Supply chain leadership matters for business success

Technology Briefing -- Supply Chain Management Review, 2/28/2008

AMR Research Inc. has released its annual listing of the Top 25 performers among public Global 500 companies. As in previous years, the Top 25 supply chains have outperformed the market with an average total return of 17.89% among them, compared with returns of 6.4 percent for the Dow Jones Industrial Average and 3.53 percent for the S&P 500. “Make no mistake, supply chain leadership matters,” says Tony Friscia, CEO and president of AMR Research.

AMR’s Top 25 ranking calls out those large manufacturers and retailers that display superior supply chain performance, capabilities and leadership. There are the companies that are furthest along in achieving the idea of a highly coordinated, demand-driven network that delivers shareholder and community value. In the past, the top 25 were determined by the AMR analysts who following major supply chains. This year, the evaluation extended to supply chain professionals. “For the first time, we added a peer opinion panel to the ranking,” says Debra Hofman, research director at AMR. “The idea was to harness the extensive knowledge of the professionals who interact and have direct experience with the companies being ranked.” Hofman notes that 78 companies were represented by senior supply chain professionals from across a wide spectrum of company size and history.

Friscia believes the key to a successful supply chain includes the use of best practices and an emphasis on adaptability. He points to accuracy in demand forecast accuracy as a key best practice common with supply chain leaders. “Demand forecast accuracy creates high responsiveness and cuts cost right through the supply chain,” says Friscia. “Companies that are best at demand forecasting average 15 percent less inventory, 17 percent stronger perfect order fulfillment and 35 percent shorter cash-to-cash cycle times while having less stock-out than their peers.”

He notes that supply chain management is at a crossroads. “On the one side you have the general recognition of its strategic importance,” says Friscia. “On the other side, many of the principles and approaches that traditional supply chain management was established upon are dramatically changing.” He also notes that supply chain technology is changing. Most companies place their bets on the potential of optimization technology to overcome constraints,” says Friscia. “But leaders have targeted execution systems that have let them respond to changes faster.”