The following posting can also be viewed in the Kinaxis Supply Chain Expert Community.

While the intent is noble, the ranking of corporate supply chains can be a risky proposition and a slippery slope.  A lot has to do with ranking methodology, screening criteria and qualitative weighting factors.  An industry analyst can sometimes dread the final rankings since certain firms can take exception as to why they were not included or even considered in such rankings.

The AMR Research/Gartner Top 25 supply chains ranking seems to be that which captures the most interest among our supply chain community.  AMR’s noted criteria for ranking its Top 25 includes 50% weighting for financial performance (ROA, inventory turns, revenue and profit growth) and 50% qualitative, meaning individual analyst and peer industry nominations. Much dialogue and discussion can be made regarding who made or was not included in the ranking, and this commentary is not about such. In the end, I suppose we should be able to agree that the most important criteria in evaluating any firm’s supply chain is whether these capabilities helped that firm to be the best performing company in its industry.

I was  reading Bloomberg BusinessWeek magazine and noted its June 21 cover article, the Annual Ranking of the 50 Best-Performing Companies. BW’s overall ranking has a context of delivering maximum stockholder value, which happens to be a rather important measure attributed to supply chain capabilities.  The ranking is further noted to be firms that have the top performance in the Standard and Poors 500 stock index over the previous five years. BW notes: “In a period of tremendous economic turbulence, these stocks returned an aggregate 222.3 percent to shareholders, including reinvested dividends.” We often communicate to senior management that the true benefits of supply chain capability do not necessarily come in any one year, but are a result of many months of building process competency and customer intimacy. Thus a five year horizon can be a meaningful benchmark measure.

In the interest of getting some constructive dialogue started, let’s contrast the top five firms listed on the BW ranking with the AMR ranking.  If one screens out non-manufacturing or supply chain centric firms, only two companies stand out: Intuitive Surgical (#2), and Apple (#4).  Apple ranks #1 within the AMR/Gartner ranking, while Intuitive Surgical revenues failed to make the threshold for the AMR/Gartner revenue screening criteria. Apple is no surprise to appearing on both rankings.

Now look at the 6 through 25 ranked firms, and the following manufacturing, retail, or supply chain related firms are noted in BW’s ranking:

Flowserve- (#7)

FMC Technologies- (#8)

Cliffs Natural Resources- (#9) (#10)

Titanium Metals- (#11)

Cummins- (#12)

Celgene-  (#13)

Precision Castparts-  (#15)

Western Digital-  (#18)

Big Lots- (#19)

Cameron International- (#20)

Airgas- (#21)

CSX- (#23)

Occidental Petroleum- (#25)

Within this BW grouping, the AMR/Gartner ranking only noted, concurring as #10.  Select names on the AMR/Gartner ranking such as Hewlett-Packard (AMR #15, BW #28) or McDonalds (AMR #11, BW #31) did not make the top twenty- five BW cut.

Are there some observations contrasting these two rankings?    I can note some.

Company size certainly stands out as a difference.  Is supply chain capability contributing to bottom-line performance just as pertinent to smaller vs. multi-billion dollar firms? Are smaller firms characteristically more agile in their ability to take advantage of market opportunities?  Should differentiating based on company size be considered in ranking of supply chains?

Specific industry needs and profile is another obvious consideration.  In times of global recession, certain industries fare better than others.  Companies that grew during the recession could invest in supply chain, while those that declined or were flat, most likely had to reduce costs or capabilities in supply chain.

What other observations or pointers do you observe from contrasting these two rankings?

Bob Ferrari