When it comes to developing a world-class supply chain, it’s all about adapting and upgrading. That’s one of the conclusions from The Gartner Supply Chain Top 25, a ranking of the global shippers managing the best logistics and supply chain management programs.
Four key trends emerged in this year’s study, developed by research and advisory company Gartner: return to growth, supply chain resiliency, simplification and “multilocal” operations.
Although the global economic recovery is shaky, companies are starting to reinvest in their supply chains for growth. “Last year, we noted that companies were starting to invest in resources and assets again,” said Debra Hofman, Gartner’s managing vice president. “This year, that trend continues even more strongly.”
Natural disasters, such as the March 2011 Japanese earthquake and tsunami and last fall’s flooding in Thailand, severely impacted supply chains in the chemical, automotive and electronics industries. Volatile demand and sourcing in high-risk geographies add to the risk of supply chain disruption.
Looking to maximize supply chain resiliency, Top 25 companies such as Intel, P&G and Unilever upgraded network management capabilities and supply chain visibility.
They and other supply chain leaders are taking it much further, redesigning products for flexibility in supply and manufacturing, developing alternative sources of supply, adding logistics providers, expanding outsourced manufacturing capacity, and updating risk management processes.
Among the Top 25, the trend is away from centralized sourcing and manufacturing to “multilocal” design, supply and support networks. The trend is occurring as companies, bigger and more global than ever, strive to strike a balance between global economies of scale and local autonomy and expertise. Companies also are sourcing their products closer to destination markets as logistics cost increase, labor costs rise in China and governments offer manufacturing incentives.
As companies build multilocal networks, they are assessing risks at specific points in the supply chain, addressing choke points, bottlenecks and other problems when and where they arise.
Gartner identified a correlation between companies that consistently record industry-leading financial results and supply chain resiliency. Average annual revenue growth of the companies in the study increased 29 percent over the previous year. Return on assets and net profits averaged 50 percent in 2010 before stabilizing in 2011.
“We posit that a company’s ability to post industry-leading financial results year after year, despite demand and supply disruptions, is another kind of resiliency,” the report noted.
Gartner described Apple, the top-ranked company in the survey, as a master at delivering total solutions to its customers through tightly integrated design of hardware components and for having “a zealous focus on starting with the consumer experience and working back through the design of its supply network.”
The report praised Dell, which has been among the top five companies since the survey was founded in 2004, for its evolution from its “blazing fast, configure to order” capabilities to a leader in supply chain segmentation. As the computer giant faced challenges such as low-cost competition, product commoditization and fast-changing global markets, it embarked on a three-year overhaul of its supply chain, moving from a single supply chain stream to a model based on customer segmentation.
Supporting the new model is a cost-to-serve methodology that allocates costs to specific business decisions and highlights the net profitability of each segment. Successful segmentation begins with understanding the different characteristics of each customer and channel, and isolating and quantifying costs.
Gartner recognized P&G as a supply chain thought leader and a standard bearer of brand management. The company’s expertise in cross-enterprise decision-making allows it to align supply and demand across its global supply chain.
Hewlett-Packard, the world’s largest computer manufacturer, has been running a simplification program across one of the most complex supply chains in the high-tech industry. It has been moving some of its production from coastal to western China since 2008 to reduce supply chain costs.
McDonald’s was cited for striking a balance between new product rollout — its McCafe product line — and the resulting supply chain complexity.
Coca-Cola has developed an innovative beverage delivery system called Freestyle that allows restaurants to choose between more than 100 beverage options via a touch screen, streamlining delivery of its products. The beverage giant has mastered last-mile distribution whether by truck or donkey, with a plant within a few hundred miles of every customer in the world.
Intel has significantly improved its supply chain agility and resiliency by reducing cycle times by more than 40 percent. Once an inward-focused component manufacturer, the company now runs a world-class demand-driven value network, vaulting it to No. 7 among Gartner’s Top 25.
Unilever has implemented a flexible manufacturing network that supports fluctuations in local demand, and proactively tailors product development to supply chain capabilities. The consumer products giant, ranked 10th, proactively tailors product development to supply chain capabilities based on specific conditions in its various global markets.
Nike is taking an innovative, partner-based approach to suppliers and has built strong upstream visibility to deliver products across a complex network of contract manufacturers and logistics providers.
Wal-Mart, a mainstay of the Top 25, is well-known for its investments in sustainable logistics and strong collaborative practices with its suppliers on merchandising, planning, forecasting and replenishment.
Kimberly-Clark, new to Gartner’s rankings, was an early leader in sharing logistics contracts with competitors and pursuing advanced capabilities in demand planning and inventory optimization. The $20.8 billion manufacturer of personal care and health care products undertook a collaborative logistics initiative to address pressures from high fuel costs, driver shortages, empty miles and congestion, all while maintaining top service levels to its retail customers.
The company’s collaborative shipping model focuses on maximizing underutilized trailer space by comingling freight from different suppliers. The project was born when a national drugstore chain asked Kimberly-Clark to reduce congestion from inbound truck traffic at its distribution centers. The company initiated pilot programs in 2010-11, with two suppliers comingling freight to maximize truck weight and volume in deliveries to four Kimberly-Clark DCs in Texas and Florida.
The pilot projects saved 68 loads, 17,000 truck miles, 2,835 gallons of fuel and reduced carbon dioxide output by 28 tons.
Each year Gartner includes a few Honorable Mentions in its survey, companies with highly innovative supply chain practices that just missed out on the Top 25. This year’s group includes Ford, which has recorded strong inventory turns and a second straight year of growth, and shown great resiliency as it faced volatile demand and upstream disruptions.
Gartner recognized Lenovo, the world’s second-largest computer manufacturer, for reducing the number of components it uses by more than one-third, while automotive manufacturer BMW Group was ranked highly by Gartner’s European voters.
Contact David Biederman at firstname.lastname@example.org.