Top Supply Chains and Being ‘Demand-Driven’

by Gray Rinehart

The Gartner consulting group recently released their 2014 Supply Chain Top 25 ranking, the tenth such ranking they have developed and published.

(“Winner,” by Skeudenn Spered, from Flickr under Creative Commons.)

The top 5 companies on the ranking are:

• Apple
• McDonald’s
• Amazon
• Unilever
• Procter & Gamble

Indeed, the top four positions are unchanged from last year, and Apple has held the top spot on the list for the last 5 years running. McDonald’s and Amazon have bounced around the ratings the last few years, as has Procter & Gamble except for a 6th-place finish in 2013. Before cracking the top five in 2013, Unilever had been 10th in 2012, 15th in 2011, and 21st in 2010.

But what jumped out at me from the report was how broad the evaluation seemed to be: despite being the “Supply Chain Top 25,” the criteria — supply chain professionals’ opinions, returns on assets, inventory turns, and revenue growth — seemed to encompass much more than supply chains. With the weightings assigned to the factors, it seemed that the analysis looked as much at overall company health as it did at the actual chain of value from suppliers to customers; by doing so, it seemed that overall company health was supposed to be accepted as automatically indicative of a robust supply chain.

The report contains a lot of good insight, for instance the observation that “The most advanced companies … are not afraid to rethink the design of their global supply networks, if that is required, for success. In some cases, this has led to increased vertical integration where leaders are getting into their customers’ and their suppliers’ businesses in an attempt to dominate value chains….” But while the listing emphasized the importance of supply chains to overall business health, it did not seem to give much insight into the individual companies’ supply chain practices themselves.

I found it particularly interesting that the report stressed the benefits of developing a “demand-driven” supply chain, i.e., a supply chain that is responsive to customer needs and inputs, but did not square those benefits with the selection of companies that can arguably be said not to exhibit that type of approach to their supply chains.

For instance, to say that Apple has a “demand-driven” supply chain simply beggars belief. Apple may respond to customer input from time to time — e.g., when fixing a bug or considering adding a feature — but they have done much more and been much more adroit at anticipating customer response and even, indeed, generating customer response where none existed before. How many customers contacted Apple to ask for iPods, and then iPhones, and so forth? Few, if any, but I would wager the number is roughly close to none. Apple operates much less on a “demand-driven” basis, and much more on the basis of driving demand.

Which reminds me of something I heard Dr. W. Edwards Deming say in one of his lectures: “The customer never invented anything.”

The most striking innovation and growth do not come from asking customers what they want and then figuring out how to give it to them; those are good things to do, but the most dramatic innovation and growth come from looking beyond what customers think they want and envisioning something they will want even though they don’t know it yet. It’s riskier, and the investment of building a supply chain around an anticipated market is part of that risk, but the payoff can be enormous.

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Other Interesting Supply Chain Items You Might Check Out:

– Procter & Gamble (one of the top 5): P&G Reinforces Supply Chain Transformation

– Automotive Supply Chains: Auto Industry Companies Proactively Strengthening Global Supply Chain Resiliency

– From eyefortransport (www.eft.com): Your Supply Chain: More than an Expense, a Competitive Advantage

– Interview: Modern supply chains – how innovative sellers engage customers in entirely new ways

– Supply Chain Optimization: Supply Chain Optimization In Manufacturing

– Segmentation in High-Performance Supply Chains

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Gray Rinehart spent 20 years in the U.S. Air Force, during which he refurbished space launch facilities, fought rocket propellant fires, commanded the Air Force’s largest satellite tracking station, and did other interesting things. Gray spent 6 years with the North Carolina MEP Center, and has been a contributing editor for Baen Books since 2007. He is an author of fiction and nonfiction, and his web site is http://www.graymanwrites.com. Connect with Gray on LinkedIn at http://www.linkedin.com/in/grayrinehart or on Twitter at http://www.twitter.com/GrayRinehart.