Supply Chain Management's Top 25

AMR Research today identified its Supply Chain Top 25 for 2005, or "those manufacturers and retailers that exhibit superior supply chain capabilities and performance," according to the study. Dell, Procter and Gamble, and IBM represented the top three. Rankings were based on each company's financial data and past supply chain performance, which represents 60 percent of the total score. The second component of the ranking is AMR Research's opinion, which represents the remaining 40 percent. According to Kevin O'Marah, vice president of research at AMR, the study found that those companies that practice successful demand-driven supply networking (DDSN), or the strategy of taking customer demand, supply chain, and product development into account to drive products to market, are likely to carry 15 percent less inventory, are 60 percent faster-to-market with products and/or services, and complete 17 percent more orders. "These advantages separate the predators from the prey," O'Marah said during today's Webcast on the subject. "Business and financial leaders have come to recognize the importance of supply chain. These 25 companies are defining the future of supply chain and giving their companies a predator's edge." DDSN represents a new, conceptual approach to supply chain management (SCM), according to O'Marah. In the past a company most likely would derive its SCM based on its production and manufacturing capabilities and schedules. To compete in today's marketplace, companies must draw from customer demand and service, supply management--which includes sourcing, manufacturing, distribution, and product design and innovation. In addition, DDSN can only work with "massive amounts of IT investment," said Tony Friscia, CEO of AMR Research. IT projects need to connect work processes to increase speed, quality, and profitability of everything from customer orders to new product launches. Necessary systems include electronic data interchange (EDI) systems, ERP, SCM, and PLM, according to Friscia. "Yes, there was oversell during the '90s tech boom, and the perpetual license sales model was bad for customers, but the systems work," Friscia said on the Webcast. "DDSN leaders are getting plenty of return on investment, provided they blend best practices and innovative IT applications, and don't rely exclusively on packaged software." Companies must place executives to lead each of the three areas of responsibility associated with DDSN: product, supply, and customer demand. Rounding out the top 10 are Nokia, Toyota Motor, Johnson and Johnson, Samsung Electronics, Wal-Mart, Tesco, and Johnson Controls. O'Marah cited Motorola (rank 15), Best Buy (17), and Nike (21) as benchmarks for other companies to follow. All three companies have some basic similarities that others should keep in mind, including establishing the proper metrics to measure and communicate both operational excellence and innovation, according to O'Marah. "Nike is a great example of a company that used go-to-market strategy to completely alter that industry. These guys have convinced us to buy lots of pairs of shoes. Best Buy has great SCM to determine which are the hot electronic items and to get those items to market quickly. Motorola is a classic example of company turning itself around." Related articles: CRM Meets SCM SOA Continues to Pick Up Steam