The 2012 Gartner Supply Chain Top 25: Asia Pacific 2012 has been published, ranking the top companies headquartered in the Asia Pacific region. But, with continued speculation on the accuracy and objectivity of the list, we spoke with Gartner analyst Debashis Tarafdar to get his take on the criticism and to discuss the findings.
Last year CHaINA Magazine published criticisms which largely revolved around the methodology used by Gartner. As with last year, the methodology uses the following proportions:
- 50%: Publicly available financial data (return on assets (25%), inventory turns (15%) and revenue growth (10%)).
- 25%: Gartner AMR Analyst Opinion (a voting panel of industry and functional analysts).
- 25%: Peer Opinion Panel (comprising supply chain professionals).
Key criticisms included high emphasis on financial rather than supply chain metrics, and the objectivity and accuracy of the Gartner AMR Analyst Opinion and the Peer Opinion Panel.
Due to the significant weighting (50%) placed on financial metrics, some critics have described the list as more of a Financial Top 25 than a Supply Chain Top 25.
But Mr Tarafdar defended the findings, saying he believed the results showed “a fair enough approximation of their supply chain capability.”
“We believe that the current methodology is a good balance of publicly available figures and the peer opinion. Because as much as we want to use a certain specific supply chain metric that will bring out the specific capabilities of the supply chain, most of the time these metrics are not publicly available, so they are not reliable when we want to compare across various companies,” he said.
He added: “We make an assumption here that the companies delivering well in terms of return on asset or in metric terms for revenue are doing well in their supply chain activities as well.”
How objective are the Experts?
With 50% of the methodology derived from opinions (25% analyst opinion and 25% peer votes), a key criticism has been the extent to which Gartner can remain objective, with many companies in the list amongst its clients. According to the Global Supply Chain Top 25 report, the Gartner analysts comprised 37 voters across industry and functional specialties.
But Mr Tarafdar responded: “Only 25% is Gartner analysts opinion. The remaining 75% is beyond our control, either it is publicly available information or the peers in the industry. There are 300 companies and many of them are not our clients.”
Yet with Gartner being relatively new to Asia, it may not be entirely surprising that many companies in the Asia Pacific list are not clients. Mr Terafdar was unable to provide the exact number of Gartner’s clients which appear in the list or how many were prospective clients:
“But definitely I can tell you that a lot of companies in the list there are not clients. With Gartner being a global brand we expect a lot of leading companies will be our clients anyway,” he said.
A Western Bias from the Peers?
According to the Global Supply Chain Top 25 report, 246 applicants were included on the peer panel, with 173 completing the voting process. The peers were at senior levels in supply chain organisations from a broad range of industries:
“Any supply chain professional working for a manufacturer or retailer is eligible to be on the panel and only one panelist per company is accepted. Excluded from the panel are consultants, technology vendors, and people who don’t work in supply chain roles.”
Mr Tarafdar said the peers were invited by email and voted online, selecting the top 25 according to their opinion and best understanding. He described it as “an objective online process.”
Yet with a large number of the peers coming from outside the Asia Pacific region, their familiarity with companies in the region is questionable.
In Gartner’s defence, Mr Tarafdar said the global assessment had been improved over the last three years. In 2010 just 4% of peer votes came from APAC, with 80% from the US and 15% from Europe. But this year APAC had 24% of the peer votes: “We are trying to increase or evenly distribute the peer voting across the globe and that will definitely create better results and a better assessment.”
He said: “We try to be objective and as close to striking a balance between all the industries, so we have a spread of peer voters across many industries. That’s how we mitigate that risk of not knowing a brand or knowing only the leading brands.”
While Gartner may be correct in saying that the application of exact supply chain metrics is difficult, many would still argue that the use of financial metrics does not provide an accurate reflection of a company’s supply chain capabilities.
Secondly, Mr Tarafdar deflects attention from the presence of many of Gartner’s clients in the list, and diminishes the significance of the 25% weighting given to Gartner analyst opinion, factors likely to continue to draw controversy.
On the positive side, Gartner has acknowledged some shortcomings of the methodology, and taken steps to include a greater proportion of peer analysts from the Asia Pacific.
Mr Tarafdar said: “I don’t think there is a perfect way of assessing this. But personally if you ask me it is quite a robust methodology now. We are constantly looking for improvements and if we think there are things that we have to do to improve the results or assessment, we’ll definitely do that in future.”
He added: “We have been trying to refine this process, to mitigate some of the limitations in this model, but in my opinion given the realities and limitations of information that we have about many companies, this is probably the best that we can get to.”
The Key Findings for 2012
The findings showed significant growth for Asian companies in the domestic market despite challenges, such as demand variability, both domestically and internationally.
The vast majority of supply chain leaders demonstrated capabilities in demand management and risk management, as well as excellence in operational capabilities and innovation.
Samsung retained its position as leader of the Top 15, with the list being dominated by high technology, automotive, and industrial products companies.
Top Chinese companies in the list were Lenovo (No.4) and Huawei (No.5). Lenovo improved its market share from the past year to become the second largest in the world. Huawei was a first time entrant to the list with strong financial performance, good product innovation, a customer centric business strategy and heavy investment in R&D.