Logistically Speaking: Supply Chain Managers Take on a New Role: Value Creators

This is one of my favorite times of the year, and no, it's not just because the snow has finally melted here in Cleveland. This is when the Top 25 Supply Chains rankings are made public, and for a long-time supply chain writer like me, it's like being a kid in a candy store. For the past 10 years, analyst firm Gartner has compiled a list of large (over $10 billion in sales) public companies in selected manufacturing, retail and distribution sectors, crunched some financial and inventory numbers, and then invited a group of peer voters to weigh in (in the interests of full disclosure, I've been part of that peer group for the past several years). From that process emerges a list of 25 companies said to be the "top 25," and then the fun begins of dissecting the rankings.

As with any such list with so many subjective aspects to it (half of the rankings criteria are based on votes from the peer group and a few dozen Gartner analysts), the final results are more akin to a popularity contest than a rigorous statistical analysis of supply chain proficiency, but after a decade, that's pretty much a given by now. What the Top 25 offers is a conversation-starter about the very nature of supply chains and logistics. And clearly, "supply chain" means different things to different people.

"Ten years ago, 'supply chain' meant just logistics," says Debra Hofman, research vice president at Gartner. I think Hofman is off by at least five years if not more, because by 1999 there were already several national publications devoted to covering supply chain management, including the late, great Supply Chain Technology News (vestiges of which live on in MH&L, of course). And well before 2004, companies were heavily investing in supply chain planning solutions, e-marketplaces, SKU rationalization, perfect order metrics, and the SCOR methodology (plan-source-make-deliver, with -return subsequently added to the mix). So from my vantage point, 'supply chain' has meant more than logistics for a lot longer than 10 years. Your mileage, as they say, may vary.

In any event, as Hofman sees it, "Future supply chains must seamlessly integrate the digital and physical worlds of customers to be competitive." Speaking at the recent Gartner Supply Chain Executive Conference in Phoenix, she also noted, "The goal of the supply chain now is to profitably deliver service to your customers."

Gartner's analysts (or the peer voters) tend to have a soft spot in their hearts for consumer-oriented companies, particularly producers of high-tech gadgets, so not surprisingly, Apple was again named the Top Supply Chain, as it has been for the past seven years. And in fact, 23 of the 25 companies on the list are either high-tech or consumer-oriented manufacturers and retailers, with Caterpillar and Cummins being the only industrial manufacturers to make the cut. Ford Motor appeared on the 2013 list, but with the entire automotive industry caught up in the maelstrom of recalls, it's not surprising to see the 2014 list devoid of automakers.

It becomes something of a head-scratcher, though, to note the lack of many other types of industries. Are the seven high-tech companies in the Top 25 really that much better at supply chain than automotive, aerospace, chemical, electrical, metals, oil & gas, paper, or plastics manufacturers? Or is there some basic flaw in the formula—number of inventory turns is the lone supply chain metric used—that promotes the consumer-friendly companies to the top while pushing the metal-benders and commodity producers off the list completely?

If there was one overarching theme to the Gartner show, it was the evolution of supply chain management from cost containment to revenue growth generation. As chief supply chain officers continue to win a seat at the board table, it will be their role to convince their CEOs that the world really does spin about the axis of the supply chain. "We in the supply chain know how to manage costs," observes Dwight Klappich, vice president of research at Gartner. "Let's start focusing now on moving our companies forward."

Linda Topping, chief procurement officer with one of the Gartner Top 10, consumer goods producer Colgate-Palmolive, adds that for her company to remain relevant as a supply chain leader, a new generation of talent will have to be developed, ready to take on the challenges of creating value for their companies. "As supply chains get exponentially more complex, talent management will be the price of admission for the next decade."