The Top Supply Chains of 2011

For supply chain bloggers like me, Christmas comes early every year when Gartner releases the rankings of the top 25 supply chains. What makes this poll such delicious fodder for blogging purposes is that they're basically a popularity contest, in a way not all that dissimilar to the voting procedure used to determine which players will compete in the annual Major League Baseball All-Star Game. Is Derek Jeter really that much better of a shortstop than, say, Asdrubal Cabrera? A-Cab actually has the better stats this year, by a substantial margin, but Jeter has the reputation and the championship rings, so he's way out ahead in the voting for AL shortstops.

So, too, do we find Apple sitting pretty atop the Gartner list (formerly known as the AMR Research list, until AMR was acquired a while back), despite a year that didn't necessarily always shine the most flattering light on Apple's supply chain operations. For instance, no mention is made in the Gartner rankings of the numerous problems Apple has been having with its offshore manufacturer, Foxconn. Actually, maybe there is an oblique reference to it after all, in the curious phrasing that Apple's No. 1 ranking comes "on the basis of continued killer financials." Gartner's analysts aren't normally the type to indulge themselves in wry asides, but then again, the choice of the word "killer" does seem pointedly apropos considering what's happened to Foxconn's reputation over the past year. Apparently, though, Foxconn's travails haven't yet tarnished the Apple brand, based on the Gartner rankings. For that matter, Apple's well-publicized problems with iPad 2 product shortages ("the mother of all backlogs," as one observer said recently) don't seem to have had any impact on its popularity with voters, either.

Another company whose supply chain problems don't seem to have hurt its stature much is Johnson & Johnson. As a member of the media, I feel a bit humbled to know that the articles my colleagues and I have written over the past couple years about product recalls and FDA citings and shuttered manufacturing facilities and lack of oversight at its offshore suppliers don't seem to have made any difference to those who voted on the top supply chains.

Of course, the Gartner rankings have long been known for its being heavily skewed in favor of high-tech/electronics companies. On this year's list, for instance, 9 out of the top 17 companies a better than 50% showing are high-tech companies. It should perhaps, then, come as no surprise that 19% of the voters in the peer opinion sample come from the high-tech industry. (Meanwhile, as a supply chain journalist and author, my vote got lumped into the category of "miscellaneous.") Curiously, companies that are expected to be proficient in supply chain management, such as shipping companies, package and freight haulers, pipelines, airlines and railroads, are omitted from contention. So we're left having to draw some sort of conclusion as to why Amazon, which manufactures nothing, is rated so highly (No. 5), while the warehousing and transportation companies that make or break the e-tailer are left out of the picture entirely.

The Gartner rankings are also known for their emphasis some might say overemphasis on inventory turns, as if that's the be-all and end-all of supply chain proficiency. It's certainly important, no denying that, but what about on-time delivery rate? Shouldn't a company's inability to delivery products when promised have a deleterious effect on its overall supply chain "score"? And Gartner makes no effort to weigh the impact of a company's sustainability efforts, which these days is a crucial factor in determining whether a company deserves to be thought of as a "top" supply chain, as opposed to just a company that can crank out a lot of stuff.

But where Gartner absolutely gets it right is in its pushing of the "supply chain definition" envelope to include digital products in the mix, along with traditional physical goods. That distinction, I suspect, is one of the main reasons why Apple continues to excel with its supply chain it has the ability to bring in billions of dollars per year via digital retail outlets such as the iTunes and Apps stores, without carrying any physical inventory at all.

Even more to the point, and the reason why I look forward to these rankings every year, is that for at least one time every year, Gartner shines the spotlight squarely on what it means to have a best-in-class supply chain, and what types of best practices it takes for companies to excel at supply chain management. While the "American Idol" style popularity contest is a bit over the top for my tastes, I applaud the opportunity to have an intelligent debate about the nature of supply chains, and what makes them work.

Here, in reverse order, are the Top 25 Supply Chains of 2011:

25. Kraft Foods
24. 3M
23. Tesco
22. Starbucks
21. Johnson & Johnson
20. Nike
19. Inditex
18. Nestle
17. Hewlett-Packard
16. Intel
15. Unilever
14. IBM
13. Colgate-Palmolive
12. Microsoft
11. Coca-Cola
10. Samsung
9. PepsiCo
8. McDonald's
7. Wal-Mart
6. Cisco Systems
5. Amazon
4. Research In Motion
3. Procter & Gamble
2. Dell
1. Apple