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May 23, 2019 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Understanding the Gartner Top 25 Supply Chains 2019
bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Distribution Digest/Green Supply Chain
bullet Cartoon Caption Contest Extended bullet Trivia      bullet Feedback
bullet New Supply Chain by Design and Expert Column bullet On Demand Videocasts



first thought


Supply Chain Graphic of the Week
US Truckload Rates Finally Slowing Down


Tariffs on Chinese Imports May Accelerate US Store Closings

Will China Reduce Rare Earth Metal Exports to US
Shoe Companies Says Tariffs will Hit Consumers Hard
Major Retailers at Risk from Higher Costs



April 10, 2019 Contest

See The Full Cartoon and Send in Your Entry Today!



Feature Story: Thoughts on WMS Trends from Gartner


pic GSC Feature Story:Highlights from Apple's 2018 Supplier Responsibility Report

Weekly On-Target Newsletter:
May 22, 2019 Edition

Last Chance Cartoon, WMS Trends, New Bar Code, Procurement Scandal, More

How Supply Chain Companies Can Achieve Decision-Centric Optimization

The Most Important Outcome of Implementing an Algorithm-Based Supply Chain Optimization Solution

Featuring Dan Gilmore, Editor along with along with Dr. Z. Caner Taskin - ICRON's Chief Technology Officer and a Professor in the Department of Industrial Engineering at Bogaziçi University.

Learn Python, PuLP, Jupyter Notebooks, and Network Design

by Dr. Michael Watson
Northwestern University

Dynamically Routing Your Fleet and For-Hire Capacity

by Mike Clark
EVP Logistics,
Chemical & Specialty Products
KAG Logistics

Cargo Threats Need Closer Attention

by Gary M. Barraco
Global Product Marketing
Amber Road



For a large prize, what was the top supply chain in AMR's 2007 ratings?

Answer Found at the
Bottom of the Page

Understanding the Gartner Top 25 Supply Chains 2019

What are the best supply chains in the world?

The reality is there is no way to determine that, absent an incredibly detailed study of leading candidates that would even then lead to potentially dubious results and certainly be obsolete by the time the research was finished. Or, we could look at the Gartner top 25 supply chain list.

I spent a couple of days at the Gartner Supply Chain Executive Conference a week ago in Phoenix (See Trip Report: Gartner 2019 Executive Conference) where the top 25 list is now unveiled each year at a "gala" dinner.


My advice: if you are really serious about this, arrange "briefings" with Gartner analysts touting what you are doing in supply chain in the same way that software vendors do.


Send us your
Feedback here

The former AMR Research brilliantly came up with the top 25 idea in 2004. Gartner then acquired AMR in 2010. Over the last few years, the concept has been extended, so that we now have a "Next 25," plus the top 25 healthcare, industrial, and consumer goods supply chains, etc.

So once again at the conference this year, I asked around a bit, and found - not surprisingly and as usual - that very few supply chain practitioners have any real idea how the list is determined. They only know if they are in or they are out, and that's about all that matters.

This year Colgate-Palmolive came out on top for the first time - sort of.

I put it that way because gain in 2019, Apple, Procter & Gamble, Amazon, McDonald's and now joining them Unilever were left off the formal top 25, as those five companies have been placed in a separate relatively new category called "supply chain masters," a sort of supply chain hall of fame. To get there, Gartner says a company needs to have attained top-five composite scores for at least seven out of the last 10 years.

In fact, it appears these five companies would have been the top five for 2019, meaning Colgate-Palmolive is really rated as sixth best supply chain.

Why does Gartner do this? It frankly may have to do with in effect getting more companies in the top 25 plus the new masters category combined - Gartner clients like that recognition, of course. It may also allow the top 25 list to appear a bit more dynamic.

As I have said before, I find the masters list idea a little goofy, but so be it.

With Amazon, Apple, P&G, McDonald's and Unilever withdrawn from the competition, the rest of the top 10 was (2) Inditex (Zara), (3) Nestle, (4) Pepsico, (5) Cisco, (6) Intel, (7) HP, (8) Johnson & Johnson, (9) Starbucks, and (10) Nike.

Just two new companies made the Supply Chain Top 25 this year versus 2010, that being Chinese ecommerce giant Alibaba and AkzoNobel (a pharma company). With Unilever being promoted to the masters list, just one other company fell out of the top 25 - Kimberly-Clark.

Below is a chart of this year's Top 25, also with where each company placed in the previous two years (NA means not in the top 25 that year).

So, you ask, how on earth is the top 25 determined?

Gartner starts with the Fortune 500 list of top US companies by revenue and the Forbes global 2000 list that basically does the same thing on a worldwide basis. It then eliminates a lot of those companies because they do not much operate what most of us would think of as a real physical supply chain - companies in banking, insurance, software, and many more.

What's more, the minimum revenue to be included in the final evaluation list was again an amazing $12 billion.

From that culled list, Gartner analyzes publicly available financial data, specifically looking at three metrics from 2018 financial reports:

Return on assets (ROA): Net income / total assets
Inventory turns:
Cost of goods sold / inventory levels
Revenue growth: Change in revenue from prior year

ROA and revenue growth use a three-year weighted average, meaning the most recent year gets the most weight and the two prior years somewhat less. Inventory turns, smartly, uses the prior year's quarterly average (reducing impact of end of year games). These three metrics together are given a full 40% of the total score weight (20% to ROA, 10% to turns, and 10% to revenue growth). Those percentage weightings are actually down 10 percentage points again this year, as I will explain in a moment.

Now keep in mind that this formula gives a tremendous advantage to some companies, such as Amazon given its huge revenue growth or McDonald's and its 175 or so inventory turns per year. It also penalizes companies like a Home Depot or a Lowes, for example, which are only going to have turns in the mid-single digits at best, because of their need to stock every item under the sun to meet customer service targets, many of which are very slow movers.

In general, this approach penalizes a company within a given sector that strategically decides on a higher service, lower turns strategy (even though we can all agree that inventory efficiency is a very important attribute of supply chain excellence). It also gives an advantage to companies that are aggressive acquirers in terms of the revenue growth factor.

Companies that have heavily outsourced production and distribution also have an inherent advantage. Why? Because they have chosen to shed assets, and that often drives their ROA metric higher. While outsourcing can be a very smart thing for many reasons, it does not inherently improve a supply chain. This metric also inherently discriminates against asset-intensive businesses, such as chemicals and automotive. That is in why we see only three such companies (Schneider Electric, BASF and BMW) in the top 25, generally towards the end of the list.

So, at this point, you must be a very large and public company to be considered in the analysis. Private companies do not have the public financial data needed for this part of formula and cannot make the list.

For fourth year now, a new corporate social responsibility factor was added, which now represents 10% of the total composite score. This factor, entered in the end as a number between 1 and 10, comes from a combination of publicly available 3rd party scores on this criteria (which you can trust as accurate or not) and if a company produces a sustainability report. Six of the top eight received a perfect 10 score on this measure, as did a number of other in the top 25. Gartner notes it has tweaked the CSR measurement since its introduction.

Another 25% of the final rankings come from so-called "peer opinion." For 2019, this consisted of about 162 (down from 184 last year) apparently very influential respondents who first select a group of 25 companies from the master list of about 300 that they believe are doing the best job of being a "demand-driven value network orchestrator." Sure, we all have that list in our heads.

From those selections, respondents are then asked to rank those companies from first to last, from which points are assigned to the companies selected based on how they are scored across respondents.

So, the reference point, in theory at least, is not "the best supply chain," but rather leadership in "DDVN orchestration." Are these the same things? I would say certainly not. Gartner defines DDVN orchestration as is being "characterized by an understanding of customer value with processes and metrics that enable business trade-offs to deliver products and services profitably. Companies that work toward the DDVN ideal use demand management as a key differentiating capability, so they can plan, sense and shape in a way that brings profitable balance to the business."

The final 25% of the composite score came from votes from 38 of Gartner's own supply chain analysts. They use the same tool and criteria that the peer group does in ranking company supply chains.

Take the financial rankings, the external CSR scores, and the votes from peer group and Gartner analyst group (again, 40%, 10%, 25%, and 25%, respectively), and voila, out spits the top 25 in something like a mathematical fashion.

Is the process perfect? Certainly not. The unstated assumption is, for example, that stellar financial results equals supply chain excellence. Only very, very large companies are considered. I am not sure demand-driven orchestration should really be the evaluation framework. Who really knows how good most other company supply chains are? And it seems clear to me that working with Gartner and even better speaking at the Executive Conference always has a beneficial effect on a company's placement.

There are other mysteries. For example, pharma company AzkoNobel, which came out of nowhere to number 24 after having never been on the list before, was dead last among the top 25 in analyst ratings, was very low on peer rankings, was a little above average in inventory turns, and had negative three-year revenue growth of -8.6%.

But it had the third highest ROA score of 20.9%, and scored 8 out of 10 on CSR. That all somehow turns into a top 25 best supply chain ranking. Really?

So, with all that, here in general is the advice I give to companies hoping to crack the top 25: (1) understand the methodology, especially with regard to the financial data. Not much you can really do about that, but you can at least understand how it works and do some comparisons to key competitors; (2) encourage others outside your organization to participate in the peer review process and rate you highly; and (3) most important, if you are really serious about this, arrange "briefings" with Gartner analysts touting what you are doing in supply chain in the same way that software vendors do. Ladle on significant helpings of demand-driven orchestration-ness. (Shoot me an email if you would like to discuss any of this.)

And speak at the conference.

The Gartner top 25 supply chains - it has many faults, but it is the best we've got. I look forward to it every year. It certainly stirs the pot - but there must be a better way.

What do you think of the Gartner Top 25 supply chain list and methodology? How could it be done better? Let us know your thought at the Feedback button below.


On Demand Videocast:

A Blueprint for WMS Implementation Success

If You Want a Successful WMS Project, You will Find the Blueprint in this Excellent Broadcast

This videocast lays out the keys to ensuring your WMS implementation goes smoothly, involves minimal pain, and accelerates time to value.

Featuring Dan Gilmore, Editor along with Todd Kovi of Radix Consulting and Dinesh Dongre of Softeon.

Now Available On Demand

On Demand Videocast:

How Supply Chain Companies Can Achieve Decision-Centric Optimization

The Most Important Outcome of Implementing an Algorithm-Based Supply Chain Optimization Solution

Featuring Dan Gilmore, Editor along with along with Dr. Z. Caner Taskin - ICRON's Chief Technology Officer and a Professor in the Department of Industrial Engineering at Bogaziçi University.

Now Available On Demand

On Demand Videocast:

Digital Transformation's Value to the Supply Chain

The Future of Order Management

This videocast breaks down what digital transformation is and how automated order management solutions equate to supply chain benefits.

Featuring Dan Gilmore, Editor along with Esker's Dan Reeve.

Now Available On Demand


Some of the short feedbacks on our recent piece on The Top Supply Chain Innovations of All-Time

Feedback on The Top Supply Chain Innovations of All-Time:


Always enjoy reading your work and it was a great pleasure to see our Continuous Replenishment Program (CRP) ranked #2 of your Top Supply Chain Innovations. CRP certainly served to transform how the grocery industry operates, initially leading to the Efficient Consumer Response initiative, Collaborative Planning, Forecasting and Replenishment (CPFR) and in turn strategic retailer/supplier partnerships.

Ralph Drayer
Supply Chain Insights LLC



Very informative.


Just for the record and to be accurate, when you update your list do not forget to accurately represent the background history that led to P&G's CRP initiative with Walmart & Kmart.

Had RP&G followed up on mu recommendation back in 1988, P&G and Walmart would have been the very first users of what we call "Flowcasting" 20 years earlier than Kraft and and Walmart did.


Andre Martin
Distribution Requirements Planning and Flowcasting






Fantastic, well researched list of innovations. Thanks for the work.

Steve Collins




Wow, Dan thanks for the Kudos on behalf of all of IBM on the innovation article. Hope we can live up to our past in the future of this area.

Erik Bergeman
IBM Retail Solution Executive


Q: For a large prize, what was the top supply chain in AMR's 2007 ratings?

A: Amazingly, it seems, Nokia.

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