Gartner Announces Top 25 Supply Chains for 2017
Gartner was out in late May with its annual top 25 supply chains, continuing the practice initiated a number of years ago by the former AMR Research, which Gartner acquired in 2009.
Only three retailers made this list - number 3 Inditex (parent of Zara and other retail banners), no. 5 H&M, and Walmart at number 18 (assuming you don't count restaurant chains McDonald's and Starbucks as retailers).
Supply Chain Digest Says... |
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| As with the old adage, retailers can only have two of speed, cost and quality, RSR Research Says. |
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The list is calculated in what appears to be an objective fashion, but which really has quite a bit of subjectivity. Greatly simplifying, the factors and weighting used in determining the rankings are as follows:
• Financial Measures in 2016 (return on assets, revenue growth, inventory turns): 40%
• Ratings from Supply Chain Practitioners Recruited by Gartner: 25%
• Ratings from Gartner's own Analysts: 25%
• A Score for Corporate Social Responsibility (based on 3rd party ratings): 10%.
The methodology gives big advantages to certain companies, such as number 2 McDonald's and its 175 inventory turns in 2016, while disadvantaging sectors with low turns or growth, such as department stores and many specialty retailers.
Here is the full list for 2017. Apple and Procter & Gamble were placed in a special "Supply Chain Masters" category for the second straight year - sort of a supply chain hall of fame - and thus not on the main list:
The Gartner top 25 supply chains - it has many faults, but it is the best we've got.
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Will We Really See "Ultrafast" Fashion?
Interesting blog post recently from Paula Rosenblum of RSR Research on so-called "fast fashion" retailers - those able to turn concepts into products on shelves or on-line in a faction of the time it takes traditional apparel retailers - Zara being the most prominent example.
Rosenblum says that "There are even some signs that the fast-fashion market itself is getting saturated, with mutterings over the past year that privately held Forever 21 has been having trouble paying its bills, and some reductions in giant H&M's gross margin and operating income with a concurrent increase in inventory-to-sales ratios, even as it continues opening stores around the world."
She brought that subject up after receiving an email from trading giant Fung Global Retail and Technology, announcing the advent of "ultrafast fashion," - retailers are ostensibly able to produce merchandise in 2-4 weeks, compared to 5 weeks for Zara and [some products of] H&M.
Fung estimates traditional apparel retailers can produce merchandise in 6-9 months - though Rosenbum thinks that estimate is low. The last time RSR ran a benchmark on product development, the time to volume remained 12-18 months, adding that "Actual numbers from H&M's financial statements tell us that only a portion of their product is produced in a true fast-fashion manner."
"If a company can affordably and profitably produce merchandise that people actually want to buy in two-to-four weeks, we're in big trouble as an industry. It's the mother of all disruptors. But I'm not sure it's actually doable," Rosenblum writes.
Why? As with the old adage, retailers can only have two of speed, cost and quality. She believes that ultrafast fashion will face this trade-off - and likely find its costs are very high, assuming they want to produce a quality product quickly. With many operating on-line only, marketing will also be tricky - and likely expensive relative to sales, save a few which get lucky with social media.
But the retail world has changed forever, Rosenblum notes, with "Generation Z" soon entering prime spending years, and their consumer behavior is likely to be far different than the Millennials that preceded them.
"Look for talent in schools, look for technology solutions, and look for closer sources of supply. And most importantly, recognize that constant change is now a fact of life," Rosenblum concludes. "Slow and steady won't win the race, but savvy retailers will."
TJ Maxx Sourcing Practices Questioned
A recent article in the Boston Globe alleges that to keep its selection fresh and on price point, TJX Companies sources from "no-name factories" both domestically and abroad, and those factories have been scrutinized for sweatshop conditions and substantially underpaying workers.
The allegation isn't a new one for TJX. In December, the Department of Labor warned the company that it needs to do better at policing its manufacturers - especially considering many are engaged in subcontracting to factories that are unregulated and often rife with poor labor and safety practices.
TJX has since said its vendor code of conduct requires all vendors, both domestic and abroad, comply with US labor and wage laws.
In order to compete with fast fashion, TJX has had to make some on-trend items closer to home for quicker deliveries, and that's where the Labor Department said the problems exists. In Los Angeles, factories are allegedly producing goods for TJX at pay rates below minimum wage.
TJX has been outperforming most other apparel retailers of late. It sells products in an average of just 25 days - far below the average department store cycle.
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