What we can learn from the 2016 Supply Chains to Admire study
A data-intensive annual study conducted by Supply Chain Insights provides industry-specific supply chain benchmarks and identifies three practices that can enhance company value.
Five months of analysis. Many heated debates. It is now over. Last month our research firm, Supply Chain Insights, finished its annual analysis of supply chain excellence, the "2016 Supply Chains to Admire," listing 16 companies as winners and 21 companies as finalists. The research starts in April and stretches over 15 weeks as we analyze the different elements and understand the patterns of each industry.
Why do we do it? Selfishly, we need a good, standard definition of supply chain excellence for our research, but we also want to help supply chain leaders improve and benchmark their operations. Currently there is no widely accepted standard for supply chain excellence; leaders agree that supply chain excellence is easier to say than define. Progress, however, is not possible without a clear goal. The answer? We think deep research, such as the Supply Chains to Admire study, can help companies determine benchmarks and set these goals.
The Supply Chains to Admire analysis is now in its third year. It is data-driven research: a deep analysis of performance, improvement, and value of 320 companies across 31 industries for the period 2009-2015. The source data for the analysis is public reporting of balance-sheet and income statements.
To determine the winners, we compared the relative effectiveness of each company against average performance within an industry-specific peer group. The analysis identified which companies have driven higher levels of improvement (based on Supply Chain Index calculations) and shareholder value (as defined by "price to tangible book value," a valuation ratio expressing the price of a security compared to its hard, or tangible, book value as reported in the company's balance sheet) while also outperforming their peer group on the performance metrics of growth, operating margin, inventory turns, and return on invested capital (ROIC). This methodology is shown in Figure 1.
And the winners are ...
In the analysis, we divide companies into three groups: winners, finalists, and underperformers.
Winners. The winners of this analysis meet all of the criteria of improvement, value, and performance when compared to a like industry peer group. Sixteen companies qualify for this category (see Figure 2). This high-performing group represents 5 percent of public companies studied.
Finalists. Finalists, like winners, showed higher levels of improvement and value than their peer group. They were also within 10 percent of the industry average on three out of four of the performance factors (growth, operating margins, inventory turns, and ROIC) while being no more than 25 percent below the mean on any of these four factors. Twenty-one companies meet these criteria (see Figure 2). In this analysis, 7 percent of companies studied are finalists. The combination of finalists and winners equals 12 percent of companies studied.
Underperformers. The winners and finalists are an elite group; 88 percent of companies do not meet the three criteria of improvement, value, and performance. Unfortunately, we find most companies are moving backwards on the Supply Chain Metrics That Matter (growth, operating margins, inventory turns, and ROIC) or are making progress on singular metrics instead of driving performance improvement on a balanced portfolio of supply chain metrics that correlate to market capitalization. This includes industry icons that are often referenced as best-in-class supply chains.
It is notable that there are no winners or finalists in the following industries: aerospace and defense, automotive, automotive suppliers, conglomerates, consumer durables, e-commerce retail, hospitals, over-the-counter drugs, packaging, pharmaceutical, third-party logistics, or toys. Similarly, industries like beverages, contract manufacturing, food, oil and gas, restaurants and fast food, and retail apparel have finalists, but no winners. We find it interesting that the industries with the greatest challenges—high-tech and electronics—post the greatest progress, while industries with slower market shifts—household products, food, and beverage—are regressing. Furthermore there is more progress in retail and discrete sectors than process-intensive industries.
What can we learn from the research?
The Supply Chains to Admire list allows us to identify high-performing supply chains based on hard data (rather than on personal opinion). With this analysis, we can then look at the companies on a vetted list and see if top performers have any traits or practices in common.
When we interviewed companies that made the Supply Chains to Admire list, we did find commonalities and similar patterns as well as commonalities among the laggards. (See Figure 3.)
Figure 3: Characteristics of Supply Chains to Admire Leaders
Laggards
Leaders
Focus on functional metrics
Focus on horizontal processes
Driving singular metric strategies
Building of balanced scorecards
Changing leadership
Consistency of leadership and culture
Focus solely on transactional processes
Strong planning and network design
Changing focus and adoption of fads
Clarity of supply chain excellence
One thing the leaders have in common is longer tenure of their leadership teams and a focus on long-term outcomes. This provides consistency in direction. The teams sidestep fads to maintain a dogged focus on supply chain excellence. In our analysis, we also found that winners are more focused on the management of complexity through the adoption of customer segmentation, cost-to-serve analysis, and item rationalization. They are better at horizontal processes, supply chain planning, and network design (with a clear definition of form/function of inventory).
What drives value?
As a part of this analysis, we also wanted to identify for supply chain leaders the factors that drive value. To do this, we worked in parallel with the Supply Chains to Admire research, mining our quantitative data to answer this question: "What steps should companies take to improve price to tangible book value (PTBV)?"
In the Supply Chains to Admire analysis, we use PTBV as a proxy metric of value. In our early research, we only used market capitalization, but in this more recent analysis, we substitute PTBV for market capitalization. Why? There is less volatility. The definition of PTBV we use is:
Price to Tangible Book Value = Market Share Price / Tangible Book Value per Shares Outstanding
We believe that improving the value of shares outstanding in relationship to assets and tangible book value is within the control of the supply chain leader. The supply chain leader has direct input into asset strategies and inventory decisions and drives supply chain strategies. These are major contributors to PTBV results.
To help supply chain leaders, we wanted to use our survey database to understand the relationship between supply chain strategies/process options and improving PTBV. Through this analysis, we find that companies that have a successful supply chain center of excellence, an effective sales and operation planning (S&OP) process, and better supplier visibility and less business pain associated with supplier reliability have greater PTBV performance. In Figure 4, we include the correlations of these factors to PTBV. (The full report also includes factors that we considered but found had a correlation of less than r=0.30 and greater than -0.30. We found that many commonly held best practices, like having a single instance of enterprise resource planning (ERP), do not show a pattern of correlation to PTBV.)
It's easy for industry consultants to speak of a top-performing supply chain, and it is right to be skeptical of claims that cannot be verified. It is for this reason that we are open and share our calculations and our methodologies.
To use the research, we recommend that you check out the supply chain's performance by plotting year-over-year metrics at the intersection of two ratios and look at the patterns. This is an "orbit" chart. We find the patterns and the intersection of inventory turns and operating margin and the patterns and intersection of growth and return on invested capital to be insightful. (These patterns are visually represented in the "orbit" charts by industry. The patterns tell stories. To understand the patterns, check out the portfolio of the winners here.) We believe that the "Supply Chains to Admire" report, by looking closely at these patterns, provides the verification you need. We hope that it helps you benchmark supply chain performance and guide your efforts. Check out the full report at supplychaininsights.com/2016-supply-chains-to-admire/.
New Jersey is home to the most congested freight bottleneck in the country for the seventh straight year, according to research from the American Transportation Research Institute (ATRI), released today.
ATRI’s annual list of the Top 100 Truck Bottlenecks aims to highlight the nation’s most congested highways and help local, state, and federal governments target funding to areas most in need of relief. The data show ways to reduce chokepoints, lower emissions, and drive economic growth, according to the researchers.
The 2025 Top Truck Bottleneck List measures the level of truck-involved congestion at more than 325 locations on the national highway system. The analysis is based on an extensive database of freight truck GPS data and uses several customized software applications and analysis methods, along with terabytes of data from trucking operations, to produce a congestion impact ranking for each location. The bottleneck locations detailed in the latest ATRI list represent the top 100 congested locations, although ATRI continuously monitors more than 325 freight-critical locations, the group said.
For the seventh straight year, the intersection of I-95 and State Route 4 near the George Washington Bridge in Fort Lee, New Jersey, is the top freight bottleneck in the country. The remaining top 10 bottlenecks include: Chicago, I-294 at I-290/I-88; Houston, I-45 at I-69/US 59; Atlanta, I-285 at I-85 (North); Nashville: I-24/I-40 at I-440 (East); Atlanta: I-75 at I-285 (North); Los Angeles, SR 60 at SR 57; Cincinnati, I-71 at I-75; Houston, I-10 at I-45; and Atlanta, I-20 at I-285 (West).
ATRI’s analysis, which utilized data from 2024, found that traffic conditions continue to deteriorate from recent years, partly due to work zones resulting from increased infrastructure investment. Average rush hour truck speeds were 34.2 miles per hour (MPH), down 3% from the previous year. Among the top 10 locations, average rush hour truck speeds were 29.7 MPH.
In addition to squandering time and money, these delays also waste fuel—with trucks burning an estimated 6.4 billion gallons of diesel fuel and producing more than 65 million metric tons of additional carbon emissions while stuck in traffic jams, according to ATRI.
On a positive note, ATRI said its analysis helps quantify the value of infrastructure investment, pointing to improvements at Chicago’s Jane Byrne Interchange as an example. Once the number one truck bottleneck in the country for three years in a row, the recently constructed interchange saw rush hour truck speeds improve by nearly 25% after construction was completed, according to the report.
“Delays inflicted on truckers by congestion are the equivalent of 436,000 drivers sitting idle for an entire year,” ATRI President and COO Rebecca Brewster said in a statement announcing the findings. “These metrics are getting worse, but the good news is that states do not need to accept the status quo. Illinois was once home to the top bottleneck in the country, but following a sustained effort to expand capacity, the Jane Byrne Interchange in Chicago no longer ranks in the top 10. This data gives policymakers a road map to reduce chokepoints, lower emissions, and drive economic growth.”
It’s getting a little easier to find warehouse space in the U.S., as the frantic construction pace of recent years declined to pre-pandemic levels in the fourth quarter of 2024, in line with rising vacancies, according to a report from real estate firm Colliers.
Those trends played out as the gap between new building supply and tenants’ demand narrowed during 2024, the firm said in its “U.S. Industrial Market Outlook Report / Q4 2024.” By the numbers, developers delivered 400 million square feet for the year, 34% below the record 607 million square feet completed in 2023. And net absorption, a key measure of demand, declined by 27%, to 168 million square feet.
Consequently, the U.S. industrial vacancy rate rose by 126 basis points, to 6.8%, as construction activity normalized at year-end to pre-pandemic levels of below 300 million square feet. With supply and demand nearing equilibrium in 2025, the vacancy rate is expected to peak at around 7% before starting to fall again.
Thanks to those market conditions, renters of warehouse space should begin to see some relief from the steep rent hikes they’re seen in recent years. According to Colliers, rent growth decelerated in 2024 after nine consecutive quarters of year-over-year increases surpassing 10%. Average warehouse and distribution rents rose by 5% to $10.12/SF triple net, and rents in some markets actually declined following a period of unprecedented growth when increases often exceeded 25% year-over-year. As the market adjusts, rents are projected to stabilize in 2025, rising between 2% and 5%, in line with historical averages.
In 2024, there were 125 new occupancies of 500,000 square feet or more, led by third-party logistics (3PL) providers, followed by manufacturing companies. Demand peaked in the fourth quarter at 53 million square feet, while the first quarter had the lowest activity at 28 million square feet — the lowest quarterly tally since 2012.
In its economic outlook for the future, Colliers said the U.S. economy remains strong by most measures; with low unemployment, consumer spending surpassing expectations, positive GDP growth, and signs of improvement in manufacturing. However businesses still face challenges including persistent inflation, the lowest hiring rate since 2010, and uncertainties surrounding tariffs, migration, and policies introduced by the new Trump Administration.
As U.S. businesses count down the days until the expiration of the Trump Administration’s monthlong pause of tariffs on Canada and Mexico, a report from Uber Freight says the tariffs will likely be avoided through an extended agreement, since the potential for damaging consequences would be so severe for all parties.
If the tariffs occurred, they could push U.S. inflation higher, adding $1,000 to $1,200 to the average person's cost of living. And relief from interest rates would likely not come to the rescue, since inflation is already above the Fed's target, delaying further rate cuts.
A potential impact of the tariffs in the long run might be to boost domestic freight by giving local manufacturers an edge. However, the magnitude and sudden implementation of these tariffs means we likely won't see such benefits for a while, and the immediate damage will be more significant in the meantime, Uber Freight said in its “2025 Q1 Market update & outlook.”
That market volatility comes even as tough times continue in the freight market. In the U.S. full truckload sector, the cost per loaded mile currently exceeds spot rates significantly, which will likely push rate increases.
However, in the first quarter of 2025, spot rates are now falling, as they usually do in February following the winter peak. According to Uber Freight, this situation arose after truck operating costs rose 2 cents/mile in 2023 despite a 9-cent diesel price decline, thanks to increases in insurance (+13%), truck and trailer costs (+9%), and driver wages (+8%). Costs then fell 2 cents/mile in 2024, resulting in stable costs over the past two years.
Fortunately, Uber Freight predicts that the freight cycle could soon begin to turn, as signs of a recovery are emerging despite weak current demand. A measure of manufacturing growth called the ISM PMI edged up to 50.9 in December, surpassing the expansion threshold for the first time in 26 months.
Accordingly, new orders and production increased while employment stabilized. That means the U.S. manufacturing economy appears to be expanding after a prolonged period of contraction, signaling a positive outlook for freight demand, Uber Freight said.
The surge comes as the U.S. imposed a new 10% tariff on Chinese goods as of February 4, while pausing a more aggressive 25% tariffs on imports from Mexico and Canada until March, Descartes said in its “February Global Shipping Report.”
So far, ports are handling the surge well, with overall port transit time delays not significantly lengthening at the top 10 U.S. ports, despite elevated volumes for a seventh consecutive month. But the future may look more cloudy; businesses with global supply chains are coping with heightened uncertainty as they eye the new U.S. tariffs on China, continuing trade policy tensions, and ongoing geopolitical instability in the Middle East, Descartes said.
“The impact of new and potential tariffs, coupled with a late Chinese Lunar New Year (January 29 – February 12), may have contributed to higher U.S. container imports in January,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “These trade policy developments add significant uncertainty to global supply chains, increasing concerns about rising import costs and supply chain disruptions. As trade tensions escalate, businesses and consumers alike may face the risk of higher prices and prolonged market volatility.”
New York-based Cofactr will now integrate Factor.io’s capabilities into its unified platform, a supply chain and logistics management tool that streamlines production, processes, and policies for critical hardware manufacturers. The combined platform will give users complete visibility into the status of every part in their Bill of Materials (BOM), across the end-to-end direct material management process, the firm said.
Those capabilities are particularly crucial for Cofactr’s core customer base, which include manufacturers in high-compliance, highly regulated sectors such as defense, aerospace, robotics, and medtech.
“Whether an organization is supplying U.S. government agencies with critical hardware or working to meet ambitious product goals in an emerging space, they’re all looking for new ways to optimize old processes that stand between them and their need to iterate at breakneck speeds,” Matthew Haber, CEO and Co-founder of Cofactr, said in a release. “Through this acquisition, we’re giving them another way to do that with acute visibility into their full bill of materials across the many suppliers they work with, directly through our platform.”
“Poor data quality in the supply chain has always been a root cause of delays that create unnecessary costs and interfere with an organization’s speed to market. For manufacturers, especially those in regulated industries, manually cross-checking hundreds of supplier communications against ERP information while navigating other complex processes and policies is a recipe for disaster,” Shultz said. “With Cofactr, we’re now working with the best in the industry to scale our ability to eliminate time-consuming tasks and increase process efficiencies so manufacturers can instead focus on building their products.”