The Top 25 Supply Chains 2007
AMR Research has released its annual list of the Top 25 supply chains. This year, cell phone manufacturer Nokia took top honors, while Apple made the list for the first time. Familiar leaders like Procter & Gamble, IBM, Wal-Mart and Toyota also scored high. Here's how AMR determined which supply chains made the list and why.
By Kevin O'Marah -- Supply Chain Management Review, 9/1/2007
The AMR Research Supply Chain Top 25 for 2007
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Inside the Numbers
The big story in this year's Top 25 is the emergence of Apple, eligible for the first time with revenue that placed it in the Fortune Global 500 for 2006. Apple's No. 2 ranking surprised many of us at AMR Research given Apple's decidedly mixed reputation for customer service, in-stock performance, and forecasting. Both opinion polls gave Apple solid support, but strong financials including spectacular inventory turns (50.8) and stellar growth (38.6%) shot the computer/iPod maker nearly to the top of our rankings.
The lesson for supply chain professionals in this is that creative design and innovation matter a lot. By delivering almost $2B in sales of a zero-inventory product (iTunes) and creating huge demand with brilliant marketing and industrial design, Apple has consumers spending heavily on a supply chain with very little physical product in stock. View | Print | Read the complete (PDF) article
Value chains that don't rely exclusively on low cost to win business can achieve some enviable results even when viewed through a traditional supply chain lens. Hewlett Packard has applied this lesson to its PC business very successfully in the past year, and Nike (No. 18), for the second year an AMR Research Supply Chain Top 25 company, lives by it. The implications of demand-shaping for big global brand owners should be obvious.
As discussed above, this trend is also important because it points the way toward a post-industrial economy in which factory-centric models of organization are replaced by idea-centric models. Looking at the capabilities of supply chain automation embodied in robotics, precision sensors, and unit-level track and trace technologies like RFID, one can envision a world in which manufacturing and distribution employ very few people worldwide while creative and logical functions like product design, software coding, and even pure art offer far more career opportunity. View | Print | Read the complete (PDF) article
Another important story that emerged in this report is the pitched battle for supremacy in the mobile telephone industry. Three of our top 12 companies, including No. 1 Nokia, No. 10 Samsung, and No. 12 Motorola are cell-phone makers. The short product lifecycles, huge global consumer demand, and complex value chain comprising chip design, hardware manufacturing, and telecom service provision may be the ultimate crucible of supply chain innovation in the world today. These three, along with Sony/Ericsson (ineligible as a non-FG500 company) and arguably LG Electronics, have made commonplace a class of devices that would have been thought of as pure science fiction just 20 years ago, and they have managed to drive prices down, allowing almost everyone access to their technologies. Supply chain leadership driven by this group includes massive inter-enterprise collaboration, highly sophisticated demand modeling, and product platform strategies built deeply into the supply chain ecosystem.
What's next for this group? As the industry forces companies to evolve from makers of phones to enablers of wireless content creation and consumption, increased collaboration within each company's internal product innovation groups and more sophisticated design partnerships with telecommunications and entertainment partners will become increasingly necessary. This implies many new business opportunities as mobile telephones increasingly become equipped to both collect (via image and audio capture technologies) and consume pure content products. In fact, the Apple iPhone, released in June 2007 to much fanfare, represents just one of many devices currently available or in development among this group of companies. View | Print | Read the complete (PDF) article
Consumer-branded companies traditionally fare well in the Top 25, largely because “demand-driven” to the shelf is intuitive to most consumer products executives. No. 3, Procter & Gamble, scored highest in our peer opinion poll, reflecting widespread recognition that its consumer-driven supply network strategy embodies much of the demand-driven ideal captured in the rankings. Also noteworthy are Anheuser-Busch, up in the rankings for the third year in a row (No. 20 in 2004, No. 12 in 2005, No.7 in 2007) with prominent leadership in demand visibility innovation, and both Coca Cola (No. 13) and PepsiCo (No. 15), which have used supply chain technology to leverage strong brands for excellent ROA. View | Print | Read the complete (PDF) article
Ranked industrial companies include Paccar (No. 24) and Lockheed Martin (No. 22)—both new to the Top 25—and Toyota (No. 5) and Johnson Controls (No. 16). Toyota remains an icon in the world of supply chain, as evidenced by its second place finish in both the peer opinion poll and the AMR Research opinion poll. Plus, Toyota's 13.4% revenue growth in the brutal industry of car and truck sales stands as a testament to its devotion to supply chain optimization.
Johnson Controls' third Top 25 ranking in a row, however, tells the most interesting story. As a supplier to the auto industry and maker of unglamorous buildings controls systems, Johnson Controls (JCI) doesn't get by on marketing. JCI's continued success proves that demand-driven principles can work anywhere in the value chain, provided “outside-in” thinking moves from the customer into manufacturing and engineering. The key for industrial companies, as for consumer companies, is to design the value chain to respond to demand, rather than just worrying about keeping the factories full. View | Print | Read the complete (PDF) article
Technology titans again feature prominently in the Top 25, led by IBM at No. 4, Cisco Systems at No. 11 and Hewlett Packard (HP) at No. 21. IBM's move toward services, software, and research is part of a strategy to deliver holistic value to corporate clients, but it also has the added benefit of increasing the digital-to-physical ratio of product sold through its value chain. Cisco is similarly positioned to make money through the software that powers its hardware while relying on contract manufacturing to keep asset burdens low. HP's more asset-intensive operations reflect a complex set of supply chains—ranging from consumer packaged goods sold in convenience stores to configured corporate data centers installed and managed by specialists. All three of these companies have learned what “solution selling” really means—namely that supply chain processes need to serve the customer, not the technology itself. View | Print | Read the complete (PDF) article
Three life-sciences companies are ranked in the Top 25: Johnson & Johnson at No. 14, GlaxoSmithKline (GSK) at No. 20 and AstraZeneca at No. 25. Johnson & Johnson appears for the third year in a row, again combining solid numbers with strong opinion scores. The common thread among these three is very high ROA. Two of the three highest ROA figures recorded by Top 25 companies were delivered in life sciences (GSK with 21.2% and AstraZeneca with 20.2%). As research & development-driven companies, these companies are, in effect, mining the same vein as Apple or Nike in that physical product movement is less of an issue than intellectual property. Very low inventory turns; however, suggest that this sector may have rested on its scientific laurels for a little too long. View | Print | Read the complete (PDF) article
Texas Instruments' (TI) second appearance in the rankings (No. 19 in 2005, No. 17 in 2007) reflects strong financials, especially ROA—an impressive 31.2%. The absence of other semiconductor manufacturers indicates that TI is doing something right beyond just riding the commodity cycles of chip markets. Also, as a largely non-branded component maker, TI shows that consumer goods companies are not the only ones able to create business value with demand-driven principles. View | Print | Read the complete (PDF) article
Finally, five of our Top 25 this year are retailers—the business closest to end consumer demand. Led by No. 6 Wal-Mart stores, this group includes four companies appearing for the third year straight. Wal-Mart and Tesco (No. 8) have each made the top 10 for three years running and both Lowe's (No. 19) and Best Buy (No. 9) are up from last year. Also, Publix Super Markets appears for the second time, holding the No. 23 spot again. The common theme among these leading demand-driven retailers is innovation, especially around the shopping experience. By aggressively pushing innovative store formats, private label product offerings, and value-added customer service these leaders are driving strong growth in tough consumer end markets, including grocery. Each has also shown creativity working with suppliers in tightening replenishment processes and collaborating for better demand visibility in the supply chain. View | Print | Read the complete (PDF) articleticle
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