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August 13, 2015 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Inventory Performance 2015 Part 2 bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet Cartoon Caption Contest Continues bullet Trivia      bullet Feedback
bullet Expert Insights bullet On Demand Videocasts

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Supply Chain Graphic of the Week
Working Capital Performance Over Time

China Risks Global Turmoil with Yuan Devaluation
New Technology Could Send Natural Gas Costs for Trucks Much Lower
Most Companies Still Have Only Backward Looking Analytics
Infor Opens Wallet Up Big Time for Supply Chain Acquisition


August 4, 2015 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!

Holste's Blog: Understanding Multi-Channel Order Processing Challenges


Download Complimentary White Paper Now To Learn the Ten Steps to Finding the Right Mobile Device


Weekly On-Target Newsletter:
August 12, 2015 Edition

New Cartoon, Understanding DOM, GT Nexus Sold, Rail Q2 Results, Lean and more

A Business-Driven Approach to Supply Chain Analytics
by Ashwin Patil
Director, Analytics and Information Management
Deloitte Consulting LLP
by Lane Warshaw
Senior Manager, Information Management
Deloitte Consulting LLP

Why Supply Chain Visibility Tools are a Good Investment

by Stephanie Miles
Senior Vice President, Commercial Services
Amber Road


New Report from SCDigest!

Conquering the Omnichannel Challenge


In the 1990s, then Gartner analyst Tom Ryan proposed the term "product marshalling and handling systems" be used to describe what category of supply chain software?

Answer Found at the
Bottom of the Page

Inventory Performance 2015 Part 2

I am going to let the pictures do most of the talking this week.

Relative to inventory management that is. I am back again this week with more analysis of the working capital data compiled each year by REL, a Hackett Group company.

To repeat from last time, our biggest value-add in this process is taking the data REL makes available to SCDigest to recategorize the companies into more narrow sectors, to make comparisons better.  So for example, we take the three retail categories in the REL data and create more than a dozen in total, grouping retailers into more specific categories.

While that does improve the accuracy, if you will, with ever growing consolidation in every industry, it also really limits the number of firms in many categories . For example, we were down to two office products retailers for this year's data,  based on 2014 results, after Office Depot acquired OfficeMax. That will be down to one company next year, after Staples takes over Office Depot.

The good news on the REL data is that this year, they provide info that can be used to calculate inventory turns. That wasn't possible when the key metric they use for inventory - Days Inventory Outstanding or DIO - was calculated using revenue in the equation:

DIO =End of Year Inventory Level/[total revenue/365]

This year, it was also calculated using Cost of Goods sold, or COGS. This REL said was to limit the effect that widely different gross margins across industries/companies had on DIO levels - a point SCDigest readers have made for years after our analysis of the REl numbers.

But using this formula:

DIO =End of Year Inventory Level/[COGS/365]

you take out the impact of margins - and instead calculate how many days worth of COGS a company has in inventory. That the allows SCDigest to calculate inventory turns using this simple formula:

Turns = 1/(DIO/365)

Below is a massive chart of the 60+ sectors we created, sorted by highest to lowest inventory turns in fiscal year 2014 from most to least on average in each sector. It also shows 2013 turns, the percent change from 2013 to 2014 in the sector, how many companies were in each sector, and just for jollies 2014 DIO to compare to turns.

Turns range from over 70 in the restaurant sector to a paltry 1.3 in the spirits industry, as can be seen:



Source: SCDigest based on Data from REL

We also created another chart that shows this data plus the companies with the highest and the lowest turns in 2014 in each sector - you will find that table here: 2014 Turns by Sector with Companies with Highest and Lowest Turns

Some sectors are more homogenous than others. Consumer packaged goods, food manufacturers, and department stores, for example, have very comparable companies. But despite our best effort, some categories are more varied, such as the machinery category. It includes companies ranging from Lincoln Electric (welders) to Timken (bearings) to truck engines (Cummins).

Still, it is interesting to consider much of this data. Why can't consumer packaged good companies, for example, muster up better than 5.9 turns per year, a number that hasn't really changed for years?

Toy maker Hasbro had slightly better turns than rival Mattel (6.0 versus 5.4), but if Mattel had equaled Hasbro's level, it would have generated an extra $58 milllion in cash flow in 2014.

In the detail on food manufacturers. why does JM Smucker have just 3.8 turns per year, while Kraft Foods had 7.5?

Anyways, take a look. We will do a final bit more analysis on this data in OnTarget next week.

Any reaction or other analysis to this inventory data? Let us know your thoughts at the Feedback button below.


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More emails this week on our story on the small retail chain Peltz Shoes publicly abandoning its item-level RFID program, some through our partnership with the good folks over at RetailWire. You will find a selection below.

Feedback on Peltz Shoes RFID Failure:


The Peltz experience clearly shows the need to use a knowledgeable integrator and to do a lot of work up front to understand all of the possible scenarios and address each.

Peltz encountered issues, most glaringly the printer issuing un-encoded labels, that should have been addressed in the solution design. Perhaps they should never have done RFID at all, but it's more likely a properly designed and deployed system would have succeeded.

The lesson learned is that RFID is not yet simple enough to deploy to engage without a lot of preliminary work.

Mike Nichols
NA RFID Leader


I second Nikki Baird's observation regarding the age of the RFID technology Peltz is apparently using. Based on this article and 2010 articles about the Peltz solution, it sounds like they are using 2009 technology. Much has changed. Tag performance and field reliability is substantially better now that it was in 2009, and reader options have evolved as well.

As Tom Redd and others pointed out, it sounds as if the system was installed and left to age without ongoing maintenance. I can't help but think that this is an execution issue rather than a technology issue.

Scot Stelter
Sr Director of Product Marketing,


Didn't we have the same discussion 20 years ago trying to get manufacturers to put anti-theft tags in the packaging? An idea not nearly as simple as it sounds, like whose tag? It remains to be seen if this chain's experience is unique or common, since retailers generally don't put press releases out about program failures! And we don't go to conferences and trade shows and visit booths announcing what doesn't work.

J. Kent Smith
VP, Business Development
Galleria RTS


It is amazing how hard it can be for a retailer to get its perpetual inventory to be right at store level. RFID or not, it's just addition and subtraction. Even more critical today with needing an accurate picture of availability to promise for online, and store inventory needing to be exposed to the web shopper who wants to click and collect.

Peter J. Charness
SVP America, Global CMO,
TXT Group



Q: In the 1990s, then Gartner analyst Tom Ryan proposed the term "product marshalling and handling systems" be used to describe what category of supply chain software?

A: Warehouse Management Systems - the proposed new name didn't stick.

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