Since its inception 18 years ago, the Gartner Supply Chain Top 25 identifies, celebrates and profiles excellence in supply chain management. The superior supply chains highlighted in the annual ranking don't just push products – they understand customer value, invest in demand management as a differentiating capability, and promote innovation (not just compliance) against ESG factors.
Consistent with the purposes of the Top 25, we believe that the sharing of best practices should be done through a transparent methodology that reflects a diversity of opinions. At a high level, the Top 25 methodology combines financial performance and opinion data; the financials provide an objective basis on top of which to place community peer and Gartner analyst votes. The Top 25 methodology is continuously evolving, growing in line with the supply chain profession. Still, we must take care to operationalize methodology changes in order to enable performance comparison across years and provide consistency across diverse industries. It can be a difficult challenge to implement changes to the methodology that can be applied equally to companies from every corner of the world.
Review of the Top 25 Methodology from 2021
- Return on Physical Assets (ROPA) – 20% weighting
- Inventory Turns – 5%
- Revenue Growth – 10%
- Environmental, Social and Governance (ESG) – 15%
- Community Peer Vote – 25%
- Gartner Analyst Vote – 25%
Detail on the Top 25 Methodology for 2022
- Return on Physical Assets (ROPA) – 15% weighting
- Inventory Turns – 5%
- Revenue Growth – 10%
- Environmental, Social and Governance (ESG) – 20%
- Community Peer Vote – 25%
- Gartner Analyst Vote – 25%
Frequently Asked Questions About the Methodology Changes for 2022
Question: Are there any changes to the inclusion criteria and the creation of the company list?
Answer: As in years past, the list starts with companies above a revenue threshold on either the Fortune Global 500 or Forbes Global 2000 lists. Since 2015, the revenue threshold for inclusion in the overall company list has been $12 billion. This revenue level provides a manageable list of companies and will not be changed in 2022.
We are adding a new industry segment to the inclusion criteria beginning in 2022: asset-heavy service companies (AHSCs). Some companies sell their offerings as a service, but also manage a significant amount of infrastructure that requires ongoing planning, sourcing and logistics by a supply chain team. These companies will be included and ranked in the same manner as other companies included on the final company list.
As the supply chains of these companies continue to evolve, we are seeing best practices emerge that can be shared across the community. In addition to the inclusion criteria mentioned above, these companies must also have more than $1 billion in physical inventory, as an indicator of possessing a physical supply chain.
Question: The company list seems to hover at around 300 companies every year. What’s the rationale for keeping the list that size, and are there any other changes for 2022 to manage the number of eligible companies?
Answer: Over the past 17 years, we have found that a list of around 300 companies is manageable for peer and analyst voters. If the list becomes much larger, it is more time consuming for voters to work their way through the company list, identify the companies they want to vote for and actually cast their votes.
For 2022, we are adding a new exclusion criteria called community awareness and sentiment. The list used by our geographically diverse voters should reflect organizations that are breaking through the collective awareness of the supply chain community. This awareness is reflected through historic peer and analyst votes. Companies that have not consistently met a minimum threshold of peer and analyst votes over the past five years will be excluded from the ranking process.
Question: Are there any changes to the weighting of the business data metrics?
Answer: Yes, there will be two weighting changes; ROPA will decrease to 15% and ESG will increase to 20%. We moved from the return on assets (ROA) metric to return on physical assets (ROPA) in 2019. In reviewing the data over the past two years, ROPA provides a better measure of the efficiency of the assets within the supply chain’s sphere of influence but can disadvantage some industries. As we continue to review the ROPA measure, we felt it appropriate to lower the weighting.
Since its launch in 2016, corporate social responsibility (CSR) and now ESG remain top of mind for supply chain leaders. For example, in the Mid-2021 Gartner CEOs and senior business executive Survey, prioritization of environmental sustainability as a top five strategic priority grew 303%. With the growing visibility and importance of ESG within the supply chain, the weighting of ESG will be increased to 20%, positively impacting companies that consistently lead in this area.
Question: What third parties are used as part of the ESG methodology?
Answer: The ESG partners used in the ESG methodology are as follows:
- The measures of Commitment are “signatory” of UN Global Compact and a science-based targets set. The sources for this information are the UN Global Compact and sciencebasedtargets.org.
- The measure of Transparency is producing annual, publicly available CSR/sustainability reports using widely recognized standards. Reports must include data about supply chain operations and supplier networks. The sources for this information are: CDP, Global Reporting Initiative (GRI) and the International Integrated Reporting Committee IIRC).
- The measure of Performance is, based on a review of the company’s data, an expert party has recognized the company’s exceptional performance in corporate governance, risk management, branding, climate change mitigation, supply chain standards, labor practices and other material ESG issues. The sources for this information are: CDP, Ethisphere, Bloomberg, the Dow Jones Sustainability Index (DJSI) World or Region Index, and the Hang Seng Corporate Sustainability Index.
Question: Which part of the process can companies proactively participate in and what are the timings?
Answer: Companies can choose to engage with the Gartner analyst community in two ways:
- Companies can submit a Supply Chain Request for Information Packet (SCRIP). The SCRIP is completed online and allows companies to provide more specific insights into their supply chain strategies, organizational span and influence, key initiatives, and impacts supply chain has had on the success of the business. SCRIPs can be submitted from 1 November 2021 through 14 March 2022. Questions may be directed to Supplychaintop25@gartner.com.
- In addition to completing a SCRIP, companies may also conduct a virtual company briefing. This provides companies the opportunity for an interactive session with the Gartner voting analysts to discuss their supply chain initiatives in more detail. Briefings are generally 60 minutes in length and can be conducted from 1 December 2021 through 14 March 2022. Companies must have submitted their completed SCRIP at least two weeks prior to the company briefing.
Read the Global Peer Opinion Panelist Frequently Asked Questions
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