For the 12th year in a row, analyst firm Gartner has unveiled its rankings of the Top 25 Supply Chains in the world, and for the 12th consecutive year, we offer our own take on the rankings. (Full disclosure: I have been one of the “peer opinion” voters for quite a few years now, so I’m analyzing a process that I also participate in.)
As we’ve noted in the past, the notion that these 25 companies (actually, 27, as you’ll discover) have the very best supply chains in the world is a flawed concept from the very get-go since there are so many exceptions to the rankings. For instance, only large, multi-national, public companies are part of the Top 25. Also, many of the companies you would immediately think of as being supply chain experts (UPS, FedEx, IBM, Disney, Google, et.al.) are omitted from consideration for one reason or another (but none of those reasons have ever struck me as being very compelling).
And there’s also the unmistakable reality that these rankings, when you get right down to it, are mostly popularity contests. Yes, there are metrics involved, such as inventory turns and return on assets, but the opinions of the peer voters and Gartner’s analysts account for 50% of the rankings.
There’s also a new category for corporate social responsibility (CSR), which appears to be based as much on third-party input as it does on any measurable performance metrics. (The CSR scores immediately raise a flag when you discover that Amazon’s score is 0.00, which probably cost the online retailer a chance to repeat as #1 this year, mostly because Amazon doesn’t issue a CSR report as many other public companies do.)
As occurred last year, Gartner has also lifted Apple and Procter & Gamble out of the Top 25 rankings entirely, placing them in a Supply Chain Masters category. Thanks to that move, and Amazon’s CSR score being so poor, we have a new # 1 on this year’s list, which you’ll discover at the very end of the rankings as we count them down from 25 to 1, just like Casey Kasem used to do. Also, we should note that, with several companies joining the rankings this year, that means a couple companies slipped out of the Top 25 in 2016. Those companies are Seagate Technology, Qualcomm, Cummins, Toyota and Home Depot.
The following gallery offers capsule descriptions of what makes each of the Top 25 (plus Apple and P&G) so good at supply chain management, and where appropriate we've included observations from Gartner’s analysts—Stan Aronow, Michael Burkett, Kimberly Nilles and Jim Romona—as to how and why each company finished where it did on the list. You can check out the rankings from previous years here:
Top 25 Supply Chains of 2015
Top 25 Supply Chains, 2014 Edition
A Look at the Top 25 Supply Chains of 2013
Top 25 Healthcare Supply Chains of 2013
The Top 25 Supply Chains of 2012
The Top Supply Chains of 2011
The Top 25 Supply Chains of 2010
Chinese computer manufacturer Lenovo continues to use its supply chain to good advantage as it integrates former IBM and Motorola products into a profitable business. According to Gartner’s analysts, Lenovo recently created a customer social/digital platform for some of its key accounts customized by order status, new product information and technical support, with a supply chain team member assigned to each major account. This kind of intense attention to customer service illustrates Lenovo’s disciplined approach to managing its supply chain.
Kimberly-Clark’s Supply Chain Efficiency Fund initiative was singled out by Gartner’s analysts, a cost-to-serve model that identifies a range of logistics services ranked by their efficiencies. The personal care and paper goods manufacturer is also focusing on packaging innovations that can make their products more direct-ship friendly.
GlaxoSmithKline had been missing from the Gartner Top 25 rankings for the past nine years, finally breaking back into the list thanks in part to solid return-on-asset numbers over the past three years.GlaxoSmithKline had been missing from the Gartner Top 25 rankings for the past nine years, finally breaking back into the list thanks in part to solid return-on-asset numbers over the past three years. One notable achievement for the pharmaceutical giant is its lean initiative, the GSK Production System, the company’s spin on the well-known Toyota Production System. The GPS standardizes how the company works towards its goal of zero accidents, zero defects and zero waste. Through the GPS, GSK is able to apply the same standards to its manufacturing processes across all our supply chains.
Neither Toyota nor Ford made it into the Top 25 this year, which allowed another automotive OEM—German luxury automaker BMW—to appear on the list for the first time in 2016. Gartner’s analysts point to the company’s development of a risk filter as a singular supply chain achievement that allows BMW to identify location-specific and product specific risks and then use that information as it considers sourcing from new and existing suppliers. BMW also uses self-driving robots (a type of automated guided vehicle) to move up to one ton of auto parts throughout its plants.
Johnson & Johnson has managed to appear on the Gartner list every year since the rankings debuted a dozen years ago, despite having a rather checkered past of product recalls and other supply chain incidents. That pattern continues this year, as the company is praised by Gartner’s analysts for deployment of digital technologies to improve supplier collaboration, while at the same time the company is under fire—and just lost a $55 million lawsuit—for claims that its talcum powder causes ovarian cancer. J&J’s use of the Internet of Things, serialization and track-and-trace technologies will no doubt be put to good use as the company defends its products against mounting health claims.
Chemical companies rarely ever appear on Gartner’s annual Top 25 list, but in 2016 BASF proves to be the exception. One initiative that intrigues Gartner’s analysts is BASF’s “lighthouse” project to digitize its logistics operation using prescriptive analytics that help the company in its daily decision-making and strategic planning. The company also earns high marks for its sustainability efforts, as well as it focus on delivery reliability excellence.
French cosmetics manufacturer L’Oreal has been focusing its supply chain efforts on demand forecasting and supply & demand matching, and according to Gartner’s analysts, the efforts have paid off with 2% improvement in service levels while holding inventory constant. The company is also well regarded for its supplier management program as well as product innovation.
Energy and automation specialist Schneider Electric is another newcomer to the list, and Gartner’s analysts singled out the company’s move from a decentralized supply chain to one more closely aligned to its customers’ specific requirements. Schneider’s rapid rise in the rankings also is a result of the company’s lean initiatives in its transportation and warehousing operations, as well as its focus on network optimization and on-time delivery.
High-tech manufacturer Hewlett-Packard last appeared on the list back in 2012, then dropped off for several years, reappearing in 2016, largely on the strength of its renewed focus on demand forecasting and perfect order fulfillment, as well as its efforts to be a player in the emerging 3-D printing marketplace. HP is also using artificial intelligence software to improve its order to fulfillment processes, Gartner’s analysts note. The company is also known for its efforts in eliminating human trafficking in its supply chain. It will be interesting to see how HP does in the 2017 rankings, since the company split into two entities late in 2015, and Gartner will follow suit by considering HP Inc. (the PC and printer side of the business) and Hewlett-Packard Enterprises (the services side of the business) as two different companies.
Retail giant Walmart takes a backseat to no one in the impact its supply chain initiatives have had on the world, most notably in recent years in its efforts to mandate sustainability targets throughout its supplier base. The retailer also plans to use drones to check warehouse inventories, and it’s developed a smartphone app that every in-store manager can use to alert staff to restock and replenish shelves in real-time. Walmart is also testing the use of for-hire driver services such as Uber or Lyft for last-mile delivery. And as Gartner notes, the retailer has also increased its sourcing from women-owned businesses.
PepsiCo’s direct store delivery network operates in almost real-time and supports hyperlocal marketing that allows the food and beverage giant to target retail campaigns at the right store at the right time, points out Gartner’s analysts. The company’s supply chain efforts have also been focused lately on a portfolio optimization platform, with the aim of using data analysis to improve profitability. PepsiCo is also rolling out a standardized demand and supply planning platform that can be leveraged for emerging markets as well as mature markets.
Industrial conglomerate 3M uses the term “efficient growth” to describe its supply chain approach, which focuses on three things, according to Gartner’s analysts: regionalizing its supply chains to reduce complexity, accelerating its use of disruptive technologies to create more innovative products, and aligning its inventory management with its global ERP platform.
Consumer packaged goods manufacturer Colgate-Palmolive reportedly has more than 10,000 projects focused on identifying cost savings opportunities and then reinvesting savings back into the company. According to Gartner’s analysts, the company’s supply chain has managed significant improvements in SKU productivity, and has implemented a supply chain control tower to improve demand sensing, inventory optimization and supply network planning.
Starbucks has never been just about the coffee. Although the company now has more than 20,000 locations, it still operates its supply chain with the goal of satisfying each and every patron, which lately has led to Starbucks testing a “green apron” logistics model that allows it to hand-deliver products to the 12,000 office workers employed in New York’s Empire State Building. The company has also developed a click-and-collect app designed to speed up the ordering process for consumers. The company also aims to be socially conscious through its espousal of numerous political causes (which occasionally backfire, drawing criticism that Starbucks should stick to making coffee).
At apparel company Nike, product innovation is a key area for its supply chain initiatives, particularly when it comes to the use of new technologies in its manufacturing processes. Gartner’s analysts also point out that Nike has invested heavily in its supply network design and product lifecycle management capabilities. Since the company relies on contract manufacturers for its products (largely in Third World countries), Nike has also invested in enabling visibility throughout its extended supply chain, as well as into the merchandising efforts of its retail customers.
Sometimes there can seem to be a disconnect between the Top 25 rankings and the actual performance of a company over the past year. The appearance of Nestlé in the top 10, and Gartner’s claim that the company scored a perfect 10 out of 10 for corporate social responsibility, certainly is one of those head-scratching disconnects, as the food and beverage company made headlines in 2015 over accusations that one of the suppliers to its Purina cat food division is using slave labor. The company spent much of 2015 trying to dodge complaints that it was exploiting water supplies in California during that state’s severe drought. Be that as it may, Gartner’s analysts were impressed by Nestlé’s use of predictive analytics for demand planning as well as the growth in the company’s e-commerce business.
Beverage giant Coca-Cola has set itself a lofty goal of replenishing 100% of the water it uses in the manufacturing process by 2020, although it’s still unclear whether that will have much of an impact, since that only accounts for 1% of the company’s overall water use. It’s one of those sustainability targets that is certainly a step in the right direction, but doesn’t exactly represent a supply chain game-changer. Even so, Gartner’s analysts applaud Coke’s goal of lowering its carbon footprint, and also point to the company’s innovative Freestyle smart delivery systems that can tailor supply chain solutions by market and segment.
Samsung Electronics is using its supply chain talent to expand its offerings into business-based product categories, such as hospitality, healthcare, finance and transportation, explains Gartner’s analysts, in an effort to differentiate its products from that of chief rivals, such as Apple. Samsung is also focusing on improving its customer collaboration by using connected devices to learn more about user behavior.
Cisco Systems not only sells its concept of the Internet of Things but it uses it internally as well, particularly to improve product quality and energy efficiency. Gartner’s analysts note that the networking equipment company has developed a cloud-based supplier collaboration platform that provides full demand visibility throughout the supply chain. The company is also using advanced technologies such as telematics and augmented reality in its warehouses to improve efficiency.
While the name “Inditex” is largely unknown to most U.S. consumers, the Spanish company is better known for its Zara brand, one of the most popular online fashion retailers. The secret to Zara’s success is its focus on Big Data and analytics to identify and then capitalize on current design and fashion trends by converting voice-of-the-customer feedback into finished products in a go-to-market timeframe much shorter than traditional fashion retailers.
H&M, a Swedish fast-fashion retailer, has built its supply chain reputation on its ability to produce 80% of its products via a build-to-plan model, and the remaining 20% being adaptable to changes in fashion trends that allow products to go from design to delivery in a store in less than three weeks. Gartner’s analysts also note the retailer is rapidly expanding its brick-and-mortar stores footprint, with 425 store openings planned for 2016, mostly in the U.S. and China.
Late last year chip manufacturer Intel completed its deal to acquire rival Altera, which will occupy much of its operational strategy this year as it expands into new markets. Also, Intel’s supply chain is serving as a test bed for new products developed by its Internet of Things division, points out Gartner’s analysts, where the goal is to improve the visibility of both inbound deliveries and outbound shipments.
Gartner omits airlines, package delivery companies and shipping companies from consideration for the Top 25 rankings, which leads to the obvious question: Should online retailer Amazon be dropped from the rankings? After all, Amazon is registered as an ocean freight forwarder, owns 30% of a cargo airline and is reportedly interested in buying an entire airport in Germany, offers an Uber-like Flex delivery service, and is developing the infrastructure to enable delivery drones. Many have speculated that Amazon, for all intents and purposes, is already more of a logistics company than a retailer. Be that as it may, there’s no denying that Amazon has one of the most prominent—and dominant—supply chains in the world.
It’s probably not fair to compare McDonald’s proficiency with inventory turns against the other members of the Top 25; at 156.0, the hamburger retailer’s next-closest competitor is Samsung (14.8). It is a bit of a surprise seeing McDonald’s perched in the # 2 slot in the list, given how frequently the company has been written off by the national press as passé and out of touch with the Millennial generation, which is said to be more interested in locally sourced, farm-to-fork foods than the mass-produced burgers-and-fries served up by McDonald’s. But the company leveraged its supply chain to expand its menu to include all-day breakfast items, and its collaboration with suppliers remains a key differentiator.
So how did Unilever end up grabbing the top spot on this year’s Top 25 rankings? If you dig into the fine print of the metrics, a lot of it is because Gartner’s analysts themselves were more impressed by Unilever than they were by any other company. The peer voters were clearly more impressed with Amazon (which garnered 3,356 points) than with Unilever (a distant second at 1,841 points). Also, Unilever scored a perfect 10 on the corporate social responsibility metric, a new category that Gartner just invented for this year’s rankings, and an area where the company has clearly staked a claim for thought leadership, with far-reaching sustainability goals. Unilever also has invested in regional operational centers that support its customer order-to-cash process, which in turn is leading to significant cost savings.
Consumer packaged goods giant Procter & Gamble, like Apple, is no longer considered part of the Top 25, having reached the status of Supply Chain Master since it’s proficiency and consistency place it in the pantheon of supply chain greatness (at least, as Gartner defines it). If you ever wonder how P&G has gotten so good at matching its products to consumer demand, consider that the company embeds sensors in some of its products (toothbrushes, air fresheners, etc.), and passes along this consumer usage data to its sales and design teams.
Apple has been at the top of the Top 25 rankings for so long that Gartner ended up just coming up with a new category called Supply Chain Masters (for which P&G also qualifies), just so there could be fresh blood at the top of the “regular” rankings. Interesting, for once Apple’s status as top supply chain dog seems to, if not be outright threatened, at least be up for discussion as the high-tech company seems to be undergoing a bit of an identity crisis, with the much-rumored development of an Apple automobile either setting the company up for a huge debacle or possibly its biggest and brashest success yet. There’s not much middle ground when it comes to Apple, which continues to rely on its supply chain proficiency to deliver both consumer gadgets and digital products in huge numbers.
Our look at the Top 25 (plus 2) Supply Chains of 2016 uncovers what the best companies in the world do, or are trying to do, to excel at managing their global supply chains.
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