The high-tech sector can claim some of the best supply chain leaders across industries with a highly integrated approach to the supply chain. These include Apple, Cisco, and Intel. In fact, Apple ranks among the “Masters” category of supply chain leaders, introduced by Gartner Inc. in 2015.
Supply chain leaders have implemented strategies that deliver big benefits to a company’s bottom line. Two of those are cutting costs and increasing profitability. Gartner recently released its annual Supply Chain Top 25, which identifies supply chain leaders across industries and highlights their best practices.
Now in its 13th year, the ranking reveals that Unilever topped the Top 25 ranking for the second consecutive year in 2017, followed by McDonald’s, Inditex, Cisco and H&M. There were a few big changes to the Top 25. Two new companies joined the Top 25 – Nokia after a seven-year hiatus and first-timer Diageo.
In addition, Amazon joined Apple and P&G in the “Masters” category. These companies show sustained leadership over the last 10 years.
“Hardly a day goes by without another announcement of Amazon’s foray into a new market, ownership of its own logistics capabilities or filing of patents to improve customer experience,” said Stan Aronow, research vice president at Gartner, in a statement. “One indicator of Amazon’s outsized influence on retail is the simultaneous real estate boom in distribution centers and bust of brick and mortar stores in the U.S. over the past two years.”
As for Apple, the company continues to “improve and innovate both its solutions and the means of producing them,” and “is still actively working on autonomous vehicle technology and experimenting with augmented reality (AR) technologies.”
Table 1. The Gartner Supply Chain Top 25 for 2017
Year Weighted ROA2
Year Weighted Revenue Growth4
|CSR Component Score5
|13||Johnson & Johnson||878||269||11.8%||2.6||0.4%||7.00||3.50|
|14||Coca Cola Company||1,579||232||7.8%||5.7||-4.2%||4.00||3.46|
1. Gartner Opinion and Peer Opinion: Based on each panel’s forced-rank ordering against the definition of “DDVN orchestrator.”
2. ROA: (2016 net income/2016 total assets)*50% + (2015 net income/2015 total assets)*30% + (2014 net income/2014 total assets)*20%.
3. Inventory Turns: 2016 cost of goods sold/2016 quarterly average inventory.
4. Revenue Growth: (Change in revenue 2016-2015)*50% + (change in revenue 2015-2014)*30% + (change in revenue 2014-2013)*20%.
5. CSR Component Score: Index of third-party corporate social responsibility measures of commitment, transparency and performance.
6. Composite Score: (Peer Opinion*25%) + (Gartner Research Opinion*25%) + (ROA*20%) + (Inventory Turns*10%) + (Revenue Growth*10%) + (CSR Component Score*10%).
2016 data used where available. Where unavailable, latest available full-year data used. All raw data normalized to a 10-point scale prior to composite calculation. “Ranks” for tied composite scores are determined using next decimal point comparison.
Source: Gartner (May 2017)
All supply chain leaders share at least one thing in common this year as a result of a general global trend toward protectionism. They are adding new supply chain capabilities to address changing trade policies.
“Despite some striking performances, however, today’s supply chain leaders face a much different business environment than just 12 months ago,” Aronow said. “A general trend toward protectionism, as evidenced by Brexit and the policies of the current U.S. administration, has caused some companies to shift supply network design decisions and create contingency plans in anticipation of new trade policies. Continued investment in innovative supply chain capabilities will be required to meet this changing landscape.”
The report also reveals three major trends among the supply chain leaders that are driving new capabilities: digitization of the supply chain, adaptive capabilities, and development of healthy ecosystems.
Here’s what Gartner Said:
Digitalization of Supply Chain
The past few years have seen a massive shift in companies creating digital connections within and across their supply chain operations. Leading companies view digitalization as an opportunity to not only provide agile support for existing products, but to reduce time to market for new ones. Some of the most disruptive and impactful technologies include solutions combining Internet of Things (IoT) sensors, cloud computing and advanced analytics. Simulation and optimization capabilities have moved into the mainstream and now cognitive computing capabilities, including machine learning, are in the labs of the most advanced supply chains. The digital pieces of the supply chain puzzle are coming together in a way that will enable more holistic, real-time management of the entire ecosystem.
Adaptive Organizations and Capabilities
Interrelated with digitalized supply chains is the ability of companies to be more adaptive to changes in their value chains. More specifically, leaders are creating adaptive organizations and capabilities to survive and win independent of future supply-related constraints or customer needs. “Some of the more impressive supply chain organizations have created a modular supply chain service model that allows for variants of functional capabilities to be combined into “plug-and-play” segments, such as make-to-stock, configure-to-order or engineer-to-order manufacturing profiles,” said Aronow. “This approach allows them to more quickly and flexibly support different business needs and outcomes, and speeds up activities such as M&A integration.”
Developing and Fostering Healthy Ecosystems
Leading companies realize that supply chain success depends on the health and well-being of the critical ecosystems within and around them. The people aspect of supply chain ecosystems applies to relationships with suppliers, partners, employees and customers along the value chain. Leading supply chains focus as much on ethical sourcing and supporting customer well-being, as they do on talent acquisition and development. Environmental sustainability is another priority for top supply chain organizations that set ambitious stewardship goals in the areas of emissions, water and other natural resources. Companies that are further along in developing mature corporate social responsibility (CSR) practices tend to have moved beyond mere regulatory compliance and are linking these efforts back to support for their underlying corporate strategies.
Overall, the Gartner report indicates that companies that continually rank among the top 25 supply chain leaders have successfully shifted to an integrated approach to the supply chain. This means taking into consideration all of the functions involved in an end-to-end supply chain.