Top Performing Supply Chains: an Innovative Approach for Teaching Supply Chain Management

Supply chain management is critically important for organizational success in today’s global business environment. Organizations formulate various strategies to enhance supply chain performance and are continually seeking ways to gain a competitive advantage. This paper highlights one specific strategy: the Demand-Driven supply network (DDSN). Gartner (formerly AMR Research) has published the Top 25 Supply Chains for several years with DDSN being a main feature of companies on that list. This paper will discuss how the Top 25 can be used in various ways to teach supply chain management and to do research about top performing supply chains. We will also discuss lessons learned while using the Top 25 in the classroom. Introduction Today’s global supply chains are extremely complex and achieving a competitive advantage very often depends on managing the supply chain effectively. The number of exchanges that occur in the overall process of planning, sourcing, making and delivering products, services and the related supply chain information translate to a large number of relationships which must be managed. As these exchanges occur and the material moves through a series of providers and ultimately reaches consumers, the efforts of several parties need to be aligned – this is referred to as the supply chain [18]. The following definition for “supply chain management” also highlights the need for integration and coordination: “Supply chain management is the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders” [10]. This description emphasizes the need to coordinate across the entire network of companies in the supply chain. Supply chain effectiveness depends on the management of each critical relationship at each link of the supply chain. For the above reasons, supply chain management continues to be a topic of great interest to teachers, students and practitioners. Because of the continued strong interest in supply chain management, looking at companies that are very successful with their supply chain initiatives may hold many worthwhile lessons for use in the classroom and in research. Gartner/AMR Research has assisted our efforts tremendously by evaluating and publishing the Top 25 Supply Chains for the past seven years. This list recognizes those companies that have achieved a high level of success in their supply chain performance. Gartner also provides some fundamental performance metrics and descriptions of company performance along with the Top 25 list. Lee offers the following list of characteristics or “six rules of thumb” for designing agility into the supply chain: “Provide data on changes in supply and demand to partners continuously so they can respond quickly. ... Ensuring that there are no information delays is the first step in creating an agile supply chain. Develop collaborative relationships with suppliers and customers so that companies work together to design or redesign processes, components, and products as well as to prepare backup plans. Design products so that they share common parts and processes initially and differ substantially only by the end of the production process. I call this strategy “postponement.” ... This is often the best way to respond quickly to demand fluctuations because it allows firms to finish products only when they have accurate information on consumer preferences. Keep a small inventory of inexpensive, non-bulky components that are often the cause of bottlenecks. Build a dependable logistics system that can enable your company to regroup quickly in response to unexpected needs. (this can be accomplished through an alliance with a third-party logistics provider). Put together a team that knows how to invoke backup plans” [11]. Many of these elements have been utilized successfully by such companies as Hewlett Packard [4][12][13][14][15] and Dell Computer [16]. Both of these companies also appear in the Gartner/AMR Research Top 25 list on a consistent basis [5][6][7]. Demand Driven Gartner/AMR Research has publicized the term “demand-driven supply network” in the course of their published research about the leading supply chains known as the Top 25 Supply Chains [3]. The term “demand-driven supply network” is a prominent factor within the discussion of the Top 25 Supply Chains in the annual publications that accompany the release of the list [1]. A demand-driven supply network (DDSN) “is a system of technologies and business processes that sense and respond to real-time demand across a network of customers, suppliers and employees” [3]. “DDSN leaders are ‘demand sensing,’ have more efforts for ‘demand shaping,’ and focus on a profitable ‘demand response’ [3]. Gartner/AMR is the leading promoter of the “demand driven” concept. According to Gartner/AMR: “The report identifies the top 25 manufacturers and retailers that exhibit superior supply chain capabilities and performance. Supply chain leaders are able to shape demand, instantly respond to market changes, and crush their competitors. According to AMR Research benchmarking data, leaders carry 15% less inventory, are 60% faster-to-market, and complete 17% more perfect orders. These advantages separate predators from prey” [1]. The criteria for selection to the Top 25 list are as follows: “The first component of the ranking is publicly available financial data and is weighted at 60% of the total score, with return on assets and inventory turns each accounting for 25%, and trailing 12 months growth accounting for 10%. The second component of the ranking is AMR Research’s opinion, which is weighted at 40% of the total score. The opinion component is based on a structured voting methodology across AMR Research’s team of analysts” [1]. Over the years the selection criteria for the Top 25 has been modified. The most recent criteria are: 25 percent for Peer Opinion, 25 percent for Gartner Opinion, 25 percent for 3-Year Weighted Return-on-Assets, 15 percent for Inventory Turns and 10 percent for 3-Year Weighted Revenue Growth. Each evaluation category is then combined into a final Composite Score [5]. Companies in the Gartner Top 25 for three recent years are listed in Table 1: Table 1. Top 25 Supply Chains from Gartner Rank 2011 Companies 2010 Companies 2009 Companies 1 Apple Apple Apple 2 Dell Procter & Gamble Dell 3 Procter & Gamble Cisco Systems Procter & Gamble 4 Research in Motion Wal-Mart Stores IBM 5 Amazon.com Dell Cisco Systems 6 Cisco Systems PepsiCo Nokia 7 Wal-Mart Stores Samsung Electronics Wal-Mart Stores 8 McDonald’s IBM Samsung Electronics 9 PepsiCo Research in Motion PepsiCo 10 Samsung Electronics Amazon.com Toyota Motor 11 The Coca-Cola Company McDonald’s Schlumberger 12 Microsoft Microsoft Johnson & Johnson 13 Colgate-Palmolive The Coca-Cola Company The Coca-Cola Company 14 IBM Johnson & Johnson Nike 15 Unilever Hewlett-Packard Tesco 16 Intel Nike Walt Disney 17 Hewlett-Packard Colgate-Palmolive Hewlett-Packard 18 Nestle Intel Texas Instruments 19 Inditex Nokia Lockheed Martin 20 Nike Tesco Colgate-Palmolive 21 Johnson & Johnson Unilever Best Buy 22 Starbucks Lockheed Martin Unilever 23 Tesco Inditex Publix Super Markets 24 3M Best Buy Sony Ericsson 25 Kraft Foods Schlumberger Intel Source: [5][6][7] Teaching Demand-Driven Concepts The Gartner/AMR Top 25 Supply Chains provides a widely recognized list of outstanding performers who leverage their supply chains to full advantage. These companies are excellent examples to use in classroom discussion or to assign for student research projects. The author has used the Top 25 list in several ways for student assignments for the past six years at two different universities. The following section offers a few examples of class assignments related to the Top 25. Example Class Assignments There are many ways to utilize the Top 25 Supply Chains and many of the examples have been classroom tested by the author. In this section we describe several examples of class assignments that have been utilized with the undergraduate supply chain class. Assignment Example #1 Compare ONE company from the Gartner Top 25 Supply Chains with ONE company that is not in the Gartner Top 25 (or even the Top 100). Discuss strengths or special characteristics; discuss the differences between the two companies; provide some recent performance numbers to compare the two companies (do more than just one quarter). The Research Paper should be 5 to 8 pages in length. Follow the APA format guidelines. List your References and cite your References appropriately in your paper. STUDENTS DO NOT use the following companies: Wal-Mart, Dell, UPS and FedEx Assignment Example #2 This assignment was used for Term Papers during Spring 2007, Spring 2008, Fall 2008, Spring 2009, Fall 2009, Fall 2010, Spring 2011, Fall 2011 and Spring 2012. The following list was provided as suggestions for students to consider: What can we learn from AMR’s Top 25 Supply Chains? How do suppliers contribute to the Top 25 Supply Chains? (give specific examples) Supply Chain Integration and the Top 25 Supply Chains In depth analysis of 2 or 3 companies listed in the Top 25 Supply Chains Detailed description of the Demand Driven Supply Network (DDSN) You can find some of the basic information by doing a Google search for “Gartner Top 25 Supply Chains” or “AMR Top 25 Supply Chains”. These example assignments are suggested uses for the Top 25 Supply Chains. We would not recommend utilizing all approaches in a single class. These assignments have been used in classes with excellent results. Some Classroom Results Overall, the use of the Top 25 has been a great addition to the Supply Chain and Production and Operations Management (POM) classes. The students are able to research widely known companies such as Proctor and Gamble, Toyota, Nokia, Apple and Coca-Cola. These assignments have been used for a Supply Chain Logistics course in a Distribution and Logistics undergraduate program and the assignments have also been adapted for the POM course in the College of Business. Some of the statistics for the most recent semesters are shown in Table 2 on the following page. Some version from the five example assignments have been used for the most recent academic years from 2009 through 2012. A majority of the students have continued to elect the Top 25 Supply Chain companies as part of their assignment during those years. The most popular topics for the few students who did not select a Top 25 topic included: Green Supply Chain, Reverse Logistics, and Supply Chain Relationships. These topics were among the options available in specific classes or they were approved by the instructor. Table 2. Student Frequency for Top 25 Assignments Semester Number Electing Top 25 Topic Total Students in Course Section