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It isn't exactly a recommended investing strategy, but AMR Research reports that for the third year in a row companies earning a spot on its Top 25 Supply Chains have outperformed the general stock market by a wide margin.
AMR says the companies that earned a spot on its Supply Chain Top 25 for 2007 achieved a combined annual return of 17.9% in 2007. That compares to a 6.4% return for the Dow Jones Industrial Average (DJIA) and a 3.5% return for The Standard & Poor 500 (S&P 500).
"While the strength of performance is surprising, it also makes perfect sense," says Kevin O'Marah, chief strategy officer at the Boston research firm. "The logic is in understanding that operational excellence tells you how well a business is performing. It tells you if you have a great athlete."
AMR has produced its list of the Top 25 Supply Chains since 2004. The last list was released in May of 2007 and achieving the No. 1 ranking is telecommunications giant Nokia. Apple was second, Procter & Gamble third, IBM fourth, and Toyota Motor fifth. The next top 25 list will be released in May 2008.
AMR ranks companies in the Fortune 500 using a hybrid scorecard method. Sixty percent of a company's mark is based on financial performance, including return on assets, inventory turns, and growth. The remaining 40% is based on opinions of experts in the supply chain industry, as well as the opinions of AMR analysts.
Nokia was not only a star in the supply chain arena, it was also a hot stock to own, gaining 93% in 2007. But supply chain excellence didn't guarantee a healthy return. On the flip side, Toyota Motor, which placed fifth in the rankings, suffered a 21% drop in share price. Another supply chain honoree, Lowe's, which ranked 19th, saw its share price fall about 34% as it weathered troubles in the housing market.
O'Marah says it is clear that companies in the Top 25 have been adept at adopting technology to streamline their supply chains and improve their forecasting abilities. One surprising finding is that 20 companies in the Top 25 have deployed systems from i2 of Dallas. i2 fell on hard times early in the decade, but O'Marah says companies that stuck with its systems have clearly benefited. Similarly, two-thirds of the companies on the Top 25 list have SAP implementations, while about one-third have Oracle. It is common for companies to combine implementations from i2 with SAP or Oracle.
"A conclusion that can be drawn for CIOs, is there's no way to compete in the top 25 without a significant investment in IT," adds O'Marah.
Looking ahead to 2008, some winners and losers are already beginning to emerge.
O'Marah says it is likely Dell will remerge on the Top 25 list in 2008 after being dropped off the list in 2007 when it was forced to restate its financials. Hewlett-Packard, which finished 21st in 2007, is also expected to make a jump up the list based on its financial performance. On the flip side, Wal-Mart has been experiencing some growing pains and uncertainty over its radio frequency identification (RFID) strategy, and that could result in a slip from its 6th place ranking.
The Top 25 for 2007 are as follows:
1) Nokia
2) Apple
3) Procter & Gamble
4) IBM
5) Toyota Motor
6) Wal-Mart
7) Anheuser-Busch
8) Tesco
9) Best Buy
10) Samsung Electronics
11) Cisco Systems
12) Motorola
13) The Coca-Cola Company
14) Johnson & Johnson
15) PepsiCo
16) Johnson Controls
17) Texas Instruments
18) Nike
19) Lowe's
20) GlaxoSmithKline
21) Hewlett-Packard
22) Lockheed Martin
23) Publix Super Markets
24) Paccar
25) AstraZeneca
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in CIO Conversations (Sponsored by IBM) by jrajani, 19-11-08 15:48
