Wall Street values supply chain management
Company stock prices can rise and fall on how well its supply chain executes.
Staff -- Modern Materials Handling, 4/1/2003
Good supply chain management is no longer just a goal; it is a necessity. And Wall Street is taking note of those who succeed, according to J. Stuart Francis, managing director and head of global technology investment banking for Lehman Brothers. He spoke to attendees at The Supply-Chain Council's Senior Executive Retreat held in Phoenix.
"Clearly there is a link between supply chain management and how Wall Street values various stocks," he said. "Companies that show they are aggressive in managing their costs have been rewarded with increases in their values."
Francis added that investors look to companies that show credibility, good execution, focus, efficiencies, stability and good cash management. "Supply chain management is allowing companies to achieve these goals," he said.
Supply chain management (SCM) has accounted for some $472 billion in revenues since 1996, Francis said. Outsourced SCM services alone, such as software, integration and on-demand services, will grow to over $50 billion annually within the next few years. He said investors are rating highly those companies that develop solid SCM programs.
Francis cited Dell Computer as a prime example of a company that has effectively managed its supply chain. The company has reduced its days-of-inventory from 20 a few years ago to only 3-4 days. Wall Street considers Dell "best-in-class" due to superb management of its inventory, logistics and operations.
Francis said the next big corporate battleground will revolve around a company's ability to work with its customers.
"Value creation will be created for those companies that have an end-to-end supply chain solution that links with their customers," he said.
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