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Focus: Manufacturing

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From SCDigest's On-Target E-Magazine

- August 4, 2014 -

Supply Chain News: Gartner Announces Top 10 Industrial Supply Chains


Just Three Industrial Manufacturers Made the Overall Top 25: Caterpillar, 3M and Cummins


SCDigest Editorial Staff

In recent years, Gartner has taken its "top 25 supply chains," brand - a company ranking program originally developed some 10 years ago by AMR Research (later acquired by Gartner) - and found numerous ways to extend it.

So now we have the top 25 European supply chains, the top industrial supply chains, and more.

SCDigest Says:


SCDigest would have liked to have Gartner be more specific about what makes the leaders' Lean Six Sigma programs better than those of the rest of the pack.

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After releasing the core top 25 list at its supply chain executive conference in May, Gartner has in the past few weeks also named its top 10 "industrial manufacturing" supply chains list, developed using the same methodology as its overall top 25.

That methodology works like this: 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 the different characteristics of various industry sectors, where metrics such as inventory turns and return on assets can vary dramatically. So, there is certainly some merit in breaking out separate lists for different sectors.

25% of the overall rating 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. (See Gartner Releases Top 25 Supply Chain List for 2014.)

Just three companies Gartner classifies as industrial manufacturers made the overall top 25 supply chain list this year, and all somewhat near the bottom of that list:

• Caterpillar: #18

• 3M: #19

•  Cummins: #23


This is not surprising, as industrial companies tend to have relatively low annual revenue growth, return on assets and inventory turns compared to many other sectors. In addition, industrial companies are typically not cast as supply chain leaders versus many consumer goods, retail and high tech companies, and thus likely would suffer in the relative Gartner analysis and peer review process.

All that said, the graphic below shows the top 10 industrial supply chains for 2014 (based on 2013 performance data).


Gartner Top 10 Industrial Supply Chains


We suspect but aren't sure that the reason it is a top 10 and not a top 25 is because there are not 25 industrial companies in the "rankings pool" that are part of the Gartner analyst and peer review process.


(Manufacturing Article Continued Below)





We could certainly quibble with some of this, as a company like Illinois Tool Works (ITW), for example, still largely runs independent supply chains across its dozens of divisions versus a more centralize supply chain operation that could be singled out for excellence, but the numbers are what the numbers are.

It is also not clear how the three non-US companies on the list (Atlas Copco, Haier, and ABB) made the list, or rather why many other non-US firms were not on the list.

Gartner suggests that there are six areas of capabilities that separate the top industrial supply chains from the rest:

Investment in Innovation and New Product Launches: The leading industrial manufacturing companies are investing heavily in their new products and services innovation, Gartner says, and offer different products to different regions and market development levels.

Comprehensive Supply Chain Models Designed for Emerging Markets: The speed at which the leading industrial companies are building emerging market supply networks is putting a lot of pressure on the after-market side of their businesses, Gartner says, noting that these companies need a strong service and support presence right from start.

Postponement Using Common Components in Product Design: Leading companies couple common designs with postponement strategies. They have a good understanding of demand on the aggregate component level. They also produce semi-finished products to sub-assembly inventory, and produce the final product to demand pull signals, Gartner argues.

Improved End-to-End Supply Chain Visibility: Leading industrial manufacturing companies have initiated visibility programs that range from master data cleansing and governance efforts to the implementation of IT tools extending across company boundaries on both the supplier and customer end of extended supply chains, Gartner says.

Strong Local Talent in New Markets: Industrial manufacturing companies are developing a strong local presence to support customers as they enter new markets in emerging regions, Gartner says. The industrial companies have achieved positive results from a center-led model in which a corporate or business unit level supply chain center of excellence (COE) participates in setting up the common processes and assists in the hiring and training of local talent.

Implementation of Lean Six Sigma Transformation Programs: The Lean Six Sigma programs and initiatives that industrial manufacturers are implementing and maturing have been very successful in terms of reducing cost, improving manufacturing cycle times and optimizing inventory, Gartner says.

On the latter point, SCDigest would have liked to have Gartner be more specific about what makes the leaders' Lean Six Sigma programs better than those of the rest of the pack.

So there you have it - as we always say, the Gartner methodology is far from perfect, but it's the best we have.

What is your reaction to the Gartner Top 10 industrial supply chains? How can the process be improved? Let us know your thoughts at the Feedback section below.

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