Summary
This research unveils the 11th annual global Supply Chain Top 25, identifying
global supply chain leaders and highlighting their best practices for heads of
supply chain and strategy organizations.
Overview
Key Findings
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Three key trends emerged among the leaders: bimodal supply chain strategies, increased
customer intimacy and emerging digital business models.
The top five include three from last year — Amazon, McDonald's and Unilever — one
returning leader, Intel, and a newcomer to this elite group, Inditex.
Apple and P&G are the two inaugural companies joining a new Masters category
recognizing sustained leadership over the last 10 years.
Three companies rejoined the list this year after a lengthy hiatus: L'Oréal, Toyota and
Home Depot.
Recommendations
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Tailor your supply chain capabilities and align them to support both growth and cost
efficiency where they are needed most by the business.
Make customer experience a first-tier metric in your supply chain organization.
Explore and adopt digital business capabilities in the areas best suited to your industry,
business model and supply chain maturity level.
Table of Contents
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Analysis
o
The Notable Trends
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Bimodal Supply Chain Strategies
Increased Customer Intimacy
Emerging Digital Business Models
Inside the Numbers
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Introducing the Supply Chain "Masters"
The Top Five
Movers and Shakers: No. 6 Through No. 15
Rounding Out the List: No. 16 Through No. 25
Honorable Mentions
What Is Demand-Driven Excellence?
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Operational Excellence and Innovation Excellence
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Measuring Demand-Driven Excellence
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 The Metrics We Wish We Had
Supply Chain Top 25 Methodology
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Financial Component
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Opinion Component
Polling Procedure
Composite Score
New "Social Vote" Pilot
Looking Ahead
Gartner Recommended Reading
Tables
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Table 1. The Gartner Supply Chain Top 25 for 2015
Table 2. Metrics for Operational Excellence and Innovation Excellence
Table 3. Industries Not Included in the Supply Chain Top 25
Figures
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Figure 1. Gartner Supply Chain Masters for 2015
Figure 2. The DDVN Maturity Journey
Figure 3. The Hierarchy of Supply Chain Metrics: Operational Excellence
Figure 4. The Hierarchy of Product Metrics: Innovation Excellence
Figure 5. 2015 Peer Opinion Panel Composition: Region
Figure 6. 2015 Peer Opinion Panel Composition: Industry
Figure 7. 2015 Peer Opinion Panel Composition: Role
Figure 8. 2015 Peer Opinion Panel Composition: Revenue
Analysis
In our 11th edition of the Supply Chain Top 25, we have several longtime leaders with new
lessons to share and a number of more recent entrants from the high-tech, consumer products
(CP), retail and industrial sectors.
A key aspect of the Supply Chain Top 25 ranking is the demonstration of demand-driven
leadership. We've been researching and writing about demand-driven practices since 2003,
highlighting the journey companies are taking — from inward-focused supply management
functions to supply chains that orchestrate a profitable response to demand.
One of our goals is to foster the celebration and sharing of best practices as a way to raise the
bar of performance for everyone. Another objective of the Supply Chain Top 25 is to shine a light
on the importance of the function and profession — within our community certainly, but also for
corporate executives outside of supply chain and the investment community, at large.
Last year, the CEO's mantra was the need to accelerate growth, and supply chain did its part to
contribute. In the face of an uneven global economy, the approximately 300 large corporations
we track in our survey managed to boost average annual revenue growth from 3.1% to 4.7%.
This came despite slowing emerging markets and significant currency fluctuations. No one
predicted the crash in oil prices over the second half of 2014, though most in supply chain
reaped the benefits of lower fuel and input costs.
Generally, we heard less about supplier risk management in the past year. Our hypothesis is that
companies have either attacked their major risks with enhanced upstream visibility and flexible
capacity or have struggled with a lack of management support to mitigate them. Of course, there
will always be a crisis unfolding somewhere each year and one that did so in slow motion was
the U.S. West Coast port closures that peaked earlier in 2015.
The Notable Trends
Each year, our analysts research the supply chains of hundreds of companies. Through this
work, we note the trends: What are the leaders focusing on, where are they investing time and
effort and what can be applied broadly? Three key trends stand out this year for these leaders
that are accelerating their capabilities and further separating them from the rest of the pack.
Bimodal Supply Chain Strategies
Chief supply chain officers (CSCOs) and their teams face an environment where business
models must change quickly, where the expectation is that they will spend as much or more time
growing and innovating as they will streamlining and promoting efficiency. Gartner has termed
this reality "bimodal." Traditionally, supply chain executives have been successful because they
were good at driving down costs. The leaders now realize they will be judged on cost
containment as well as the ability to promote and support the top line.
In parts of the business with innovative products and solutions, these leaders help promote
organic growth through timely supplier enablement, co-innovation and active participation in the
phase gate release process to enable smooth new product launches. When growth comes from
selling in new geographic markets, supply chain is a full partner with marketing, sales, finance
and R&D, and plans for the required enablers well in advance. This often takes the form of local
sourcing, manufacturing, order management and logistics capabilities. Moreover, leading supply
chains have already developed deep partnerships with IT and HR to jointly deliver the systems
and talent needed to implement these capabilities. Another pillar of growth that we've seen
accelerate across most industries is the effective integration of mergers and acquisitions (M&As).
The more mature supply chain organizations that we speak with have dedicated teams and
established playbooks for assessing the current and required capabilities of new businesses and
determining the best transition roadmap.
The other mode for these leading supply chain teams is the continued pursuit of improvement
and efficiency in mature and declining businesses. High-performance work systems are used to
identify and pare out non-value-added complexity in product portfolios and operational processes
to remove waste and improve profitability. Many of the companies at the top of the Supply Chain
Top 25 are running integrated supply chains that can drive the appropriate trade-offs across
individual functions for lowest end-to-end supply chain cost. They have also matured
relationships with commercial and engineering teams in the business to drive standardization
and reuse at the beginning of the product life cycle, and financial-based methods to evaluate
which products need remediation or removal from the portfolio later in the cycle.
Some leaders have strategies tailored to different business units, while others differentiate by
major geography or individual markets. The common thread across them is a clear and
cascading link between corporate and supply chain strategies, performance metric targets,
business processes, technology and talent.
Increased Customer Intimacy
Another trend is a focus on customer experience as a measured priority in supply chain
organizations. Some of the leading companies are tracking customer satisfaction measures,
such as Net Promoter Score (NPS), as a first-tier metric for their organizations. Independent of
the product being sold, leaders are focused on listening more closely to their customers and
responding with innovative solutions. We see this happening not only in the CP/retail space, as
expected, but also across the industrial manufacturing sectors.
Global digital commerce now stands at north of one-trillion dollars, and push-of-a-button-type
convenience has become an expectation, whether delivery is taken at home or at a physical
store. Many of the more mature CP companies have regionalized customer service organizations
to standardize and raise the overall quality of their interactions with customers. They have also
built multilocal supply networks that enable agile responses to demand by staging capacity local
to each region.
This year, we heard from more companies extending visibility and insight beyond first-line
customers and moving on to the end users of their products. Their supply chains are not just
collecting data concerning the details of the sale, but also the patterns of usage and resulting
sentiment of the end user. Consider that several leading PC and mobile device manufacturers
are starting to think about product quality from both the perspective of performance-tospecification and performance-to-expectations. For instance, if a consumer is used to looking at
high resolution screens on their smartphone and media tablet, they might think that the screen on
their computer is functioning poorly if the clarity and brightness of the images are lower by
comparison, despite performing to specifications. Mining of online sentiment data allows for
these types of connections to be drawn and fed back to design teams for future product releases.
Remote equipment monitoring is another popular mechanism for gathering end-user insights and
for assisting with preventative maintenance. We see applications of this capability increasing at
leading industrial machinery companies and high tech manufacturers, as well as in the consumer
world of health monitoring products, home office equipment and others.
Ultimately, delighting customers with strong operational supply chain performance, when
combined with improved solution performance, will lead to measurable improvements in
customer satisfaction and contributions to the top line. This is yet another way that leading supply
chain organizations are becoming partners in growth with the business.
Emerging Digital Business Models
While still a nascent concept, the view on how supply chain can leverage digital capabilities to
support new business models and improve broader value chain performance became clearer this
year. Manufacturing is the center of many digital capabilities, including predictive quality, energy
management and smart automation, all leveraging sensors and advanced analytics. Moreover,
leading companies recognize that "the factory" is not just somewhere inside the four walls of the
company or an outsource partner. Digital synchronization of manufacturing lines with upstream
suppliers and other supply chain functions is where the business value starts to multiply. The
automotive and chemical industries offer a leading vision of where digital manufacturing can go
next in terms of these capabilities.
The logistics function is not far behind manufacturing in terms of automation using sensors,
gateways, tracking systems and business rules to predict and alert when there will be a variance
to the current plan of record. For example, the rapid emergence of online ordering has forced
retailers into the digital world of multichannel order management and fulfillment that requires
increased visibility. Logistics control tower capabilities are not new, but when combined with
more affordable sensors and computing power, they portend the democratization of deeper
visibility that can reduce risk and improve both operating costs and customer-service levels for
many companies.
The use of big data and advanced analytics to improve demand visibility is somewhat
commonplace among the top consumer-facing supply chains, though some are taking it to a
higher level. Some smartphone manufacturers are replenishing supply and offering additional
services based on device activations. A handful of consumer goods companies are using hourly
SKU-shelf-level visibility to surgically manage supply during critical promotional and seasonal
events.
3D printing is yet another digital-based technology having transformative effects on select
processes at leading companies. Many industrial and high-tech companies are leveraging it to
manage their equipment spares. Consumer-facing companies are using 3D printing to quickly
prototype and manufacture high-mix, low-volume packages and containers for their products.
Human organs, food, building materials — the list of potential applications is long and, as the
variety of "printable" materials increases, more industries will add this form of instant agility to
their toolkit of supply chain capabilities.
One final impact of these digital business models is that they create a new growth opportunity for
the technology companies that sell the hardware, software and talent to support not only
themselves, but the rest of the industry.
Bimodal supply chain strategies, increased customer intimacy and emerging digital business
models are this year's most common trends among supply chain leaders.
Inside the Numbers
Introducing the Supply Chain "Masters"
This year we are introducing a new category to highlight the accomplishments and capabilities of
long-term leaders. At the same time, we want to create room for growth and visibility of even
more newcomers. We are, therefore, recognizing those companies that have consistently had
top-five composite scores for at least seven out of the last 10 years and placing them into a
"masters" category, separate from the overall Supply Chain Top 25 list. In this inaugural year for
supply chain masters, we want to recognize two companies demonstrating sustained leadership:
Apple and P&G (see Figure 1).
Figure 1. Gartner Supply Chain Masters for 2015
SOURCE: GARTNER (MAY 2015)
Like a bolt out of the blue, Apple appeared at No. 2 on the 2007 Supply Chain Top 25 ranking,
having not passed our revenue threshold during the prior two years. From 2008 through 2014,
Apple sat at the pinnacle of the ranking, pulling far ahead of the pack on every component score,
including all financials and opinion polls. There were a few one-word reasons for this sudden and
sustained dominance: iPhone, ecosystem and solutions. The fact that many of us now begin and
end our days with smartphone in hand is directly related to the sheer amount of functions they
offer, and Apple has been a crucial driver behind this phenomenon. While there were mobile
devices that previously provided parts of the current solution, no company, up until that time,
brought it all together with beautiful hardware, intuitive software, hundreds (if not thousands) of
useful applications and entertaining content.
Skeptics point to the fact that for the most part, Apple's products are mainly "designed in
California" and "assembled in China," but the reality is that it takes skill and, in some cases,
sheer will to orchestrate the design, development and high-volume launch of highly integrated
products across a network of hardware, software, manufacturing and logistics suppliers. Apple
has chosen to mostly insource areas that it deems strategic, such as specialty microprocessor
and OS design, as well as retail and customer service operations. In more recent years, it has
become more vertically integrated and acquired additional suppliers of specialized hardware
components and software solutions to further its competitive advantage.
The company has always recognized the value of the digital ecosystems it creates. This started
with the iTunes and the App Store catalogs that kept consumer purchases within a walled
garden. It continues with the more recent launch of its digital wallet service, Apple Pay. Tomes
have been written on the good, bad and ugly aspects of the Apple story, but one thing is clear, a
resurgent Apple has captured the imagination of the entertainment, communication and
computing markets with the introduction of each of its devices or services. This high tech leader
demonstrates the spirit of the Supply Chain Top 25 through the integration of innovation and
operations excellence.
In stark contrast to the relatively young Apple is CP juggernaut P&G, which was founded in 1837
as a soap and candle maker. The perennial supply chain and product leader has appeared on
the top five of our ranking for nine out of the last 10 years. P&G has a long-standing history of
innovative supply chain practices, starting with the Efficient Consumer Response (ECR)
capability it built with Walmart in the early 1990s, which evolved into modern-day collaborative
planning forecasting and replenishment (CPFR) capability.
Today's P&G is redefining customer-centricity in how it measures service by adopting
differentiated performance metrics representative of the top customers in the channels it
serves. The company's global product supply officer has reported directly to the CEO for several
years, and many in the C-suite have had past stints in product supply leadership. The company
has also blended its supply chain and product R&D organizations for a seamless approach to
new product development and launch (NPDL). In the last year, the CP leader announced a
decision to shed more than half of its brand count to improve profitability and accelerate the
turnover of its customers' shelves. The 60 to 70 brands that will remain represent more than 90%
of today's profits, and P&G will focus on standard formulations with a small number of regional
variations off of a common menu.
The company's Integrated Work Systems approach in manufacturing leverages best-in-class
quality and efficiency techniques and tools to deliver progressively improved capabilities that are
eventually extended out to both customers and suppliers. P&G is also using big data analytics to
remove waste from its distribution network. This work dovetails into its commitment to improve
the environment in areas such as reduced emissions, energy and water usage, and shifting
toward sustainable inputs for its products.
Both Apple and P&G have made major contributions to the supply chain profession over the
years. P&G was one of the first to characterize and embed the concept of a consumer-driven
supply chain, and Apple, defining the very notion of a "solution" supply chain, blazed new trails
with its demand creation capabilities. We're excited to introduce this new Masters category to the
ranking, and will revisit it each year as companies enter and exit it.
Along with the Masters category, the Supply Chain Top 25 continues to offer a platform for
debate, insights, learning and contribution to the rising influence of supply chain practices on the
global economy (see Table 1).
Table 1. The Gartner Supply Chain Top 25 for 2015
Rank
1
Company
Amazon
Peer
Opinion1
(200
voters)
(25%)
Gartner
Opinion1
(35
voters)
(25%)
ThreeYear
Weighted
ROA 2
(25%)
3,394
468
0.0%
Inventory
Turns 3
(15%)
ThreeYear
Weighted
Revenue
Growth 4
(10%)
Composite
Score 5
8.7
21.7%
5.32
Table 1. The Gartner Supply Chain Top 25 for 2015
Inventory
Turns 3
(15%)
ThreeYear
Weighted
Revenue
Growth 4
(10%)
Composite
Score 5
14.6%
157.3
-0.2%
5.23
619
11.3%
6.7
-0.2%
5.15
1,064
481
12.1%
5.0
2.4%
4.09
Inditex
1,003
297
17.0%
3.8
8.8%
4.04
6
Cisco
Systems
1,147
500
8.4%
12.6
1.5%
4.01
7
H&M
809
89
26.6%
3.7
12.8%
4.01
8
Samsung
Electronics
1,568
330
10.5%
17.7
0.5%
3.91
9
ColgatePalmolive
1,034
318
17.8%
5.0
0.6%
3.91
10
Nike
1,369
214
14.5%
4.1
10.7%
3.78
11
The Coca
Cola Co.
1,938
287
8.9%
5.4
-1.0%
3.49
12
Starbucks
1,215
174
13.0%
6.8
11.6%
3.48
13
Walmart
1,794
259
8.4%
7.8
2.5%
3.39
14
3M
1,161
150
14.9%
4.2
2.7%
3.09
15
PepsiCo
890
330
8.9%
8.3
0.3%
3.04
16
Seagate
Technology
176
114
19.9%
10.8
3.9%
2.99
Company
Peer
Opinion1
(200
voters)
(25%)
Gartner
Opinion1
(35
voters)
(25%)
ThreeYear
Weighted
ROA 2
(25%)
2
McDonald's
1,626
283
3
Unilever
1,996
4
Intel
5
Rank
Table 1. The Gartner Supply Chain Top 25 for 2015
Rank
Company
Peer
Opinion1
(200
voters)
(25%)
Gartner
Opinion1
(35
voters)
(25%)
ThreeYear
Weighted
ROA 2
(25%)
Inventory
Turns 3
(15%)
ThreeYear
Weighted
Revenue
Growth 4
(10%)
Composite
Score 5
17
Nestlé
1,123
244
9.9%
5.1
2.0%
2.93
18
Lenovo
Group
771
218
3.9%
12.8
18.9%
2.89
19
Qualcomm
218
50
15.5%
8.8
17.8%
2.85
20
KimberlyClark
819
243
10.5%
5.9
0.8%
2.76
21
Johnson &
Johnson
1,192
139
11.1%
2.8
4.6%
2.73
22
L'Oréal
749
118
12.5%
2.9
2.9%
2.41
23
Cummins
148
149
11.5%
5.2
4.7%
2.16
24
Toyota
1,322
23
3.6%
10.6
13.4%
2.16
25
Home Depot
268
44
14.1%
4.6
5.6%
2.11
Notes:
1. Gartner Opinion and Peer Opinion: Based on each panel's forced-rank ordering against the
definition of "DDVN orchestrator"
2. ROA: ((2014 net income / 2014 total assets) * 50%) + ((2013 net income / 2013 total assets) * 30%) +
((2012 net income / 2012 total assets) * 20%)
3. Inventory Turns: 2014 cost of goods sold / 2014 quarterly average inventory
4. Revenue Growth: ((change in revenue 2014-2013) * 50%) + ((change in revenue 2013-2012) * 30%)
+ ((change in revenue 2012-2011) * 20%)
5. Composite Score: (Peer Opinion * 25%) + (Gartner Research Opinion * 25%) + (ROA * 25%) +
(Inventory Turns * 15%) + (Revenue Growth * 10%)
2014 data used where available. Where unavailable, latest available full-year data used. All raw
data normalized to a 10-point scale prior to composite calculation. "Ranks" for tied composite
scores are determined using next decimal point comparison.
SOURCE: GARTNER (MAY 2015)
The Top Five
Amazon claims the No. 1 spot on the ranking this year and makes its fifth appearance in the top
five. As a serial innovator, it posted a three-year weighted average revenue growth rate of more
than 20%. Conversely, its average return on assets (ROA) was 0% over the same time frame
due to continued heavy investment in future products and capabilities. Amazon's track record for
introducing widely-adopted new products and services has been impressive. On the product side
of its business, Amazon Kindle Fire tablets continue to sell well and act as a platform for
delivering content. Its phone launch did not go as well, though a future version might gain traction
in the marketplace if consumers' value proposition shifts further toward content and away from
hardware-based features. On the service side, Amazon's cloud services are the most successful
in that market by an order of magnitude.
The e-commerce giant has also demonstrated its ability to successfully launch new supply chain
services, such as same-day delivery, now available in 54 U.S. metro areas. There was a lot of
buzz last year when Amazon started testing drones for package delivery. One year later, it's
looking like that will happen in Europe and some Asian countries with more accommodating
regulatory environments than the U.S. In another out-of-the-box move, Amazon recently
announced a pilot with German automaker Audi to deliver packages directly to the trunks of
customer's automobiles, following a similar announcement with Volvo. Finally, last year, Amazon
released a series of instant ordering devices under the brand Amazon Dash, which enable
consumers to push a button on a small, product-branded fob when they need to reorder common
household items like laundry detergent, instant coffee cups and diapers. Where will Amazon go
next? Amazon opened up its first brick-and-mortar store this year on a college campus.
Regardless of how that experiment goes, its competitors will be watching closely.
McDonald's, No. 2 on the ranking, is facing significant headwinds this year — new competition
from specialty restaurants, innovative products from existing players, changing consumer tastes
and a tightening labor market with increasing wages. Internally, it has had some challenges
managing a menu that has grown more diverse over the last few years. All of these factors led to
its first negative three-year revenue growth measure since joining the ranking in 2010.
The company recently installed a new CEO that is focused on returning the restaurant giant to
growth, and supply chain is central to the success of this strategy. In March, McDonald's
announced that over the next two years, its U.S.-based stores will only serve chicken raised
without antibiotics. Given the volumes it buys, this will create a sea change in the poultry
business. It is also exploring the removal of preservatives from its food, in line with trends in
consumer preference for fresh foods. McDonald's is rolling out a custom ordering menu called,
"Create Your Taste." This service will slow down order times, so at the same time, it is removing
lower volume and velocity items from its menu, to balance the portfolio. With an understanding of
the cost-to-serve items from its menu, the supply chain, in partnership with outsource partners, is
positioned to help the company make data-driven decisions. Supply chain operations have
deepened involvement in the product life cycle to drive profitability and can help the business
strike the delicate balance between reigniting growth and stoking complexity that detracts from
profitability.
CP leader Unilever is No. 3 on the list. As part of the broader Sustainable Living Plan it launched
in 2010 to double revenue and halve its environmental impact by 2020, the company recently
announced that it had achieved its goal of sending zero waste from all factories to the landfill, a
year ahead of schedule. A big part of the company's success comes from its partnership with
suppliers. Borrowing a page from the automotive and A&D playbook, it is now forging
multicompany relationships between suppliers to foster deeper collaborative innovation on
ingredient design and manufacturing processes.
Unilever is rolling out regional centers of excellence (COEs) for customer service and logistics.
Pilot results are showing improved speed-to-response and more efficient teams as a result of the
colocation of these functions. The more centralized structure has also improved end-to-end
visibility through the adoption of logistics control towers and enabled network optimization across
a broader scope. Unilever's supply chain is viewed as a partner in growth and one example of
that comes through its low-cost business model, which is focused on smarter formulations and
packaging, material specifications, sourcing, portfolio deployment and pricing, all in partnership
with suppliers. With collaboration in its corporate DNA, Unilever's supply chain team has also
embraced a broader role in spreading best practices across the entire community.
Intel, at No. 4, is another company whose supply chain has risen quickly up our ranking over the
years. Its supply chain vision includes delivering on five key vectors that drive Intel's competitive
advantage in the marketplace: technology leadership, manufacturing scale, agility,
responsiveness and social responsibility. Intel's supply chain has taken on an expanded
partnership role as an enabler of growth in new product markets. In recent times, that has meant
media tablets and solutions that leverage the "Internet of Things" (IoT).
In 2014, Intel went from selling almost no media tablet chips to over 40 million of them. Beyond
the ability to successfully supply and ramp new products, this is a story about building a new
ecosystem of hardware and software suppliers and contract manufacturers to work with in China.
Another business where Intel's supply chain is part of the go-to-market approach is the IoT,
which includes market verticals around transportation, smart buildings and industrial
manufacturing applications. The supply chain group has successfully piloted the use of this
technology for inbound factory capital installation and capacity management, as well as for
transportation security through the use of geofencing, tracking and connections into local law
enforcement.
Jumping six slots to No. 5 this year is Spanish clothing retailer, Inditex. The owner of eight
brands, including flagship Zara, sports a 17.0% three-year weighted average ROA and leverages
a common operational approach across its portfolio. It also continues to grow through new store
openings and expanded e-commerce offerings in all existing and new markets.
Inditex is rolling out a reusable item-level RFID tracking system for all garments sold in its Zara
stores. This system allows for more efficient inventory counts, quick, precision stock
replenishment, enhanced security control and, ultimately, better service for customers looking for
specific products within physical stores and online. Its supply chain continues to prioritize social
responsibility and was recently recognized by the Dutch Association of Investors for Sustainable
Development. In its appraisal, the jury emphasized Inditex's work in ensuring living wages for the
textile workers comprising its supply chain and gave it the highest score of any retailer.
Movers and Shakers: No. 6 Through No. 15
This section of the ranking offers an impressive array of blue chips, with notable contributions to
the discipline of supply chain management (SCM).
Leading off this group and up one slot this year is Cisco at No. 6. The networking leader is well
down the path of selling integrated solutions. Value engineering work with customers has brought
the realization that hardware is the commodity and software is the key differentiator in a
solution's ability to effectively move data and workloads around a network. Supply chain's role in
software has evolved in line with this shift, and it has stepped up to manage hardware and
software quality, as part of new product release process. Cisco's supply chain has also invested
in improving customer intimacy. Each director and above is a customer champion aligned with
specific end customers and sales teams. These leaders are analyzing feedback, and being
personally connected and invested has changed how the supply chain organization responds to
customer requests. Cisco is another technology company using IoT, or the "Internet of
Everything" as it's branded it, to both improve its supply chain operations and support the
company in bringing these solutions to market.
H&M made another large jump this year to No. 7 on the ranking. Its financial performance is
spectacular, with three-year weighted average ROA and revenue metrics at 26.6% and 12.8%,
respectively. The Swedish retail chain expanded its e-commerce business this year and rolled
into nine new markets, including China. H&M's supply chain is strong at managing the product
life cycle with designers and suppliers. Its next challenge will be reinventing the ability to capture
demand and fulfill across all channels, given the recent expansion into e-commerce. H&M has
received multiple awards for sustainability and social responsibility. The company was
recognized as the 2015 World's Most Ethical Company by the Ethisphere Institute, a global
leader in defining and advancing the standards of ethical business practices.
Samsung Electronics was ranked No. 8 this year. This perennial leader is well-respected in the
peer community and continues to post strong inventory turns at 17.7, complemented by a threeyear weighted-average ROA above 10%. While growth has recently flattened, the hope is that
products such as the new sixth-generation Galaxy smartphone can pull back share from Apple.
Operational excellence at Samsung Electronics centers on two key factors driving flexibility and
profitability. The first is visibility in end-to-end supply chain, which it defines as R&D,
procurement, manufacturing, logistics, marketing, sales and service. The second is the capability
of its people, organization, process and IT infrastructure. Recent focus areas in supply chain
include Collaborative Planning, Forecasting and Replenishment (CPFR) with mobile suppliers,
supporting expansion into new markets such as large-scale printers and medical devices for
businesses and online sales for Chinese consumers. Other priorities include improving
demand/supply planning for mature markets and channel partners and continuous improvement
in customer logistics.
Colgate-Palmolive retained its No. 9 rank. Its supply chain team is testing the use and integration
of leading-edge systems, utilizing the latest in-memory computing technology. This will allow it to
gain end-to-end visibility and to take real-time actions in the planning and execution horizons.
The vision, for this well-respected CP company is to have transparent business information,
collaboration tools, what-if simulations and real-time analytics utilized by the supply chain and
cross-functional partners all sitting at the same table — true integrated business planning.
Colgate continues to fund the company's growth through close management of all investments in
capital and capabilities. This growth has tapered due to slowing emerging markets and a strong
dollar, but Colgate-Palmolive's three-year weighted average ROA continues to be a bright spot at
17.8%.
Up two slots to No. 10 is perennial footwear and apparel leader, Nike. Despite intense
competition, the company continues to deliver consistently superior financial performance, with a
three-year weighted-average ROA of 14.5% and growth rate of 10.7%. Nike's supply chain has
strong foundational capabilities in product life cycle and supply network management and is
expanding the use of Lean techniques from the manufacturing environment to other supply chain
functions. On the innovation front, it has unveiled products using a new ColorDry technology that
dyes fabric with recycled CO 2 and zero water versus traditional water-intensive dyeing methods.
This technology also saves energy and eliminates the need for added chemicals in the fabric
dyeing process. Nike is also actively building prototypes for football cleats using 3D printing
technology and exploring 4D printing technology for materials that can adapt to different
environments over time.
At No. 11, The Coca Cola Co. is consistently well regarded by the supply chain community. It
faced some pressure on growth this year, reflected by a three-year weighted average revenue
trend that was negative for the first time since the inception of our ranking. The Coca Cola Co.'s
supply chain is focused on a handful of key objectives this year. In the upstream supply network,
it is about quality at the source, with leading metrics and process controls that support its safety
culture. Within its manufacturing and distribution environments it is automation that will increase
productivity faster than the top line. Customer-facing initiatives are aimed at improving on-time
and in-full rates through improved forecast collaboration, value-based product and packaging
portfolio management and tailoring customer service models so that there is a picture of success
for each channel type. Finally, the beverage leader is focused on continuous capability
improvement in its people through professional development courses and experiential learning.
Starbucks jumped five slots to land at No. 12. The world's largest coffee retailer continued its
strong performance heading into 2015 with both a three-year weighted average ROA and growth
rate well above 10%. Starbucks runs a broad-spanning supply chain, which includes new product
development, customer service and strategy. Talent development is a core focus within the
organization, as reflected by its training and rotational programs. Starbucks is still the only
retailer to offer no-strings-attached reimbursement for employees pursuing an online
undergraduate degree. It continues to innovate and will be expanding its advance mobile order
and pay program to the entire U.S. in 2015. In the second half of 2015, Starbucks will also pilot
two types of food and beverage delivery systems. One, in Seattle, Washington, will allow
consumers to order products through an online app linked to a large, on-demand delivery
service. Sustainability is another priority for Starbucks, as evidenced by its recent verification that
99% of the coffee it buys is ethically sourced.
Supply chain pioneer Walmart is No. 13. The megaretailer has continued its push into ecommerce and has expanded investment in multichannel drive-thru pick-up centers, including
one at its headquarters-based distribution center and a "click-and-collect" grocery service offered
at some of its stores in Arizona. Walmart is also leveraging its expertise in supply network design
and optimization in a drive to recapture the low-cost crown from its competition. At roughly 2.2
million employees, it is the largest private employer in the U.S. and often finds itself the subject of
debate on labor and wage standards. The company is running multiple social responsibility
programs focused on increasing sustainability at suppliers and in its own network, support for
women-owned businesses and the broader communities it serves.
Diverse industrial 3M climbed four to No. 14. Senior leadership in its supply chain recognize that
complexity limits the long-term growth potential of the company and are on a mission to optimize
operations through lean extended value streams. The lean work is clearly paying off as the
company boasts an industry-leading three-year weighted average ROA of 14.9%, up more than a
percentage point from last year. The engineering-savvy company actively engages with
customers to develop innovative solutions to their problems and works closely with key suppliers
early in the ideation process for new products with a focus on joint cost reduction and
accelerated cycle times. 3M is also focused on increasing vertical integration through the
acquisition of technologies and operational capabilities.
Rounding out the middle section of the list is another perennial leader, PepsiCo at No. 15. The
food and beverage company is unique in running an integrated distribution network that does
direct store delivery through retail teams managing shelves around the globe. Its new demand
signal repository tools are driving significant results based on the ability to do real-time promotion
display management at the SKU level. PepsiCo's supply chain is also making significant
automation investments in manufacturing and its distribution centers. The results are significant
in terms of cost savings and sustainability benefits through the reuse of packaging materials.
PepsiCo is cultivating a booming e-commerce business and driving innovations in shipping
package design to accommodate its fragile snack products. This channel is accelerating product
co-purchase behavior, whether through a Superbowl party pack in the United States or a
Chinese New Year Box ordered on Alibaba. The PepsiCo team has continued its focus on social
responsibility and sustainability with programs aimed at environmental quality, ethical sourcing
and community improvement, including its innovative PepsiCorp program.
Rounding Out the List: No. 16 Through No. 25
Seagate Technology is up four slots at No. 16, this year. The supply chain team at this leading
high-tech storage company has developed a global network of customer value centers to provide
more efficient fulfillment and deliver customer-specific solutions. It has also established a
detailed value-at-risk methodology and applied it to determine and mitigate trouble spots in
Seagate Technology's supply base. This capability, coupled with operational visibility at strategic
suppliers, enables a fast time to recovery when supply disruptions occur. Seagate Technology
has spent the last few years developing a cross-functional supply chain transformation office
focused on landing new capabilities, developing talent and rolling out metrics for improved
visibility. This group has also staffed "tiger teams" of subject matter experts (SMEs) that
collaboratively develop improved supply chain processes at suppliers for better inventory and
product quality performance.
At No. 17, Nestlé runs one of the largest and most complex consumer foods supply chains in the
world. The company processes 10% of both the coffee and cocoa sold globally, as well as
significant levels of other agricultural commodities, so it is mindful that a lot of the world's farmers
rely on it. Last year, Nestlé was recognized by community-based organization, Oxfam, as a topranked company for responsible sourcing. Nestlé's supply chain culture centers on decentralized,
locally-empowered teams. Capital efficiency is a focus area since its level of local investment is
high compared to competitors. E-commerce is a growth driver and divided into three distinct
areas: clicks and mortar with big retailers, pure players in markets such as China and branded
dot-com for its Nespresso line of espresso makers and accessories. Another major priority is
upstream product traceability to ensure consumer trust, with a longer-term goal of tracking 100%
of products back to source.
Lenovo Group returns to the ranking at No. 18, this year. The Chinese technology company's
supply chain strategy cascades from its continuing corporate strategy to protect PC-based
businesses and attack mobile, enterprise, computing ecosystem and cloud services businesses.
It's 18.9% three-year weighted average growth rate reflects significant acquisitions in the last two
years. The supply chain team continues to drive new capabilities, while ensuring the smooth
integration of large mobile and enterprise computing businesses. For instance, a major project
for the network planning and manufacturing teams was migrating an acquired business to an
existing Lenovo plant in China to improve efficiency and spread expertise on configure-to-ordertype products. The PC supply chain group has created an advanced analytical solution for
inventory and order support visibility. It also has an extensive program to improve customer
experience that includes new sensing tools, root cause analysis and a feedback loop on actual
and perceived customer quality issues.
Wireless telecommunications chipmaker, Qualcomm, landed at No. 19 again, riding a wave of
growth in the mobile phone market over the past few years that generated a 17.8% three-year
weighted average revenue growth rate in their business. Previous investments in supply capacity
optimization and inventory management will be critical for it this year, on the heels of Samsung's
announcement that it will use internally designed and manufactured chips for the next generation
of its flagship Galaxy line of mobile devices. Meanwhile, Qualcomm is making continued
investments in new applications for its products. The company's investment fund is seeding
startups that leverage smartphone technologies for new consumer robotics applications. These
include 3D mapping of building interiors for automated cleaning and the use of GPS and machine
vision to guide delivery drones. The chipmaker is also making a push into the connected car
market.
Kimberly-Clark returns to the list, up one slot at No. 20. The purveyor of personal care and paper
products continues to make progress on a multiyear journey to improve its supply chain
organization and capabilities. It is extending lean expertise out in partnership with customers to
improve collaborative processes for joint value. The company also runs a supply chain fund that
shares value back with customers that choose to order and take delivery using efficient
standards. Underpinning this program is a cost-service trade-off model built and leveraged by the
supply chain organization. Another recent project is focused on standardizing integrated
production scheduling, capacity planning and deployment planning tools. The supply chain in
partnership with the business has established a standard product portfolio governance process
aimed at improving overall SKU health. This work, along with effective demand shaping
capability, has enabled a relatively high forecast accuracy for the company.
Perennial healthcare leader Johnson & Johnson is ranked No. 21. J&J's supply chain has a
legacy of decentralized decision making, but has become more center-led over the years as a
COE formed to drive cross-business unit improvements. One of these programs is focused on
complexity management and data-driven governance of the company's diverse product
portfolios. The COE team is also working to better understand the voice of the customer in the
pharmaceutical business. Following a method of immersion, innovation and connection, the team
starts with patients and their unmet needs, then walks back through the supply chain process by
which they get their drugs through intermediaries to identify potential improvements. For one
product line, the packaging and instructions were simplified to improve patient adherence to their
prescriptions. The COE is also delivering enhanced track-and-trace capabilities in support of
global brand protection.
It's been a decade since L'Oréal was on the global Supply Chain Top 25 list, and this year it
lands at No. 22. The supply chain team has a dedicated effort in partnership with the business to
improve demand forecast accuracy. It is also leveraging optimization techniques in supply
planning to improve customer service levels, while holding less inventory. This required
foundational investments in clean master product data to enable more agile planning. L'Oréal is
using a collaborative supplier platform with its top strategic upstream partners to feed them
weekly demand forecasts and pull through consumption requirements. Outside of acquisitions,
the supply chain team has been able to maintain SKU counts with the business based on a
simple, but powerful, "one in, one out" rule.
Cummins returns to the list at No. 23. The vertically integrated engine and power equipment
leader has a strong COE organization. Its COE is partnered with operations to evolve to end-toend differentiated SCM and, eventually, the orchestration of the extended supply chain through
collaborative governance. Cummins' analytics team is starting to move beyond basic descriptive
reporting of operational performance to more predictive applications such as network, inventory,
transportation and warehouse optimization modeling. Its supply chain operations teams are also
experimenting with the use of an inventory quality ratio (IQR) to identify areas of over and
undercoverage across the product portfolio.
Toyota rejoins our ranking at No. 24, based on improved ROA, growth and peer vote
performance. It last appeared in 2009 at No. 10. Prior to that time, it was a perennial on the list
since the inception of the ranking. Toyota's eponymous production system, which it pioneered
leveraging lean principles, has been emulated by the rest of industry and beyond. Its supply
chain team is focused on building logistics control towers and mitigation plans to avoid repeating
supply disruptions experienced over the last several years. The organization has also worked
through some challenges as it expanded from centralized design to region-based design. As a
part of its digital strategy, Toyota is building its next-generation customer service model on a
cloud-based platform where vehicle owners, dealers and service agents can exchange
information about vehicle location, performance parameters and service status.
Closing out this year's list is Home Depot at No. 25. The world's largest hardware retailer last
appeared on the global Supply Chain Top 25 in 2005. Home Depot's CFO recently cited its
supply chain as the enabler to improving gross margins. Its three-year weighted average ROA
certainly reflects this result, coming in at just over 14% this year. Home Depot's supply chain
team is reaping the rewards of a multiyear improvement journey. It is introducing direct fulfillment
centers that will be able to ship to 90% of U.S. households within 48 hours. E-commerce, while a
small portion of its total business, spans a wide variety of products and one-third of the volume is
"click and collect" at its brick-and-mortar stores. Upstream, Home Depot has set up a vendor
source program tapping into vendor-managed inventory (VMI) stocks.
Honorable Mentions
Every year, there are companies that demonstrate strong leadership in demand-driven principles,
but do not make the list. This year, we recognize Caterpillar, HP, Schneider Electric, BASF and
Nokia.
Caterpillar dropped three slots to No. 26, this year, reflecting a market challenged by
macroeconomic factors. The industrial leader has taken a disciplined approach, building upon a
foundation in lean techniques to engineer integrated value chains. It is attacking configuration
complexity and lead times in its product portfolio and is tailoring supply chains for different
customer requirements. Caterpillar has also built logistics control tower capabilities for its own
network and external customers. HP, empowered by supply chain operations, has rekindled
innovation in products and services such as 3D printing workstations, advanced enterprise
servers and digital printer ink replenishment. It is also demonstrating operational excellence in
how it runs its enterprise server factories under a lean production system. HP's financials had
suffered as a result of a secular decline in PC growth and large M&A write-offs, but those
impacts are waning and it is back within shooting distance of the Top 25 at No. 30, this year.
Schneider Electric jumped an amazing 33 slots this year to No. 34, based on higher opinion vote
scores. Under its "Tailored Supply Chain" (TSC) transformation, Schneider Electric has
segmented its supply chain into four types, helping it better align with customer needs and
providing a differentiated manufacturing and delivery model for each customer segment.
Schneider's TSC strategy, with S&OP as the decision-making forum supported by end-to-end
supply chain visibility, is seen as the "nervous system" for its extended value chain, helping it
bring predictability to its business results.
BASF, the world's largest chemical company, finished up four slots at No. 36 overall in the
Gartner rankings. The company has restructured its approach to supply chain in the past few
years, having the CIO and CSCO roles under a single leader and aligning processes and IT
systems to orchestrate end-to-end material flow, including both inbound and outbound deliveries
across a complex global network of factories and storage locations. The supply chain team is
exploring predictive analytics in areas such as preventative maintenance and weather-based
forecasting for agrichemicals.
Nokia was No. 1 on our ranking back in 2007 before it met fierce competition in the smartphone
business from Apple and Samsung. After selling its mobile handset business to Microsoft, it
shifted its focus to the telecom equipment business that was originally created as a joint venture
with Siemens. Its disciplined SCM team is driving an impressive turnaround at the company.
All of these companies exhibit leadership characteristics and have compelling lessons for the
broader supply chain community. We look forward to sharing lessons from them and many
others in the year ahead.
What Is Demand-Driven Excellence?
The concept of being demand-driven is at the heart of the Supply Chain Top 25 ranking. We
have published hundreds of documents on the topic for more than a decade, including a maturity
model to help companies move along the transformation curve (see "Introducing the Five-Stage
Demand-Driven Maturity Model for Supply Chain Leaders" ).
Because it's so critical to the Supply Chain Top 25 analysis, here's a brief synopsis of what it
means to have a demand-driven value chain. The DDVN model is characterized by an
understanding of customer value and enabled by processes and metrics that enable business
trade-offs to deliver products and services profitably. Companies that work toward the DDVN
ideal use demand management as a key differentiating capability, so they can plan, sense and
shape in a way that brings profitable balance to the business. They also design supply networks
to be more closely aligned with the development of product platforms that enable innovation,
agility and responsiveness.
We find that companies that continually secure spots on the Supply Chain Top 25 have
successfully shifted from the traditional disconnected approach to managing supply, demand and
product to an integrated approach to coordinating plan, source, make and deliver functions
across the end-to-end supply chain. Companies typically make this shift as they advance along
the DDVN maturity journey, which represents a long-term commitment to doing business in a
customer-value-centric way (see Figure 2).
Figure 2. The DDVN Maturity Journey
SOURCE: GARTNER (MAY 2015)
The seven dimensions of the Gartner DDVN maturity model (see "Assess Your Supply Chain
Maturity Using the Seven Dimensions of DDVN Excellence" ) establish a clear definition for each
aspect of the supply chain, as it matures and integrates with focus on customer value.
Operational Excellence and Innovation Excellence
Two basic dimensions of measurement capture the totality of the best-in-class, demand-driven,
global supply chain: operational excellence and innovation excellence. To measure operations,
including delivering as promised to customers and keeping costs under control, we recommend a
hierarchy of metrics, with perfect order performance and total supply chain costs at the top
(see "The Hierarchy of Supply Chain Metrics: Diagnosing Your Supply Chain Health" ).
Of course, operational excellence has value only if customers want what's being made and
shipped. To address this, we look at innovation excellence. Although far harder to measure
reliably, this dimension can also be managed with a hierarchy of metrics, in this case, topped by
time to value and return on NPDL. The key is to find the right balance on both these dimensions.
Too much emphasis on one at the expense of the other either squashes innovation or hampers
growth.
It's important to recognize the business life cycle aspect to this balance that our methodology
also attempts to reflect. Each year, we see examples of previously successful businesses
struggling with the competitiveness of their products, while still possessing very advanced supply
chain capabilities. This condition can exist for a period of time before both resynchronize and
either return to high performance or spiral into decline. Since the opinion poll portion of our
methodology is based on the relative capability and leadership of a supply chain at a given point
in time, it is possible for a company's supply chain to score well on the polls, while also posting a
less-competitive financial performance in the near term.
Measuring Demand-Driven Excellence
The Metrics We Wish We Had
For the Supply Chain Top 25 ranking, our ideal would be to have metrics that perfectly describe
the two basic dimensions of performance: operational and innovation excellence. These are the
dimensions that point meaningfully to the better value chain, identifying which business is faster,
stronger and smarter. Betting on next year or next quarter is a matter of knowing who the better
"athlete" is, not merely who won last time. Our premise is that the better athlete is more likely to
win markets and profits in the future. Therefore, the companies that can demonstrate superior
performance against these dimensions merit a higher share price multiple on a dollar of current
earnings.
In our ongoing supply chain research, we've identified the metrics that map to these dimensions,
which, if we had them, would clearly convey the organizations that have the healthiest value
chains (see Table 2).
Table 2. Metrics for Operational Excellence and Innovation Excellence
Performance Dimension
Key Metrics
Operational Excellence
Perfect order rates
Total supply chain costs
Innovation Excellence
Time to value
Table 2. Metrics for Operational Excellence and Innovation Excellence
Performance Dimension
Key Metrics
Return on new product launch
SOURCE: GARTNER (MAY 2015)
For each of these performance dimensions, we've published a full hierarchy of metrics that
allows management to assess overall performance at the highest level, diagnose problems via
process decomposition and make corrections at the tactical work level (see Figure 3 and Figure
4). We have also published hierarchies for each of the functions that make up the supply chain: a
hierarchy of supply management metrics (see "Use the Hierarchy of Supply Management Metrics
for Strategic Alignment and Enhanced Performance" ) , a hierarchy of manufacturing metrics
(see "Aligning Manufacturing and Supply Chain Performance, Part 2: The Hierarchy of
Manufacturing Metrics" ), and a hierarchy of logistics metrics (see "Align Supply Chain and
Logistics Performance With the Hierarchy of Logistics Metrics" ).
Figure 3. The Hierarchy of Supply Chain Metrics: Operational Excellence
AP = accounts payable; AR = accounts receivable; FG = finished goods; SCM = supply chain
management; WIP = work in process
SOURCE: GARTNER (MAY 2015)
Figure 4. The Hierarchy of Product Metrics: Innovation Excellence
SOURCE: GARTNER (MAY 2015)
However, from our work with companies and our benchmarking studies, we're all too aware of
how inaccessible this data is in most companies, particularly within a realistic time frame.
Moreover, although some companies may have some of the data we seek, there are vast
inconsistencies in how these metrics are calculated from company to company.
Therefore, for the Supply Chain Top 25 ranking, we look to publicly available, audited financial
data to find the closest possible proxies. We know the limitations inherent in these metrics.
Existing financial accounting principles were developed in the hard-asset, factory-intensive
economy of the early 1900s. For example, the balance sheet treatment of inventory as a valuable
asset rings false for the many short-cycle businesses today that see inventory as more of a
liability. Similarly, soft assets like brands and IP, which are essential to demand creation, are
difficult for standard accounting practices to handle. Even income statements can obscure real
costs with sneaky capitalization rules.
Because of these issues, our methodology isn't limited to financial metrics. Instead, we see the
financials as one important component that provides a baseline, an anchor and an objective
foundation on top of which we place the group intelligence of a vote, precisely because no
combination of income statement or balance sheet financial metrics will tell us which companies
are furthest along toward the demand-driven ideal of supply chain excellence. For this reason,
we look to craft a methodology that combines enough, but not too many, of the right metrics —
both quantitative and qualitative — to achieve our goals.
Supply Chain Top 25 Methodology
The Supply Chain Top 25 ranking comprises two main components: financial and opinion. Public
financial data provides a view into how companies have performed in the past, while the opinion
component offers an eye to future potential and reflects leadership in the supply chain
community. These two components are combined into a total composite score.
We derive a master list of companies from a combination of the Fortune Global 500 and the
Forbes Global 2000. Over the past 10 years, the revenue threshold for inclusion in the overall
company list has been 10 billion U.S. dollars. In an effort to maintain the list of companies
evaluated at a manageable level and in recognition of the inflation and growth these larger
companies have experienced, we increased the general revenue threshold to $12 billion this
year.
We then pare the combined list down to the manufacturing, retail and distribution sectors, thus
eliminating certain industries, such as financial services and insurance (see Table 3 for a full list
of excluded industries).
Table 3. Industries Not Included in the Supply Chain Top 25
Airlines
Insurance
Services
Banks
Mail, Package and Freight
Delivery
Shipbuilding
Metals
Software
Development
Diversified Financials
Mining
Telecommunications
Energy
Petroleum Refining
Temporary Help
Engineering/Construction
Pipelines
Trading
Entertainment
Railroads
Utilities
Healthcare: Insurance, Managed Care,
Services, Providers
Real Estate
Information Technology/Computer Services
Shipping
Crude Oil Production
SOURCE: GARTNER (MAY 2015)
Each year, we examine the methodology used to develop the ranking, with two sometimesconflicting goals in mind: consistency and improvement. We want to improve the methods and
procedures we use, but, for the sake of consistency, in a way that builds on what we've done in
previous years.
We are open to feedback from the broader supply chain community on the methodology we use
and have made some changes this year related to corporate social responsibility and a new
"masters" category recognizing sustained leadership. Indeed, the Supply Chain Top 25 at its
core is intended to be a lightning rod and foundation for vigorous debate about what constitutes
leadership and supply chain excellence.
At the same time, we continually look for ways to enhance the explanatory power, applicability
and extensibility of the overall ranking. The impact of brand recognition on the vote, industry
variations in inventory and inequalities between more versus less asset-intensive industries are
all challenges with which we grapple. These issues are multifaceted. By analyzing them, we've
been able to make incremental changes that have allowed us to painstakingly chip away at some
of the problems, while maintaining consistency from year to year at the same time.
Similar to last year, we used a 50/50 overall weighting for this year's ranking: 50% for the
financial component and 50% for the opinion component.
Financial Component
Three financial metrics are used in the ranking:
 ROA — Net income/total assets
 Inventory turns — Cost of goods sold/inventory
 Revenue growth — Change in revenue from prior year
ROA was weighted at 25%, inventory turns 15% and growth 10%. Inventory offers some
indication of cost, and ROA provides a general proxy for overall operational efficiency and
productivity. Revenue growth, while clearly reflecting myriad market and organizational factors,
offers some clues to innovation. Financial data is taken from each company's individual, publicly
available financial statements.
The weighting within the financials is the same as last year. Prior to 2010, inventory was
weighted at 25%. We had considered dropping it altogether. As much as inventory is a timehonored supply chain metric — one of the few "real" supply chain metrics on a company's
balance sheet — there have always been issues with it, not the least of which is that higher turns
don't always point to the better supply chain. At the same time, it's a metric that's widely known
and understood, both inside and outside the supply chain community. Despite the issues, it's not
entirely invalid as an indicator, particularly if combined with other metrics. Therefore, we decided
to leave it in, but reduce its weighting.
Since 2009, we've used a three-year weighted average for the ROA and revenue growth metrics
(rather than the one-year numbers we had previously used), and a one-year quarterly average
for inventory (rather than the end-of-year number we had previously used). The yearly weightings
are as follows: 50% for 2014, 30% for 2013 and 20% for 2012.
The shift to three-year averages was put in place to accomplish two goals. The first was to
smooth the spikes and valleys in annual metrics, which often aren't truly reflective of supply chain
health, that result from events such as acquisitions or divestitures. It also accomplishes a
second, equally important goal: to better capture the lag between when a supply chain initiative is
put in place (a network redesign or a new demand planning and forecasting system, for example)
and when the impact can be expected to show up in financial statement metrics, such as ROA
and growth.
Inventory, on the other hand, is a metric that's much closer to supply chain activity, and we
expect it to reflect initiatives within the same year. The reason we moved to a quarterly average
was to get a better picture of actual inventory holdings throughout the year, rather than the
snapshot, end-of-year view provided on the balance sheet in a company's annual report.
Opinion Component
The opinion component of the ranking is designed to provide a forward-looking view that reflects
the progress companies are making, and the extent to which they demonstrate leadership
through visibility in the supply chain community. It's made up of two components, each of which
is equally weighted: a Gartner analyst expert panel and a peer panel.
The goal of the peer panel is to draw on the extensive knowledge of the professionals that, as
customers and/or suppliers, interact and have direct experience with the companies being
ranked. Any supply chain professional working for a manufacturer or retailer is eligible to be on
the panel, and only one panelist per company is accepted. Excluded from the panel are
consultants, technology vendors and people who don't work in supply chain roles (such as public
relations, marketing or finance).
We accepted 231 applicants for the peer panel this year, with 200 completing the voting process.
Participants came from the most senior levels of the supply chain organization across a broad
range of industries. There were 35 Gartner panelists across industry and functional specialties,
each of whom drew on their primary field research and continuous study of companies in their
coverage area.
Organizations must surpass a base threshold of votes from both panels to be included in the
ranking. Therefore, a company that had a composite score fall within the Supply Chain Top 25
solely based on the financial metrics would not be included in the ranking.
The figures below provide a breakdown of the peer vote on the dimensions of region, industry,
role and revenue. The regional breakdown of voters continued to be a particular emphasis for us,
and we continued to make progress this year. Until 2010, North American voters made up 80%
of the total. Since that time, we have made progress in achieving better balance regionally to
provide a more balanced global view of supply chain leadership (see Figure 5).
Figure 5. 2015 Peer Opinion Panel Composition: Region
SOURCE: GARTNER (MAY 2015)
Figure 6. 2015 Peer Opinion Panel Composition: Industry
SOURCE: GARTNER (MAY 2015)
Figure 7. 2015 Peer Opinion Panel Composition: Role
SOURCE: GARTNER (MAY 2015)
Figure 8. 2015 Peer Opinion Panel Composition: Revenue
SOURCE: GARTNER (MAY 2015)
Polling Procedure
Peer panel polling was conducted in April 2015 via a Web-based, structured voting process
identical to previous years. Panelists are taken through a four-page system to get to their final
selection of leaders that come closest to the demand-driven ideal, which is provided in the
instructions on the voting website for the convenience of the voters.
We included consideration of corporate social responsibility (CSR) practices in this year's opinion
poll voting criteria. We are now using more explicit language referencing CSR on our peer voting
website and within the Gartner analyst evaluation process that influences our opinion poll. We
specified that peer voters consider each company's commitment to running a supply chain that
addresses social, environmental, ethical human rights and consumer concerns in its operations
and core strategy. Many companies are proud of their CSR initiatives, and have observed that
supply chain leadership includes running a responsible, sustainable business, and that our
ranking should explicitly reflect this dimension. We have always recognized and often written that
CSR is an important aspect of leadership, and wholeheartedly agree that it should be a
consideration for how high or low they rate on the annual ranking.
Here's a breakdown of the voting system:
 The first page provides instructions and a description of the demand-driven ideal.
 The second page asks for demographic information.
 The third page provides panelists with a complete list of the companies to be considered.
We ask them to choose 30 to 50 that, in their opinion, most closely fit the demand-driven
ideal.
 After the subset of leaders is chosen, the form refreshes, bringing just the chosen
companies to a list. Panelists are then asked to force-rank the companies from No. 1 to
No. 25, with No. 1 being the company most closely fitting the ideal.
Individual votes are tallied across the entire panel, with 25 points earned for a No. 1 ranking, 24
points for a No. 2 ranking and so on. The Gartner analyst panel and the peer panel use the exact
same polling procedure.
By definition, each peer voter's expertise is deep in some areas and limited in others. Despite
that, peer voters aren't expected to conduct external research to place their votes. The polling
system is designed to accommodate differences in knowledge, relying on what author James
Surowiecki calls the "wisdom of crowds" to provide the mechanism that taps into each person's
core kernel of knowledge and aggregates it into a larger whole.
Composite Score
All this information — the three financials and two opinion votes — is normalized onto a 10-point
scale and then aggregated, using the aforementioned weighting, into a total composite score.
The composite scores are then sorted in descending order to arrive at the final Supply Chain Top
25 ranking.
New "Social Vote" Pilot
This year, for the first time, we tested the concept of a "social vote" as a complement to the
Supply Chain Top 25 global ranking. The purpose of this social vote is to get a perspective for
comparison from a broader portion of the supply chain community. The results from the social
vote were not used in the scoring of the Supply Chain Top 25 ranking this year, rather we plan on
using the results as complementary to the Supply Chain Top 25 ranking, which will still be
determined using our traditional methodology. The social vote is very similar in appearance to
the survey the peer voters complete; however, we asked that the social voters only pick their top
10 supply chain leaders. The intent is to see if different patterns emerge out of this more open,
public vote versus our current invitation-only peer panel vote.
The Supply Chain Top 25 social vote is open to any and all supply chain professionals. Unlike
the peer vote, there is not a limit of only one voter per company. We leveraged a variety of social
media channels and supply chain publications to inform the community of this new approach.
The level of response was positive and we look forward to growing the social voter base next
year.
Looking Ahead
Supply chain as a profession and practice has advanced dramatically over the years and now
plays a central strategic role for companies with global aspirations. As we look forward to the
future of the Supply Chain Top 25, we are excited to share the latest and greatest stories of the
supply chain profession with the community and to a continued dialogue with you all on the
definition of leadership.
The Healthcare Supply Chain Top 25 lies ahead for the rest of 2015, as well as a steady
cadence of publications that offer various analytical lenses on the full 2015 global ranking. These
include industry cuts that examine how the companies in a particular industry stack up against
each other and what the industry can learn from them, as well as regional cuts for Asia/Pacific
and Europe, which do the same for companies headquartered in each region. These cuts will be
published throughout the year and we will pull them all together in a special report toward the
end of the year for ease of reference.
We plan to publish a report after our 2015 supply chain executive conference that provides a
"what if" scenario, comparing each company's performance against their specific industry, or a
combination of industry and business model. Based on the results of this study and internal
analysis and feedback from the broader community, we may choose to make further changes in
the 2016 cycle and beyond.
We will also continue to investigate new metrics, including the ROA metric on the physical supply
chain, as well as other ways to define and measure supply chain excellence. For instance, we
are investigating the incorporation of an externally published CSR index, such as the Dow Jones
Sustainability Index, into the quantitative metric portion of Supply Chain Top 25 ranking
methodology in 2016.
In our engagement with supply chain leaders over the past year, it is evident that the bar of
performance has risen considerably for the top of the group. As Gartner's supply chain research
organization, we remain committed to providing a platform for informed and provocative debate
about supply chain leadership. We look forward to leveraging this research to share the lessons,
best practices and characteristics of leaders to inspire and challenge the entire supply chain
community to new levels of performance and contribution.