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Gartner cites global resiliency, partnerships of top 25 supply chains

David Essex

Successful companies work closely with partners to build resilient “value chains” that extend the supply chain to functions such as new product development and customer service, Gartner Inc. said in its seventh annual ranking of the top 25 supply chains.

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Apple was top-rated for the fourth straight year, while fellow manufacturers 3M, Kraft Foods and Nestle made the list for the first time. Research in Motion (RIM), maker of the BlackBerry smartphone, rode strong three-year revenue up five spots to fourth place after debuting in the rankings last year. 

“It’s striking, when you look at the list, that there are less heavy industrial companies than, for example, high-tech or consumer companies,” said Debra Hofman, a research vice president at the Stamford, Conn-based firm and co-author of the report. “Leadership is connected to [supply chain] visibility. If you are a company that is doing great things, but nobody knows about it, that’s not leadership. The heavy industrial companies tend not to be as visible.”

The economic downturn showed companies the importance of giving trading partners supply chain tools to respond to lingering demand volatility, according to Hofman. “They’re not just worrying about their own ability to deliver predictably but also being able to help out their trading partners,” she said. “It’s a value network perspective as opposed to a single-enterprise perspective.” Gartner has also noted a trend toward appointing global heads of supply chains and executing in truly global -- not simply multinational -- fashion. Increasingly, that means selling into overseas markets instead of just sourcing from them.

The companies use a variety of either vertical or horizontal approaches to successfully integrate their value chains, according to the report. Samsung, for example, has always owned its supply chain, while The Coca-Cola Co. and PepsiCo acquired their largest bottlers. In contrast, Cisco and Microsoft do it through extensively outsourced networks of trading partners. “The key isn't whether a company owns all the pieces of its network -- it's how well it controls the outcome of the activities that take place in the network,” the report stated.

The top 25 also execute their supply chain strategies by replicating localized best practices throughout their organizations, a complex task that calls for new governance and change management strategies. Those that are better at executing Gartner’s vision for the demand-driven supply chain -- companies it calls “orchestrators” -- are also more willing to defy conventional wisdom, the report stated.

Apple rewrites the supply chain rules
Gartner ranked the largest manufacturing, retail and distribution companies in the Fortune 500 by several financial measures, including inventory turns, as well as the opinions of peers and analysts. The list used to be published by AMR Research, a company Gartner acquired in December 2009.

Manufacturers dominated the top five, with mainstays Apple, Dell, Procter & Gamble and RIM joined by Amazon, another newcomer to the upper echelon. Other manufacturers on the list include Colgate-Palmolive, IBM, Intel, Johnson & Johnson, Nike, Tesco and Unilever.

Apple blew away all competitors with a composite score 65% higher than No.2 Dell’s, thanks to chart-topping peer votes and healthy, three-year revenue growth. “They certainly had some hiccups this year,” Hofman said, citing iPad stockouts and delays caused by the Japan earthquake. “One of the interesting things about Apple is they go beyond supply chain best practices and break all the rules and make their own.”

Gartner called out other perennial winners for continuing to push the envelope in supply chain innovation. It complimented Dell for radically redefining itself and diversifying beyond its build-to-order heritage with storage and business solutions supported by a segmented supply chain. No. 6 Cisco leads with customer value chain management, risk management and regionalized supply chains, while Hewlett-Packard continues to wring costs out of its low-margin businesses, Gartner said.

Among this year's newcomers, Hofman cited Unilever for its virtual manufacturing network that helps the company standardize operations while maintaining local management. “They manage sites around the globe as if they were one,” she said. Diversified manufacturer 3M excels at translating its reputation for innovation into launched products: “They credit their supply chain with being able to accelerate speed to market and ride the sales growth that they have.” Kraft Foods gets strong peer and financial ratings from its superior demand management, while Nestle excels at selling overseas, she said.

Falling off the list were Best Buy, Lockheed Martin, Nokia and Schlumberger. “Most of them were dropped because of their financials, and they didn’t drop very far,” Hofman said, adding other companies’ growth shifted the relative rankings for everyone.  

Lessons from the top 25 supply chains
Taking cues from the top 25, Gartner advised companies to take the following steps:

  • Improve resiliency by spreading supply chain processes and methodologies throughout their partner networks to deliver predictable results. 
  • Supplement long-term value-chain visions with strong, agile execution that pushes performance boundaries.
  • See their supply chains through customers’ eyes by internalizing customer needs and building customer feedback into supply chain design.
  • Consider both basic supply chain capabilities and more innovative approaches for differentiating themselves through a constant focus on governance, change management and culture.

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