Category Archives: Risk Management

Apple Again Leads Gartner Supply Chain Ranking

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Gartner announced its top 25-ranked organizations for supply chain in 2014, which includes four in the top-5 that also topped last year’s list. They are: Apple, McDonald’s, Amazon and Unilever, with P&G at fifth place. Gartner analysts announced the findings from this year’s research at its Supply Chain Executive Conference last week.

Apple took the No. 1 spot for the seventh year, continuing to outpace the others by a wide margin on the composite of financial and opinion measures used. McDonald’s placed in second spot for the second year in a row, followed by Amazon.com.

Two new companies joined the Top 25 this year—Seagate Technology (No. 20) appeared for the first time and Kimberly-Clark (No. 21) re-emerged after a year’s hiatus.

A primary goal of the Supply Chain Top 25 research initiative is to raise awareness of the supply chain discipline and how it impacts business, Gartner said. The supply chain rankings comprise two main components: financial and opinion. Public financial data gives a view into how companies have performed in the past, while the opinion component provides an eye to potential and reflects future expected leadership. These two components are combined into a total composite score.

Gartner analysts develop a master list of companies from the Fortune Global 500 and the Forbes Global 2000, with a revenue cutoff of $10 billion. The company then breaks the combined list down to the manufacturing, retail and distribution sectors, eliminating certain industries, such as financial services and insurance.

Analysts highlighted three standout trends for supply chain leaders in 2014:

Supporting the “Fully Contextualized” Customer

A trait of leading companies is that customer needs and behaviors serve as the starting point for go-to-market and operational support strategies. Their cultures enable consistently high-quality customer experiences that are tailored, where important, to local tastes. Supply chain leaders are expanding this demand-driven concept in terms of how they relate to their customers. They are more deeply understanding customers and striving to blend seamlessly into their daily routines. Ultimately, this understanding of customers in their local environments is helping supply chain leaders capture more revenue for their businesses, improving operational effectiveness, Gartner said.

Converging Digital and Physical Supply Chains

Leading companies have moved past selling only discrete products or services to their customers and are focused on delivering solutions. Regardless of industry, these companies want their customers to be loyal subscribers to their solutions. Several of the leading consumer product companies on this year’s list offer e-commerce subscriptions for their products, in partnership with retailers. This approach offers convenience and privacy to those customers who would typically purchase products in a physical store—and might switch to another consumer brand at any time.

Progressive industrial companies have suggested order replenishment systems with their dealer networks, based on the manufacturer’s ability to forecast demand for their dealer. Some have gone further, acting as virtual consultants to their customers’ planning organizations. They recognize that helping improve customers’ internal capabilities is part of a total solution, which makes them more competitive suppliers.

“Another significant aspect of the total customer solutions we see deployed by leaders relates to the remote management of aftermarket services, leveraging Internet connectivity,” said Debra Hofman, research vice president at Gartner. “The Internet of Things allows for monitoring of performance across the value chain; in the field at customer sites, but also to collect and analyze the big data generated as part of upstream manufacturing and logistics flows. This additional connectivity has also elevated the importance of supply chain security to prevent theft, counterfeiting and other forms of fraud. One thing is clear — future supply chains must seamlessly integrate the digital and physical worlds of customers to be competitive.”

Supply Chain as Integrated Partner

Growth is a top priority for the C-suite in 2014, with 63% of senior executives picking growth as a top imperative in Gartner’s 2014 CEO Survey. Leading supply chains are enabling this growth both organically and through successful M&A integration. Supply chain leaders also are emerging as trusted and integrated partners to business groups. Their focus on profitable growth often leads to smarter, more conscious decision making, saving business groups from spiraling out of control in the drive to maximize revenue.

In their quest for growth, however, many companies are finding the business models they were famous for dominating are now under attack from competition. Supply chain has a large part to play in enabling the business to compete for the future, concurrent with protecting existing business. The most advanced companies in the ranking said they are not afraid to rethink the design of their global supply networks to be successful. In some cases, this has led to increased vertical integration where leaders become involved in their customers and their suppliers’ businesses in an attempt to dominate value chains, redrawing the lines of competition in the process.

More detailed analysis is available in the report “The Gartner Supply Chain Top 25 for 2014.”

NOAA Releases 2014 Hurricane Season Outlook

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hurricane season

In a press conference this morning, the Climate Prediction Center of the National Oceanic and Atmospheric Administration (NOAA) released its official 2014 outlook for the Atlantic and Eastern Pacific hurricane seasons.

The East Coast may see below-average activity this year, thanks, in part, to the anticipated development of El Nino this summer. According to NOAA, “El Niño causes stronger wind shear, which reduces the number and intensity of tropical storms and hurricanes. El Niño can also strengthen the trade winds and increase the atmospheric stability across the tropical Atlantic, making it more difficult for cloud systems coming off of Africa to intensify into tropical storms.”

There is a 50% chance for a below-average season, a 40% chance of a near-normal season, and only a 10% chance of an above-average season, the center predicts. “For the six-month hurricane season, which begins June 1, NOAA predicts a 70 percent likelihood of 8 to 13 named storms (winds of 39 mph or higher), of which three to six could become hurricanes (winds of 74 mph or higher), including one to two major hurricanes (Category 3, 4 or 5; winds of 111 mph or higher),” they announced.

2014 Atlantic Hurricane OutlookBut the forecast is no reason to take preparations lightly. “Thanks to the environmental intelligence from NOAA’s network of earth observations, our scientists and meteorologists can provide life-saving products like our new storm surge threat map and our hurricane forecasts,” said Kathryn Sullivan, Ph.D., NOAA administrator. “And even though we expect El Niño to suppress the number of storms this season, it’s important to remember it takes only one land-falling storm to cause a disaster.”

On the West Coast, it may be a more tumultuous summer. The outlook calls for a 50% chance of an above-normal season, a 40% chance of a near-normal season, and a 10% chance of a below-normal season. The center predicts there is a 70% chance of 14 to 20 named storms, which includes 7 to 11 hurricanes, of which 3 to 6 are expected to become major hurricanes (Category 3, 4 or 5 on the Saffir-Simpson Hurricane Wind Scale).

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“The key climate factor behind the outlook is the likely development of El Niño this summer. El Niño decreases the vertical wind shear over the eastern tropical Pacific, favoring more and stronger tropical storms and hurricanes,” said Gerry Bell, Ph.

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D., lead seasonal hurricane forecaster with NOAA’s Climate Prediction Center. “The eastern Pacific has been in an era of low activity for hurricanes since 1995, but this pattern will be offset in 2014 by the impacts of El Niño.

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Next week (May 25-31) is National Hurricane Preparedness Week, and NOAA and FEMA will be offering additional tips and insight on their websites ahead of the official start of hurricane season on June 1.

The World’s Most Resilient Cities

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Toronto most resilient city

How do you invest, source and expand responsibly?

Picking the right place to do so may make or break your efforts. At least, that’s the theory of London-based property company Grosvenor. With that in mind, the company analyzed 160 data sets to assess the vulnerability and adaptive capacity of the world’s “50 most important cities” to determine which are the most resilient, with resilience defined as “the ability of cities to continue to function as centers of production, human habitation, and cultural development despite the challenges posed by climate change, population growth, declining resource supply, and other paradigm shifts.”

Grosvenor first measured vulnerability by looking at climate threats, environmental degradation (including pollution and overconsumption due to sprawl), resources, infrastructure and community cohesion. For the next half of the equation, according to the Guardian, “Adaptive capacity, or a city’s ability to prevent and mitigate serious threats, was a combination of governance (high value here on democracy, freedom of speech, community participation, transparency, accountability and long-term leadership vision), strong institutions, learning capacity (including good technical universities), disaster planner and finally funding (from budget to credit and access to global funding).”

Of particular note, eight of the weakest 20 cities are in BRIC countries, and some of the cities where population and industry growth are waiting to boom may pose the greatest risks.

Obama Calls Attention to Aging Infrastructure

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Tappan Zee Bridge. Photo by Laura Glickstein

President Obama is visiting the Tappan Zee Bridge, 25 miles north of Midtown Manhattan, on Wednesday to raise awareness of the nation’s crumbling infrastructure. The message is that funding for projects such as roads and bridges is to expire this fall.

The president’s speech will highlight the need for congressional action on infrastructure spending, the White House announced on Saturday. Obama will use his visit to the bridge site, where work is underway on pilings for a new bridge, to highlight the urgency of replenishing the Highway Trust Fund. The administration predicts the fund will be insolvent by the end of the summer.

Refurbishing the infrastructure is critical, as the American Society of Civil Engineers grades for U.S. infrastructure systems are low. Last fall the organization gave road and transit systems a D, bridges a C+, and levees a D-.

According to The White House Blog funding for infrastructure impacts more than 112,000 active projects to pave roads and build bridges, and about 5,600 projects to improve the country’s transit systems. This doesn’t include almost 700,000 jobs supported by these projects.

The White House plans several infrastructure-themed events, which began with the release of a report on Monday that lays out its argument for infrastructure investment and the ensuing funding crisis if Congress fails to act.

While construction is underway to replace the 58-year-old Tappan Zee Bridge, a $3.9 billion project recently approved for a $1.6 billion federal loan—the largest loan ever awarded under the Transportation Infrastructure and Innovation Act (TIFIA)—the administration is warning that other projects could be halted, slowed or not began in the coming months.

“We have reports that many states are already rethinking their investment plans due to the uncertainty,” U.S. Transportation Secretary Anthony Foxx told a Senate committee last week. Foxx pointed out that one-in-four bridges either needs significant repair or cannot handle current traffic, and that 65% of the nation’s roads are not adequate.

Foxx told the Senate that the administration is open to a variety of possibilities for raising new revenue to finance the Highway Trust Fund. The administration has proposed a one-time infusion of $150 billion into the fund, using revenue generated by corporate tax reform. The proposal, called the GROW AMERICA Act would provide $302 billion over four years for highways, bridges, transit, and rail systems, according to the blog.