I have spent the past week drafting up a new survey for Supply Chain Insights focused on understanding current plans, actions and perceptions of risk management within the supply chain business community. From looking at past surveys, blog posts, and other documents, it is my sense that we’ve got a long way to go in anticipating, defining plans, and reacting in proactive and coordinated manners to unexpected risk events around the globe. Today, we’ll try to connect risk events with financial results using a case study of a popular toy manufacturer. Our choice of metric will be the Cash-to-Cash Cycle representing supply chain efficiency throughout the company. In this blog post, we examine the financial results of Mattel over the past decade as they responded to several large recalls including the now nearly infamous 2007 lead paint recall.
What we find here is variability within the C2C cycle, but it not necessarily linked to the years in which recalls were conducted. Mattel annual reports reveal that major recall events occurred in 1998, 2007, 2009 and 2010. Variability within the C2C cycle seems much more to be a factor of the Great Recession; and overall, Mattel demonstrates no improvement on C2C as they close out 2011 with the same values they began with. Perhaps it’s not so much that recalls and risk events directly affect that year’s financial performance in the C2C cycle, but that risk events and recalls create an unstable environment which is not conducive to driving year-over-year gains. Financial performance may not be directly affected by risk management activities, but unexpected events can have a foundational effect on financial performance and create a stable or unstable environment for driving improvements in financial and supply chain excellence metrics. Of course, that is the just the initial hypothesis and would require more investigation.
Would you agree or disagree with the viewpoint above that Mattel’s C2C cycle does not show direct impacts of frequent recalls, but does demonstrate an unstable environment and thus stagnancy on the metric? Are there other metrics you believe would be more meaningful for a comparison against risk management performance? Or other case studies you think would be insightful? While you ponder those questions, I’ll turn my attention back to the risk management survey. But, before we can launch this newest survey into the field, we’ve got a couple of surveys and events to wrap up. Check them out below:
Voice of the Supply Chain Survey— take it here.
Supply Chain Talent: The Missing Link Webinar (Dec 5th @ 3 pm EST) — sign up here
And finally, Happy Thanksgiving to you and your family! I have much to be thankful for this year, including all of my readers. Cheers!