Professional Documents
Culture Documents
First Thoughts
Dan Gilmore
Editor Like This Article?
Supply Chain Digest
June 1, 2017
Subscribe
This year Unilever came out on top for the second year in a
On-Demand Videocast:
row (link to the full list a little later in this column). Now is the Time for WMS
in the Cloud
Again this year, Apple and Procter & Gamble were left off Click here to send us your
the formal top 25, as both those companies have now been comments Mar, 07, 2016
SCDigest to Launch
Second Retail-Vendor
Survey in July
Jun, 29, 2017
Innovation in Shipper-
3PL Relationships
Benchmark Study Full
Data Set
Mar, 10, 2017
Innovation in Shipper-
3PL Relationships
Benchmark Study
Mar, 10, 2017
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 2016 financial reports:
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 inventory turns per year. It
also penalizes companies like a Home Depot or a Lowes, for example, which are only going to
http://www.scdigest.com/firstthoughts/17-06-01.php?cid=12510 2/7
1/28/2018 Understanding the 2017 Gartner Top 25 Supply Chain Rankings
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
grow through acquistion.
Companies that have heavily outsourced production and distribution also have an inherent
advantage. Why? Because they have chosen to shed assets, and that drives their ROA metric
higher. While outsourcing can be a very smart thing for many reasons, it does not inherently
improve a supply chain move. This metric also inherently discriminates against asset-intensive
businesses, such as chemicals and automotive. That no doubt 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 the second year in a row, 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). Number 1 Unilever again received a perfect 10
score on this measure, as did a number of others. Gartner says that metric was tweaked a bit for
2017, though exactly how is not detailed in the Top 25 document.
Another 25% of the final rankings come from so-called "peer opinion." For 2017, this consisted of
about 169 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 comes 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 (see Schneider
Electric last year and Johndon & Johnson this year) always has a beneficial effect on a compan's
placement.
There are other mysteries: the scores from the peer and Garnter analyst ratings are often quite
different, with this year for example Walmart being rated relatively highly by the peer group and
low by Gartner; looking at the detail numbers for all the factors, it is impossible to really
understand how the rankings came out as they did.
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
http://www.scdigest.com/firstthoughts/17-06-01.php?cid=12510 3/7
1/28/2018 Understanding the 2017 Gartner Top 25 Supply Chain Rankings
"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.
Any reaction to this year's Gartner Top 25 or methodology? Do you see any ways it
could be improved? Let us know your thoughts at the Feedback section below.
Your Comments/Feedback
Name Title
Company
Srihari
Posted on: May, 22 2016
Senior Consultant, Infosys
Great article. I am a little suprised not to see BNSF in the mix while I understand their financial mode/operation is a little
di erent.
That would only give a complete perspective with all the players in the pool.
Mike O'Brien
Posted on: May, 26 2016
Senior editor, Access Intelligence
Surprised to see Home Depot fall o the list; thought they were winning with Sync?
Julie Leonard
Posted on: Jun, 27 2016
Marketing Director, Inovity
Using the right tool for the right job has always been a best practice and one of the reasons, we feel, that RFID has never
taken o in the DC as exponentially as pundits have been forecasting since 2006. While these results may seem surprising to
those solely focused on barcode scanning, the adoption of multi-modal technologies in the DC makes perfect sense for
greater worker e iciency and productivity.
Carsten Baumann
Posted on: Aug, 19 2016
Strategic Alliance Manager, Schneider Electric
The IoT Platform in this year's (2016) Hype Cycle is on the ascending side, entering the "Peak of
Inflated Expectation" area. How does this compare to the IoT positions of the previous years, which
have already peaked in 2015? Isn't this contradicting in itself?
Editor's Note:
You are right, Internet of Things (IoT) was at the top of the Garter new technology hype curve not long
ago. As you noted, however, this time the placement was for “IoT Platforms,” a category of software
http://www.scdigest.com/firstthoughts/17-06-01.php?cid=12510 4/7
1/28/2018 Understanding the 2017 Gartner Top 25 Supply Chain Rankings
tools from a good number of vendors to manage connectivity, data communications and more with
IoT-enabled devices in the field.
So, this is different fro IoT generally, though a company deploying connected things obviously needs
some kind of platform – hoe grown or acquired – to manage those functions.
Why IoT generically is not on the curve this year I wondered myself.
Jo Ann Tudtud-Navalta
Posted on: Aug, 21 2016
Materials Management Manager, Chong Hua Hospital, Cebu City, Philippines
This "putting in writing" can also be used for almost anything else. Here are some general benefits
(only some) of "putting in writing":
1. Everything is better understood between parties involved. There are lots of people types who need something visual to
improve their understanding.
2. Everyone can read to review and correct anything misunderstood. This will ensure that all parties concerned confirm the
details of the agreements as correct. This is further enhanced by having all parties involved sign o on a hard copy or
confirm via reply email.
3. Everything has a proof. Not to belittle the element of trust among parties involved, it is always safest to have tangible
proof of what was agreed on.
4. There will be a document to refer to at any time by any one who needs clarification.
5. The documentation can be useful historical data for any future endeavor. It provides inputs for better decisions on related
situations in the future.
6. This can also be compiled and used to teach future new team members. "Learn from the past" it is said.
There are many more benefits. Mr. Schneider is very correct about his call to "put it in writing".
Sandy Montalbano
Posted on: Aug, 24 2016
Consultant, Reshoring Initiative
U.S. companies are reshoring and foreign companies are investing in U.S. locations to be in close proximity to the U.S.
market for customer responsiveness, flexibility, quality control, and for the positive branding of "Made in USA".
Reshoring including FDI balanced o shoring in 2015 as it did in 2014. In comparison, in 2000-2007 the U.S. lost net about
200,000 manufacturing jobs per year to o shoring. That is huge progress to celebrate!
The Reshoring Initiative Can Help. In order to help companies decide objectively to reshore manufacturing back to the U.S.
or o shore, the nonprofit Reshoring Initiative's free Total Cost of Ownership Estimator can help corporations calculate the
real P&L impact of reshoring or o shoring. http://www.reshorenow.org/TCO_Estimator.cfm
Robert
Posted on: Aug, 30 2016
Transportation Manager, N/A
Good article! I am sending this to my colleagues who work with me. We have to keep this in mind. Thanks!
Ian Jansen
Posted on: Sep, 14 2016
Mr, NHLS
SCM is all about getting the order delivered to the Customer on date/ time requested because happy Customers = Revenue.
Using the right tools to do the right job is important and SCM is heavily dependent on sophisticated ERP systems to get right
real data info ASP.
I've worked in a DC with more than 400,000 line items and measured the Productivity of Pickers by how many "picks" per
http://www.scdigest.com/firstthoughts/17-06-01.php?cid=12510 5/7
1/28/2018 Understanding the 2017 Gartner Top 25 Supply Chain Rankings
day.
I've learned that one doesn't have to remind Germany about your EDI orders.
Don Benson
Posted on: Sep, 15 2016
Partner, Warehouse Coach
Challenge - to build and sustain e ective relationships at the level of the organizations that are responsible for e ectively
coordinating and colaborating in an otherwise highly competitive environment
Jade
Posted on: Oct, 02 2016
Admin, Fulfillment Logistics UK Ltd
Of course we all need to up our game. We need to move with the times, and always be one step ahead of what the future will
bring.
Mike Dargis
Posted on: Oct, 03 2016
President of asset-based carrier based in the Midwest, Zip Xpress Inc. (at ZipXpress.net)
Thanks for the article, but I know there's a lot more to this issue than just the pay rates. Please check out my blogs on the
subject at www.zipxpress.net.
Blaine
Posted on: Nov, 16 2016
Inventory Specialist, Syncron
Lora, great article! I agree that companies choose the 'safe' solution more o en than not. My solution is a bolt-on for legacy
ERP's and we even face challeneges of customer adoption. Most like to play it safe and choose an ERP upgrade, which is
more costly, time consuming, and has lower ROI across the board. Would love to learn more about your company, we are
always looking for partnerships.
Blaine
blaine.schultz@syncron.com
Bob McIntyre
Posted on: Nov, 21 2016
National Account Executive, DBK Concepts LLC
This is a game changer in GE's production and prototyping. It also has huge implications across the GE global supply chain
with regard to the management of their support and spare parts network.
Kai Furmans
Posted on: May, 22 2017
Professor, KIT
I am referencing to the comment that leasing of warehousing equipment (beyond forkli trucks) is a vision for 2030.
Just recently in Europe, such a business model has started, see here: https://next-intralogistics.de/
Home | Subscribe | Advertise | Contact Us | Sitemap | Privacy Policy
© Supply Chain Digest 2006-2013 - All rights reserved Website Designed & Developed by : XDIMENSION
.
http://www.scdigest.com/firstthoughts/17-06-01.php?cid=12510 6/7
1/28/2018 Understanding the 2017 Gartner Top 25 Supply Chain Rankings
http://www.scdigest.com/firstthoughts/17-06-01.php?cid=12510 7/7