Interview with Jill Marcotte of Dealer Tire

Last week I had a chance to chat with Jill Marcotte, Partner and Chief Supply Chain Officer of Dealer Tire, LLC. We covered everything from metrics to supply chain excellence across industries to career advice for young professionals. Check it out.

Jill Marcotte was named Partner and Chief Supply Chain Officer with ownership interest for Dealer Tire, LLC in January of 2001 as the company was initially founded. Dealer Tire is exclusively focused on building and supporting the car-dealer channel by making it easy and profitable for automotive dealers and OEMs to sell tires, services, and parts to drive loyalty and retention.  Dealer Tire currently manages 25 OE tire programs across the US and Canada for customers such as BMW, MB, Lexus Toyota and Chrysler.  Jill is known as a goal-oriented team builder with an ability to create a vision and inspire outstanding results.  Jill has directed growth of Dealer Tire’s Logistics function from its original three distribution centers to its current network of 32 in the U.S. and seven in Canada.  She also built Supplier Relations, Transportation, Supply Chain Solutions, and Inventory Management teams to support the company’s dramatic sales growth.

 What financial metrics do you track at Dealer Tire?

We have many metrics that we track for a variety of purposes.  From an overall financial perspective, key metrics include, but are not limited to: revenue growth, gross margin, operating expenses as a % of sales (warehouse, SG&A), EBITDA margin, DSO, DPO, and inventory turns.

 How has this changed since you started with the company? 

We have always tracked these metrics.  However, at times, the company’s performance or strategic goal(s) may shift the focus towards certain metrics more than others.

 What different industries have you worked in and how has your experience differed across those especially in terms of what makes a “good” supply chain?  I have been fortunate to have gained experience in a variety of company types, including automotive and confections (consumer/food) with both a wholesale and retail focus.  I have worked in privately held and public companies, large and small companies and fast growing and stable companies.  A “good” supply chain supports the company vision and goals, adapting to meet the needs of the customer and key stakeholders.  What is most important in each situation, with each unique company, is to determine the best way to have the most impact on the company.  In each company, determining that one most important advantage has been key to leveraging the supply chain and it has differed in each company.  Building a supply chain that can flex with the many changes (environmental, economic, customer additions, product offerings, service offerings, geographical expansions, etc.) that companies experience today is important to having a “good” supply chain.   Being future focused, proactive and staying ahead of your competition will minimize lost opportunities.  Executing with excellence and meeting commitments and metrics is fundamental to having a successful supply chain.

Dealer Tire is expanding its B2C business. What has surprised you the most about that experience? Where are you at currently? Is the pilot program expanding?

Our first pilot of RightTurn.com was in Dallas, Texas.  We used this pilot to test our concept, the process, the web site and marketing.  Leveraging customer feedback and results, we then made improvements.  We expanded the pilot to include Cleveland, Ohio.  In both cases, we received positive feedback from consumers, validating our goal of an “easy, right, fair” experience – a fairly new concept to tire purchasing.  Our associates have really embraced our expansion from a B2B company to include a B2C presence.  What has surprised me the most is the wide variety of consumers that have purchased from the site, not just our targeted demographic group.  We will definitely be expanding into additional markets in 2015.

Finally, what would you tell young professionals in the supply chain industry?  Supply chain is a great career choice.  Companies are continuing to place increasing value on the contribution that can be made by supply chain professionals.   The variety of supply chain roles makes it a great choice for professionals with differing skill sets.  The best advice I can give to young professionals is to focus on their company’s needs; find the best way to positively impact company results.  Always be selfless about putting the company’s needs first and foremost – always looking for a way to have an impact.  Have an informed point of view – have facts and information to defend your perspective.  Continually develop your relationship skills to increase your influence to drive the right decisions at your company.  You will be recognized as a valued contributor.

Thank you so much to Jill for taking time to answer these questions. I hope my readers found this interview as interesting and insightful as I did. If you did, let me know and I will work to incorporate more interviews into the blog.

Big Data Helps You Ask The Right Questions

There’s a lot of buzz these days about big data. But big data just for the sake of being big has little to offer supply chain. A spreadsheet with a million rows is no more or less insightful than one with ten rows. It depends on what is in the data and what tools we have to analyze the data. The tools and skill set component is a critical one. In fact, I think that big data can sometimes paralyze overwhelmed and understaffed supply chain departments.

Check out the results of a recent survey we did. The top pain for all respondents was the ability to get to data. Does more data make that task any easier? I would argue no. In some instances it is probably true that data doesn’t exist. In others, data exists and it is the task of slogging through it to find meaning that is the challenge.

At Supply Chain Insights, we have spent more than two years buried in financial data trying to understand the relationship between supply chain performance and financial performance. There is a large quantity of both. The challenge is finding meaningful relationships and actionable insights from the data.

This is a journey without a clear end and a math problem without a single solution. For me, coming from school, I spent a long time looking for the single answer. I am slowly coming around to accept that there is not a single answer. Why does the Index model depend so heavily on inventory turns and operating margin? It’s a good question. Those metrics are some of the most meaningful for supply chain leaders, they are objective and they are harder to game than other metrics. Would gross margin be better? Or days of inventory? Or something else entirely? Maybe. This is wholeheartedly a journey without a clear destination. The further we go, the more we discover and the better we are at asking important questions. I think what I’m trying to say is that more data doesn’t solve your problems. In fact, if you’re using it right, it probably just forces you to ask better questions.

One Year Later: Do We Have a Greener Supply Chain?

There are several research studies that we repeat on an annual basis- risk management, supply chain talent, green supply chain and big data. If you’d like to contribute on any of those topics, click the links above and take the short survey. We share all the results openly after the survey closes. In identifying topics to track year over year, we like to pick subjects that are dynamic. Are companies’ approaches to big data different this year than they were last? Are companies making progress on sustainability issues? Has all the publicity about the talent shortage helped alleviate the issue?

We just got the results compiled for our second green supply chain survey and I thought I’d share some high level insights.

Companies are doing less public sharing of sustainability goals than they were a year ago. More companies plan to, but less are actively doing so. This disappoints me. Things get done when parties are held accountable. Public sharing of goals is a great way for companies to make a public commitment to improve their supply chain practices in a more green direction.

But here’s something interesting. At the same time that companies are being less vocal about what they doing, they are including a more extended version of the supply chain in their green plans.

Only 34% of respondents are only focused on activities within their four walls and I think that’s refreshing. Supply chains don’t exist in isolation and it’s great to see companies acknowledging and working towards that extended vision. Collaboration on green initiatives can be a great first step on a long list of ways companies could improve performance in concert.

Like I mentioned, this study is still open and we are hoping to collect significantly more responses before closing it down for final analysis. If you’d like to participate, here is the link one more time.

New and Old

I am out of my comfort zone this week. I took a break from the financial analysis to do some thinking and learning about the software vendor space in supply chain management. This is a whole new world!

On one hand, the options and technologies are incredible. Companies are tracking SKU level data, obtaining instant out-of-stock alerts and all kind of real-time events. On the other hand, we are still fighting the same problems we’ve had for 30 years. Many companies are using the same old tools. In fact, a recent survey I found from Software Advice stated that 9% of respondents are still using only spreadsheets to track supply chain, while a further 5% are using nothing!

Many supply chain problems have remained remarkably consistent over time. Maybe they’re a bit more intense or occurring at a faster pace, but we’re well versed in the problems. How do we get this box to this place for this cost in this time period? The solutions however are totally different. Smartphones are totally reshaping the landscape. 3D printing, the Internet of Things, autonomous cars. These things sound so futuristic. And they are. But they’re on their way. Are you optimistic?

Research Is Hard

Last night as I worked to compile the data needed for a table in our upcoming consumer value network report, it hit me. What we are doing is hard. There is a lot that happens behind the scenes to get that pretty data in to the report. Below is the table I was working on to consider 5 industries in the consumer value chain over the period 2006-2012. Not only are we showing averages, but also the change over the time period on the second portion of each row. It seems obvious, but the average and the percentage change illuminate different facts. Together, they provide a much more comprehensive understanding than on their own.

But what makes it into our research and how do we display it? The choices are many and for better or for worse, there is no one single right answer. What industries are considered part of the consumer value network? What is the right NAICS code designation to capture the retail segment without getting too narrow or too broad? What are the metrics we (or the reader) should care about?

Some supply chain metrics are obvious: inventory turns, cash-to-cash cycle and operating margin. Other are less so, revenue per employee encompasses the whole enterprise but helps as a proxy of complexity in operations from a supply chain perspective. Return on invested capital (ROIC) is another metric we have come to gradually, through trial and error. In our work last year, we were surprised to find that ROIC had a much higher correlation factor with market capitalization than the more traditional return on assets. It is for this reason we have included ROIC as one part of the balance metric in the Supply Chain Index.

Once the metrics are chosen, more decisions appear. What is the right time period to consider? Is a table appropriate or perhaps an orbit chart? What about a simple line graph? These decisions depend not only on what data we want to present, but also on the audience. For someone new to the methodology, jumping straight into a pile of orbit charts is hard. Tables or simpler charts might provide a better entry point.

Next time you’re faced with a chart or table, remember the layers of decisions that lie beyond that research offering. A pie chart may look simple, but research is anything but easy as pie.

Black, White and Gray

The world of supply chain is one of gray. As much as I want it to be black and white, it is not. There are few “best practices” and few “worst practices.” Mainly there are evolving or improving practices. There are countless technology vendors, consultants, analysts, journalists and practitioners. We are all in this together. Unlike a spelling bee or an offsides call in a hockey game, there is no wrong or right answer.

Immersed in financial metrics, it is easy to lose sight of this. There should be a “right” answer. But there is not. Our ongoing research on the Supply Chain Index is one of discovery. For every question we answer, we come up with three more. This moves the industry forward. It is not fast and it is not perfect, but we are doing our best and trying new ways every day to improve supply chains around the world.

The Supply Chain Index, Broadly

One of the core beliefs backing the new Supply Chain Index is that companies face wildly different operating environments and should be compared only against peers in similar situations. Safeway Inc.‘s supply chain is so structurally and strategically different from American Apparel Inc that any comparison is almost entirely meaningless. Of course, there are lessons to be learned from one industry and implemented into another, but it is rarely as simple as copy-and-paste. For that reason, we like to conduct our Supply Chain Index analysis along strict industry lines.

Every once in a while though, we branch out and compare different industries. Usually, this comparison is based upon the idea of a value chain or value network. Industries that cooperate and collaborate to bring products to consumers may not be apples-to-apples comparable, but it can be insightful to gain a longer value chain perspective stretching across different industries. The table below illustrates some preliminary work we have conducted on the consumer value network encompassing retail, consumer packaged goods, food & beverage and chemical companies.

The three metrics: balance, strength and resiliency are objective measures based upon financial performance. The best companies or industries will have high values for balance and strength, but low values for resiliency. Resiliency, the calculation of tightness of the pattern at the intersection of inventory turns and operating margin, is best when the value is low and the pattern is tight.

In the table above, based upon a rather selective number of companies you can see that the food & beverage industry has the best performance on balance and strength, while consumer packaged goods leads the way on resiliency. Fluctuating commodity costs make resiliency a different task in the food & beverage world.

The chemical industry turns in negative performance on both balance and strength, meaning the industry as a whole has lost ground since 2006. The Great Recession created significant challenges for chemical manufacturers and that is reflected in their results.

What else do you see in the results? Do the results for this value chain or value network surprise you? We’ll be profiling these four industries in greater detail in a June research report. In the meantime, you can check out our latest Index methodology report here and take a listen to a podcast over here.

 

What I Learned

Nearly two and half years of work on financial ratios in connection with supply chain excellence have led us to this point. This week we are publishing the results of the 2014 Supply Chain Index. Our report (The Supply Chain Index: Improving Strength, Balance and Resiliency) examines the methodology of the Index as well as three industry peer groups (chemical, consumer packaged goods and pharmaceutical). Here is what I have learned through the process -

* This is hard work. Connecting financial metrics with supply chain performance is not as simple as it sounds. Maybe to wiser people it doesn’t sound easy, but to me it initially sounded straight forward. It has not been. This has been a long project full of mistakes and iterations and improvements.

*Cross industry analysis and comparisons are fun but not always meaningful. Comparing well known supply chain leaders like Wal-Mart, McDonald’s and Apple is a fun exercise, but the realities of the different business environments means practices are not always transferable across industries. Comparing against a similar peer group of public companies or even down to divisional analysis provides much more actionable insight.

*Big companies may be disadvantaged in the race for supply chain excellence. Companies with a larger supply chain footprint and more complexity stretching across the globe deal with more inertia than smaller more agile companies. It is for this reason we are aiming to include public companies of all different sizes in our ranking, not only the largest by revenue.

*Change takes time. It takes several years to measure consistent and sustained change within a supply chain. Most leaders are surprised to see that, in general, inventory levels over the past decade have not come down significantly. A short-term project mentality has led us to exaggerate inventory improvements. In an effort to provide the necessary time horizon, the Supply Chain Index is based on seven years of results (2006-2012).

I hope you will catch the whole report available here and consider joining our webinar on May 19 at 11 EST. The webinar is the second on the list here.

What About Customer Service Metrics?

Our exploration of supply chain excellence divides financial metrics into four categories. Growth, profitability, cycle and complexity are the four components of the Supply Chain Effective Frontier. We believe supply chain leaders have to make conscious trade-offs of these four priorities in order to improve supply chain performance in a calculated and controlled manner. Many of you are familiar with our seesaw of the Supply Chain Effective Frontier.

One of the most common questions we get in our discussions of supply chain excellence is “where are the customer service metrics?”. Unfortunately, for the time being, they are not here. For several reasons we are not comfortable including customer service metrics. There are no objective standards for customer service metrics. Because they are not reported in annual reports (with the rest of our metrics), we do not believe companies can be expected to objectively measure and report their performance.

Inventory is a proxy for customer service. Large swings in inventory are evident in financial metrics including days of inventory or inventory turns. Excessive fluctuation in these indicates an underlying issue within the supply chain which may manifest in reduced customer service levels. It is not perfect, but it is the best we have for the time being.

Finally, when we conduct deep dives into divisional data for clients, we are able to get a more nuanced look including some measures of customer service levels. After signing an NDA, companies are more willing to share that data and we can look at performance across different divisions or categories. The figure below illustrates an example of inventory turn and case fill percentage across three different categories.

If you’re interested in complimentary benchmarking or a deeper dive into your company’s financials, send me a note at abby.mayer@supplychaininsights.com. If you’re developing a measure of customer service based on financial performance or other objective measures, definitely let me know. In the meantime, thanks for following along!

Supply Chain Resiliency Revisited

A couple weeks ago, I wrote a post entitled “What the Heck is Supply Chain Resiliency?” We had just completed preliminary work on a new metric in cooperation with Arizona State University called resiliency. Resiliency is a measure of a company’s performance at the intersection of inventory turns and operating margin. It is one piece of the Supply Chain Index that we are developing. The other pieces are still in development, but I’d like to give you a sneak peek into our work. We’re planning to develop two additional metrics – strength and balance.

Strength will be our attempt to quantify year-over-year consistency in results. This might be revenue growth on an annual basis or even Return on Invested Capital. This metric is designed to reward companies demonstrating consistency in results. Of course improvement in metrics is important, but so too is consistency.

Balance is the third metric we are creating and for long time readers will likely evoke memories of last year’s work on the Index. This is our attempt to connect supply chain financial metrics with market capitalization. Of course, there is a TON of noise in market capitalization data that cannot be controlled by supply chain, but we believe there is a relationship there. As the work continues, we are finding that some industries demonstrate a correlation and others do not. Is there a pattern between industries that do or do not correlate? The discovery is ongoing.

This is work that has never been done before and it keeps me on my toes. If you’d like to follow along with our latest developments, be sure to tune into our complimentary webinar this Thursday, April 24 at 2 p.m. ET. Lora Cecere, myself and Dr. George Runger of ASU will be presenting our latest research.

In order to keep our webinar series going, we depend on survey respondents from readers like you. We have several open surveys available here and are especially excited to finish a long running study on retail scorecards. If you can help us out, here is the link. See you Thursday!