The Top 25 Supply Chains of 2008

Every year at this time I pay particularly close attention to two lists that have particular relevance to me: the Major League All-Star Team, which I've voted on every year for several decades now, and the AMR Research list of the top 25 supply chains, which I voted on this year for the first time. The one thing both lists have in common is that nobody will ever agree with all of the choices, as these sorts of lists tend to be based at least as much on reputation as they do current accomplishments. For instance, is Jason Varitek of the Red Sox really the best catcher in the American League, as current balloting would suggest, or is he merely popular because the Red Sox won the World Series last year and their fans have proven remarkably adept at stuffing the ballot box, a skill that apparently isn't taught here in Cleveland schools or else Victor Martinez would clearly be the leading vote-getter.

So it is with supply chain "best of" lists. The top two finishers in 2008, just as in 2007, were Apple and Nokia (the companies merely switching places this year). Apple, however, was not the leading vote-getter (that would be Toyota), nor even the consensus choice among AMR's staff (that would be Procter & Gamble. Neither Apple nor Nokia were the best in return-on-asset (that would be Texas Instruments). What did the trick for Apple was its inventory turns performance (cost of goods sold / year-end inventory), as well as revenue growth (24.3%), which both were best among the Top 25.

The real question, though, is how much Apple's performance can be attributed to its supply chain. What's the "supply chain," for instance, of an iTune? Apple sells more than 1 billion songs per year off iTunes, with no perceptible supply chain to speak of, at least in terms of a physical product changing hands. That's one of the reasons why I (and actually, the majority of voters) opted to go with Toyota as having the best traditional supply chain.

For the first time, AMR is including what it calls "entertainment companies" in the mix, with Walt Disney joining the Top 25. Here, too, there's a distinct blurring of what exactly constitutes a supply chain; clearly Disney manufactures toys, apparel, books and other physical products, but its revenues are also derived from its ownership of the ABC TV network and other media properties. What's the supply chain of managing Barbara Walters' hair? Hard to say. In any event, Disney debuts at # 17 this year.

After missing the list completely in 2007 (because its financials were in reinstatement), Dell vaulted up to # 3, which some would explain as the Cal Ripken effect, i.e., they were so good for so long that people just automatically vote them in year after year. Dell, however, really only could boast of its high inventory turns, as neither the voters nor the AMR panel voted them particularly high.

The company experiencing the most precipitous fall was Motorola, which placed at # 12 in 2007, but fell off the list completely in 2008.

Here's the full list of the Top 25 Supply Chains of 2008 (in reverse order):

25. Publix Super Markets
24. Royal Ahold
23. Johnson Controls
22. Lockheed Martin
21. Texas Instruments
20. Schlumberger
19. Johnson & Johnson
18. Hewlett-Packard
17. Walt Disney
16. SonyEricsson
15. Nike
14. Best Buy
13. Coca-Cola
12. Tesco
11. PepsiCo
10. Anheuser-Busch
9. Samsung Electronics
8. Cisco Systems
7. Toyota Motor
6. Wal-Mart Stores
5. IBM
4. Procter & Gamble
3. Dell
2. Nokia
1. Apple

If you want to see last year's Top 25, click here. And if you want to vote for this year's MLB All-Star Team, click here.