Supply Chain Top 25: What really matters?

Gartner just released the ninth annual Supply Chain Top 25, and with it the floodgates of debate have opened. How fair is it? How valuable is it? Why isn’t such and such a company on it? And so on.

I invented the Supply Chain Top 25 back in 2004 (at AMR Research as it was then) as a way to get people to care about supply chain in the same way they care about their favourite sports teams winning championships – passionately.

The original design, which has changed very little over the years, was based on American college football’s Bowl Championship Series (BCS) rankings system, which uses a combination of objective data (win percentage, strength of schedule) and subjective data (polls among coaches and sportswriters).

Both rankings work well because everyone can understand and debate the criteria, and because competitive people simply cannot resist a ranking.

Is Apple really the best supply chain in the world?

Apple is #1 on Gartner’s list for the sixth year running. Does this mean it has the best supply chain? The answer doesn’t matter, but the question does. Apple is run by a true supply chain guy (Tim Cook) and used cutting-edge supply chain thinking to transform the company from a basket case unable to harvest the value of killer design and marketing into the most valuable enterprise on earth. What matters is how supply chain fits into that story.

SCM World published a report late last year that drilled into how Apple made this transformation and what everyone else can learn from it. In the same report we also looked at how Amazon (ranked #2 on Gartner’s list in 2012, #3 this year) innovates in supply chain to drive its business forward. Each company takes a radically different approach to supply chain strategy, yet both have transformed their industries.

Our report examined elements of each company’s use of demand shaping, digital supply chains, vertical integration and new product launch, and found innovative tactics that any forward-thinking supply chain leader should understand. The fun part, however, was a poll asking who was more admired – Apple or Amazon – and why. The results are shown in the two charts below.

Source: Apple and Amazon: Lessons for the Rest of Us, SCM World, November 2012

The SCM World community clearly admires Amazon more than Apple, largely because of demonstrated agility, collaboration and execution. One takeaway might be that the Top 25 ranking is wrong. A more meaningful lesson is that alignment of supply chain strategy to business strategy demands much more than just aping someone else’s best practices. It’s all about profitable growth, which is hard to deliver with a cost-only mentality.

Leadership is what the Top 25 measures best

The most common criticism of the Top 25 is that it’s a beauty contest. While there is an element of truth to this, it does successfully flag those companies that stick their necks out. Unilever, for instance, got the top total analyst opinion vote this year (and ranked #4 overall, up from #10 in 2012). To me, this reflects the tireless efforts of its Chief Supply Chain Officer, Pier Luigi Sigismondi, to get out in front even if it means taking a few arrows. Unilever was closely followed in the analyst poll by Cisco and Intel, both of whom also seem committed to engaging in debate on what supply chain leadership entails.

The key to this ranking is that it gets everyone out of the shadows and into the spotlight. Supply chain people are habitually unassuming and often culturally pressured to “enable” others to succeed. In fact, it is common enough for marketing, engineering and sales leaders to look upon supply chain still as little more than an errand boy to the business.

This is a debilitating attitude, not just because it devalues what supply chain brings to the party, but also because it encourages CEO ignorance of operational limits that can take down the whole enterprise. Without Tim Cook, it’s hard to see how Steve Jobs could have launched the i-revolution as we know it.

Driving change is what matters most

At one point in the endless Twitter feed tracking the release of this year’s Top 25, I saw the following Tweet:

This warmed my heart and restored my faith in the Top 25, whatever its shortcomings. Healthcare and pharmaceuticals as a sector could be the biggest single challenge facing the supply chain community. It consumes 10-20% of GDP in most big countries and deals more directly in advancing human welfare than any other industry. Yet its supply chain practices are generally archaic. It may take decades to get it right, but at least executives in the sector know it’s time to get started.

I like to believe supply chain can save the world, and I’m sure that mega-problems like environmental sustainability, social justice, and universal health, education and welfare cannot be tackled without it. The real purpose of the Top 25, in my view, is to give those willing to lead a platform from which to point the way.

Kevin O’Marah
Chief Content Officer
SCM World