Resiliency, agility, excellence, visibility, responsiveness. These are all words thrown about to describe the ideal supply chain. But does anybody really have a clear definition of what supply chain resiliency is? At Supply Chain Insights, we finally do! To check out our full research report click here, but from the short and sweet version, keep reading. (As for those other adjectives, we’re working on them.)
Our definition of supply chain resiliency or “Resilience Ranking” is a mathematical measure of corporate performance at the intersection of inventory turns and operating margin. Originally, we started with subjective analysis of orbit chart performance. Take the chart below for example. When we look at the patterns of Boston Scientific versus Stryker, it is obvious how much tighter Stryker has managed inventory turns and operating margin compared to Boston Scientific.
Through a partnership with Dr. George Runger and Bahar Azarnoush at Arizona State University, we have quantified that tightness into a measure of “mean distance” of the pattern. This is our measure of resiliency. Similar to the cash-to-cash cycle, a lower number is better as it represent more stability, more resiliency and less oscillation in the pattern. The table below quantifies the patterns of several medical device companies with Stryker and Boston Scientific as bookends. Notice that the rating of Stryker (0.22) is significantly lower than Boston Scientific’s 0.68.
I hope this gives you a sense of the new Resilience Ranking we have developed at Supply Chain Insights. For the full report and a more in-depth look at several industries, check out the report here. Defining a great supply chain is hard enough without the nebulous nature of undefined adjectives thrown into the mix. Cross resiliency off the list of vague adjectives.
Another component of the work we are doing besides the financial analysis is quantitative research surveys. One of our current surveys looks at the state of risk management now, 5 years ago and 5 years from now. I hope you’ll consider completing the survey here. Our ultimate goal is to connect results from our financial work with our research surveys to be able to answer questions like this – How do risk management strategies vary between companies of low and high resiliency rankings? We need your help to get there!