of these Top 25 Supply Chains ought to lend a hand to the food industry. The government remains unable to figure out what food product is causing the mass salmonella outbreak, or where that food product came from. Were there some sort of good traceability mechanism in place, this sort of clumsy search would be a thing of the past. At the very least, it wouldn't be dragging on like this one is.

First it was tomatoes, then it was something else (I forget what), and now it might be peppers. I would love to be watching this investigative process.

[David Blanchard]

About a year or so ago, Kodak announced it was working on an edible RFID tag that, when ingested, could provide data on what somebody had eaten. Click here for the original announcement (http://technology.newscientist.com/article/dn11162).

Extrapolating from that idea, since the RFID folks are already working on tagging all animals and meat products, maybe someday in the not-too-distant future, all food products, including fresh produce, will include an edible tag so that, even after the tainted food is eaten, you can go into the hospital and, while they're pumping out your stomach, they'll be able to identify exactly where the bad food came from. It'd probably involve a combination of RFID and nanotechnology when it comes to individually tagging something like peas or beans, and it'd probably be a while off before it'd be affordable to tag every grain of rice in a box of Uncle Ben's, but give 'em time.