On Linked-In Pulse, noted MIT supply chain thought leader, author and fonder of the MIT Center for Transportation and Logistics (CTL), Yossi Sheffi penned a timely and well-articulated editorial calling for better measures of supply chain success, particularly when it concerns ratings of certain industry supply chains. We wanted to call Supply Chain Matters reader attention to this insightful editorial because it is long overdue in our supply chain community. It further echoes some of the very concerns and frustrations that this particular editor has been penning in prior Supply Chain Matters commentary.
Professor Sheffi makes specific mention that Gartner’s Top 25 supply chain ranking is one of the most followed indices but questions if it really provides meaningful assessments of the best performing supply chains. He argues that the assessment criteria may be flawed, and that supply chain teams get a false impression of what it takes to build and sustain excellent supply chains in particular business sectors. As Dr. Sheffi observes: “some supply chain leaders may get undeserved kudos while others receive criticism despite achieving strong performances.” Various industry supply chains have far different needs and requirements in supporting business objectives and outcomes.
Dr. Sheffi’s other pearl of wisdom is directed at peer ranking. He opines: “Apportioning more than approximately 10% of a company’s overall score to peer reviews is excessive and not reflective of reality, unless the peers are from the same industry or similar industries.”
We will not take away from the full impact of Professor Sheffi’s arguments and conclusions and encourage our readers as well as specific industry analyst firms that publish rankings to thoroughly read and absorb this well-timed editorial.
As noted in our Supply Chain Matters commentary in May of 2013, too often; these ranking exercises have far too much weighting towards specific financial metrics that depict outsourcing of supply chain assets and resources in a favorable context. Apple’s supply chain strategy and consequent top ranking is the best example, while Apple’s prime contract manufacturers or key suppliers hardly receive any prominent ranking. Heavy dependence on financial metrics of performance precludes noteworthy turnarounds in performance, overall supply chain process innovation and abilities to rise to a challenge in rather difficult industry settings. Privately-held companies and those from emerging markets are often precluded from rankings that place the majority of emphasis on financial metrics.
One wonders if certain retailers had not taken the risk to accelerate inventory investments in anticipation of a possible west coast port disruption, or bit the bullet to airfreight inventory at the last minute in order to achieve customer holiday fulfillment goals. While there certainly was consideration for financial impacts, customer responsiveness and grand loyalty was another weighted criteria.
Bravo to Professor Sheffi for once again challenging existing thought processes and criteria for how our community should measure supply chain success.