Supply Chain Insights Webinar on the Supply Chain Index on May 23rd

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Second presentation on the Supply Chain Index. The Supply Chain Insights team is working on building formulaic representations of supply chain excellence by industry. This is a second in a series of webinars where the team explains which metrics matter by industry.

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  • 1. Supply Chain Index Part IIHow & Why?May 23, 2013#sciwebinar

2. Supply Chain Insights LLC Copyright 2013, p. 2Supply Chain Insights is focused on deliveringindependent, actionable and objective advicefor supply chain leaders. A company dedicated toresearch, turn to us when you want the latestinsights on supply chain trends, technologies toknow and metrics that matter.About Us#sciwebinar 3. Supply Chain Insights LLC Copyright 2013, p. 3PresentersAbby MayerResearch AssociateLora CecereFounder and CEO#sciwebinar 4. Supply Chain Insights LLC Copyright 2013, p. 4This is the new bible for all supply chainexecutives. It provides an insidersperspective that will prove incrediblyvaluable to even the most grizzled supplychain veteran. This is the next must-havebusiness book.--Bruce Richardson, Chief Enterprise Strategist,Salesforce.comToday, the worlds of social business andsupply chain management have manydegrees of separation. I enjoyed workingwith Lora to understand what the futuretransformation of digital marketing to digitalbusiness could look like.--Jeremiah Owyang, Research Director, AltimeterSecond Printing of Bricks Matter:15 Five-Star Reviews on Amazon#sciwebinarBook can be ordered: http://www.amazon.com/Bricks-Matter-Building-Market-Driven-Differentiation/dp/1118218310/ref=sr_1_1?ie=UTF8&qid=1369245253&sr=8-1&keywords=bricks+matter 5. Supply Chain Insights LLC Copyright 2013, p. 5Publishing Two eBooks in2013 on Metrics ThatMatter2013 Publications#sciwebinar 6. Supply Chain Insights LLC Copyright 2013, p. 618 Reports in 2012#sciwebinar 7. Supply Chain Insights LLC Copyright 2013, p. 7Over 30 Reports Planned for 2013#sciwebinar 8. Supply Chain Insights LLC Copyright 2013, p. 8Supply Chain Metrics That Matter ReadershipFocus of Report Date of Publication Readership (as of 5-21-2013)Retail August 2012 1,592Consumer Products September 2012 1,097Chemical Industry November 2012 693The Cash-to-Cash Cycle November 2012 1,823Pharmaceutical Industry December 2012 1,429Driving Reliability in Margins January 2013 1,298Hospitals January 2013 865Brick & Mortar Retail February 2013 545Medical Device Manufacturers February 2013 633Consumer Electronics April 2013 490Apparel May 2013 300Supply Chain Metrics That MatterReadership#sciwebinar 9. Supply Chain Insights LLC Copyright 2013, p. 9 What Is Best in Class? Understanding the Supply Chain as a ComplexSystem Which Companies Have Maximized MarketValuation Through Supply Chain Excellence? Using the InsightsAgenda#sciwebinar 10. Supply Chain Insights LLC Copyright 2013, p. 10 Perform better than peer group Improve year-over-year results Align internally on metrics Deliver against the business strategy Demonstrate consistency in results Use innovation in supply chainprocesses Balance. Leaders in managing trade-offsWhat Is Best in Class?#sciwebinar 11. Supply Chain Insights LLC Copyright 2013, p. 11 What Is Best in Class? Understanding the Supply Chain as aComplex System Which Companies Have Maximized MarketValuation Through Supply Chain Excellence? Using the InsightsAgenda#sciwebinar 12. Supply Chain Insights LLC Copyright 2013, p. 12What Is A Supply Chain?A Supply Chainis a Complex Systemwith ComplexProcesseswith IncreasingComplexity#sciwebinar 13. Supply Chain Insights LLC Copyright 2013, p. 13The Supply Chain Effective Frontier:First Representation#sciwebinar 14. Supply Chain Insights LLC Copyright 2013, p. 14Mining 20 Years of Financial DataFinancial MetricsGrowth Profitability Cycle ComplexityCommon Shares Cash Cash-to-Cash Cycle Altman ZEmployee Growth Cash Change in Period Days of Finished Goods Capital TurnoverEmployees Cash on Hand Days of Inventory Current RatioMarket Capitalization Cash Ratio TTM Days of Payables Outstanding Quick RatioR&D Margin Cash Ratio Quarter Days of Raw Materials Return on AssetsR&D Ratio Cash Ratio Year Days of Sales Outstanding Return on EquityR&D to COGS Ratio Cost of Goods Sold Days of Work in Progress Return on Invested CapitalRevenue EBITDA DPO/DSO Return on Net AssetsRevenue Growth Free Cash Flow Ratio Finished Goods Inventory Revenue per EmployeeRevenue Growth TTM Gross Margin Inventory Working Capital RatioRevenue TTM Gross Profit Inventory TurnsSG&A Margin Net Profit Margin Receivables TurnsSG&A Ratio Operating Cash Flow Ratio Raw Materials InventorySG&A to COGS Ratio Operating Margin Work in Progress InventoryOPEX RatioPretax Margin#sciwebinar 15. Supply Chain Insights LLC Copyright 2013, p. 15The Supply Chain Effective Frontier:Second Representation#sciwebinar 16. Supply Chain Insights LLC Copyright 2013, p. 16 Supply Chain Index: A formulaic representation ofsupply chain financial ratios correlated to stockmarket capitalization valuation. Supply Chain Effective Frontier: The balance ofgrowth, profitability, cycle and complexity metrics todeliver the supply chain strategy. It may or may notmaximize the companys market valuation. Supply Chain Excellence: The behavior ofcompanies working to maximize value through thesetting of targets for supply chain financial ratios andaligning metrics that matter (tied to value chainstrategy).Definitions#sciwebinar 17. Supply Chain Insights LLC Copyright 2013, p. 17A Look at History: Progress in Productivity#sciwebinar 18. Supply Chain Insights LLC Copyright 2013, p. 18Cash-to-Cash Cycle vs. Gross Margin(2000-2011): Medical Device Industry#sciwebinar 19. Supply Chain Insights LLC Copyright 2013, p. 19Cash-to-Cash Cycle vs. Gross Margin(2000-2011): Pharmaceutical Industry#sciwebinar 20. Supply Chain Insights LLC Copyright 2013, p. 20Inventory Turns vs. Revenue perEmployee (2002-2011): Hospital Industry#sciwebinar 21. Supply Chain Insights LLC Copyright 2013, p. 21Cash-to-Cash Cycle vs. Gross Margin(2000-2011): Cross Industry Analysis#sciwebinar 22. Supply Chain Insights LLC Copyright 2013, p. 22Financial Metrics Across theHealthcare Value Chain (2000-2011)#sciwebinar 23. Supply Chain Insights LLC Copyright 2013, p. 23 What Is Best in Class? Understanding the Supply Chain as a ComplexSystem Which Companies Have Maximized MarketValuation Through Supply ChainExcellence? Using the InsightsAgenda#sciwebinar 24. Supply Chain Insights LLC Copyright 2013, p. 24Introducing theSupply Chain IndexA formulaic representation ofhow companies are trading offgrowth, profitability, cycle andcomplexity performance onselected supply chain financialmetrics against marketvaluation.#sciwebinar 25. Supply Chain Insights LLC Copyright 2013, p. 251. To better understand which supply chain metricsmatter to corporate balance sheet performance inpublic markets. We want to help leaders betteralign supply chain and financial performance.2. To create an objective system for evaluating andranking supply chains by industry peer group.3. To connect financial performance with supplychain excellence as measured throughquantitative surveys in an effort to better identifyand define best practices across industry groups.Why Did We Do This?#sciwebinar 26. Supply Chain Insights LLC Copyright 2013, p. 26 What it is: A way to understand the impact ofcompanies supply chain (relative to peers withinan industry sector) to market capitalization based aset of preselected supply chain ratio metrics. What it is NOT: A way to evaluate overallcompany performance or compare the modelresults to actual market capitalization.What It Is. What It Is Not.#sciwebinar 27. Supply Chain Insights LLC Copyright 2013, p. 27 May 23rd: presentation of consumer value chainand healthcare value chain industries June, July, August: release of results foradditional industries and discussion in SupplyChain Insights Community Monthly Webinars (June 27, July 25, August 29) Monthly Reports (June 11, July 9, August 13) September 11-12th: 1st annual Global Summit withspeakers selected based on Index performanceNow and Then#sciwebinar 28. Supply Chain Insights LLC Copyright 2013, p. 28Selected 14 CoreSupply Chain Ratios to StudyFinancial MetricsGrowth Profitability Cycle ComplexityCommon Shares Cash Cash-to-Cash Cycle Altman ZEmployee Growth Cash Change in Period Days of Finished Goods Capital TurnoverEmployees Cash on Hand Days of Inventory Current RatioMarket Capitalization Cash Ratio TTM Days of Payables Outstanding Quick RatioR&D Margin Cash Ratio Quarter Days of Raw Materials Return on AssetsR&D Ratio Cash Ratio Year Days of Sales Outstanding Return on EquityR&D to COGS Ratio Cost of Goods Sold Days of Work in Progress Return on Invested CapitalRevenue EBITDA DPO/DSO Return on Net AssetsRevenue Growth Free Cash Flow Ratio Finished Goods Inventory Revenue per EmployeeRevenue Growth TTM Gross Margin Inventory Working Capital RatioRevenue TTM Gross Profit Inventory TurnsSG&A Margin Net Profit Margin Receivables TurnsSG&A Ratio Operating Cash Flow Ratio Raw Materials InventorySG&A to COGS Ratio Operating Margin Work in Progress InventoryOPEX RatioPretax MarginSource: Supply Chain Insights LLC#sciwebinarSelected Ratios 29. Supply Chain Insights LLC Copyright 2013, p. 29What is Altman Z?Source: Investopedia (http://www.investopedia.com/terms/a/altman.asp)#sciwebinar 30. Supply Chain Insights LLC Copyright 2013, p. 30Consumer Value ChainMetrics That Matter by IndustryRetail (Discount StoresHousehold & PersonalProductsChemicalOperating Margin Operating Margin Operating MarginWorking Capital Ratio Free Cash Flow Ratio Days of InventoryReturn on Invested Capital Return on Invested CapitalDays of PayablesOutstandingDPO/DSO Ratio Current Ratio Return on AssetsDays of Inventory SG&A to COGS RatioDays of PayablesOutstandingDays of Inventory#sciwebinar 31. Supply Chain Insights LLC Copyright 2013, p. 31Healthcare Peer Groups#sciwebinar 32. Supply Chain Insights LLC Copyright 2013, p. 32Pharmaceutical Value ChainMetrics That Matter by IndustryMedical CareMedicalDistributionPharmaceuticalMajorPharmaceuticalGenericFree Cash Flow Ratio Operating Margin Free Cash Flow Ratio Operating MarginWorking Capital RatioReturn on InvestedCapitalReturn on InvestedCapitalFree Cash Flow RatioOperating Margin Free Cash Flow Ratio Altman Z Working Capital RatioSG&A to COGS Ratio Working Capital Ratio Current Ratio DPO/DSO RatioYoY Revenue Growth Return on Net AssetsDays of PayablesOutstandingAltman ZCurrent Ratio DPO/DSO RatioReturn on InvestedCapitalDays of SalesOutstandingCurrent Ratio Current RatioDays of Inventory Days of Inventory SG&A to COGS RatioDays of PayablesOutstandingDays of SalesOutstandingDays of Inventory#sciwebinar 33. Supply Chain Insights LLC Copyright 2013, p. 33Medical Device Value ChainMetrics That Matter by IndustryMedical CareMedicalDistributionMedical DevicesMedicalInstruments &SuppliesFree Cash Flow Ratio Operating Margin Return on Assets DPO/DSO RatioWorking Capital RatioReturn on InvestedCapitalOperating Margin Altman ZOperating Margin Free Cash Flow Ratio Free Cash Flow RatioReturn on InvestedCapitalSG&A to COGS Ratio Working Capital Ratio DPO/DSO Ratio Free Cash Flow RatioYoY Revenue Growth Return on Net Assets Working Capital Ratio Working Capital RatioCurrent Ratio DPO/DSO Ratio Return on Net Assets YoY Revenue GrowthDays of SalesOutstandingCurrent Ratio YoY Revenue Growth SG&A to COGS RatioDays of Inventory Days of Inventory Altman Z Current RatioDays of PayablesOutstandingCurrent RatioDays of PayablesOutstandingDays of PayablesOutstandingDays of Inventory#sciwebinar 34. Supply Chain Insights LLC Copyright 2013, p. 34Medical Care EquationLn(market cap) = 6.24 + 16.33(FCF) + 10.34(WC) + 5.72(OM) 2.39(SGAC) + 1.09(YOY) 1.01(CR) + 0.02(DSO) + 0.01(DOI) +0.01(DPO)Medical Care Equation#sciwebinar 35. Supply Chain Insights LLC Copyright 2013, p. 35Medical Care Ranking(2012)Medical Care Ranking (2012)Rank Company1 Fresenius Medical Care AG & Co. KGaA2 Community Health Systems3 DaVita HealthCare Partners Inc4 Health Management Associates, Inc.5 VCA Antech, Inc.6 Omnicare, Inc.7 Chemed Corporation8 Vanguard Health Systems, Inc.9 SunLink Health Systems, Inc.10 Cardionet IncSource: Supply Chain Insights LLCMorningstar peer group used as basis for equation included Acadia Healthcare Company Inc., Almost Family, Inc. Amedisys Inc., Amsurg Corp, GentivaHealth Services, Inc. Hanger Inc. HCA Holdings Inc. HEALTHSOUTH Corp, Healthways, Inc. IPC The Hospitalist Company Inc., LCA-Vision Inc., LHC Group,Inc., LifePoint Hospitals, Inc., Mednax Inc., Select Medical Holdings Corporation, Tenet Healthcare Corporation, The Providence Service Corporation, U.S.Physical Therapy, Inc., Universal Health Services, Inc. for which 2012 results were not available as of 5/9/2013.#sciwebinar 36. Supply Chain Insights LLC Copyright 2013, p. 36Medical Care Performance Ranking(2012)MedicalCareRanking (2012)Rank Company CR DOI DPO DSO FCF OM YOY SGAC WCEquationOutput1Fresenius MedicalCare AG & Co.KGaA1.77 41.19 29.62 81.97 0.097 0.157 0.102 0.272 0.1802 Community HealthSystems1.60 68.09 152.75 57.92 0.039 0.083 -0.044 0.138 0.0983 DaVita HealthCarePartners Inc1.43 5.11 27.10 63.37 0.067 0.158 0.216 0.161 0.1054HealthManagementAssociates, Inc.1.51 64.46 96.06 60.66 0.035 0.051 0.155 0.090 0.0855VCA Antech, Inc.1.31 14.18 10.86 12.01 0.094 0.058 0.144 0.094 0.034Source: Supply Chain Insights LLC, Corporate Annual Reports 2012 from One SourceRankings only include companies that had annual data available through One Source at time of calculation (May 2013).#sciwebinar 37. Supply Chain Insights LLC Copyright 2013, p. 37Medical Distribution EquationLn(market cap) = 6.04 + 33.39(OM) 24.69(ROIC) +15.23(FCF) 11.11(WC) + 1.49(RONA) + 1.37(DPODSO) +0.83(CR) + 0.02(DOI)Medical Distribution Equation#sciwebinar 38. Supply Chain Insights LLC Copyright 2013, p. 38Medical Distribution Ranking(2012)Medical Distribution Ranking (2012)Rank Company1 McKesson Corporation2 Cardinal Health, Inc.3 Henry Schein Inc.4 Patterson Companies Inc.5 Owens & Minor, Inc.6 MWI Veterinary Supply, Inc.Source: Supply Chain Insights LLCMorningstar peer group used as basis for equation included, AmerisourceBergen Corp., ALRTechnologies Inc. and Chindex International, Inc. for which 2012 results were not available asof 5/15/2013.#sciwebinar 39. Supply Chain Insights LLC Copyright 2013, p. 39Medical Distribution PerformanceRanking (2012)Medical Distribution Ranking (2012)Rank Company CR DOI DPODSO FCF OM ROIC RONA WCEquationOutput1 McKesson Corporation 1.09 31.66 1.91 0.021 0.017 0.065 0.474 0.0162 Cardinal Health, Inc. 1.24 27.86 1.85 0.008 0.017 0.074 0.210 0.0313 Henry Schein Inc. 1.84 68.10 0.78 0.040 0.069 0.116 0.259 0.1374Patterson CompaniesInc.2.65 49.08 0.45 0.082 0.101 0.131 0.200 0.2465 Owens & Minor, Inc. 1.76 34.92 1.09 0.020 0.022 0.089 0.122 0.079Source: Supply Chain Insights LLC, Corporate Annual Reports 2012 from One SourceRankings only include companies that had annual data available through One Source at time of calculation (May 2013).#sciwebinar 40. Supply Chain Insights LLC Copyri...