Overview of the Methodology
Criteria for Inclusion in the Top 25
Creation of the Top 25 company list is completed at the start of each Top 25 cycle using the most up-to-date information that is available at that time. Once the list is completed, companies won’t be added or removed from the company list for that year’s cycle. The creation of the company list begins with combining the Fortune Global 500 and the Forbes Global 2000 lists. To maintain the list of companies evaluated at a manageable level, we then apply the following inclusion criteria:
- Must be featured on the latest Fortune Global 500 or Forbes Global 2000 lists.
- Must have annual sales revenue greater than $15 billion (most recent year).
- Must not be in an excluded industry.
- Must have a minimum of four years of publicly available, audited financials that are available in S&P’s Capital IQ (CapIQ) database.
- Must either have more than 50% of revenue from physical products or more than $1 billion in inventory for asset heavy service companies (AHSCs).
- Must meet a minimum threshold in the S&P Global ESG Score.
- Must reach the Community Sentiment and Awareness minimum combined voting score across the previous five years.
- Must release its financial data in time for inclusion in the rankings at the end of the Top 25 cycle.
Notes:
- Excluded industries: airlines; banking; crude oil production; diversified financials; electronics manufacturing services; energy; engineering/construction; entertainment; healthcare: insurance, managed care, services, providers; information technology/computer services; insurance; mail, package and freight delivery; media; metals; mining, crude oil production; petroleum refining; pipelines; railroads; real estate; shipping/transportation/logistics; services; shipbuilding; software development; temporary help; textiles; trading; travel & leisure; utilities.
- AHSCs primarily sell services but also run a physical supply chain with more than $1 billion in assets to support their service offering (such as some telecommunication service providers).
- Companies excluded under the Community Sentiment and Awareness criteria are reviewed each year by our industry experts. These experts determine if they have recently done anything of significant note that would likely cause them to receive enough votes to surpass the combined voting threshold and receive a ranking. Any companies flagged by these experts are added back onto the company list.
Calculation of the Company Rankings
Once we have locked the company list in the fall, we then start the process of collecting all the component data that is used to make up the composite score, which is the criteria we use to create the rankings. The higher the composite scores, the higher up the rankings a company will land.
The Component Data
The composite score is arrived at by combining two main components which are weighted at 50% each — business performance and community opinion:
- The business performance component is quantitative data made up of a variety of publicly available financial and environmental, social and governance (ESG) indices that reflect how companies have been performing.
- The community component is a qualitative view arrived at by each voter based on their view of a company’s maturity, leadership and overall supply chain excellence.
The Business Performance Component
The quantitative components of the Supply Chain Top 25 scoring system use publicly available financial and ESG data. The following business performance components are used in the ranking:
- Return on physical assets (ROPA) — Operating income/net property, plant, equipment and year-end inventory (three-year weighted average of ROPA performance).
- Change in return on physical assets (Delta ROPA) — The change in the three-year weighted average change in ROPA.
- Inventory turns — Cost of goods sold/quarterly average inventory.
- Revenue growth — Change in revenue from prior years (three-year weighted average of growth).
- ESG — Up to 10 points based on Gartner’s selection of trusted third parties’ indices and assessments for ESG commitment, transparency and performance.
The primary source for the four financial components is the CapIQ database. In some instances, CapIQ financial reports may include standardizations to ensure a consistent reporting methodology across companies.
Gartner has derived a set of ESG criteria which is informed by a range of trusted third-party sources. They are selected by Gartner to give a view of a company’s overall commitment to ESG, its transparency in reporting and its supply chain’s performance against selected ESG areas. The company level points are awarded for being a signatory of the United Nations Global Compact and reporting in accordance with the Global Reporting Initiative (GRI) Universal Standards. And the supply-chain-level performance is represented in “environmental” through the Science Based Targets initiative (SBTi) and CDP data, the “social” through S&P ESG Social Score and EcoVadis Medal status, and the “governance” through the S&P Global ESG Governance score.
Turning Results Into a Composite Score
The data for every component needs to be converted onto a 10-point scale and a weighting then applied to determine its contribution to the composite score. For the ESG component, the 10 points are simply derived from a company’s position in a range of trusted third-party indices. For the financial data, the four business data points are normalized onto a 10-point scale using the average of the best five scores as the benchmark for 10 points. The average of the lowest five scores form the base of the normalization, but we do not produce negative scores — so negative growth or change in ROPA are capped at zero.
The Community Opinion Component
The community component of the ranking is designed to provide a forward-looking view that reflects the progress companies are making and the extent to which they demonstrate leadership through visibility in the supply chain community. It’s made up of two components, each of which is equally weighted — a Gartner expert panel and a global peer panel.
The goal of both panels is to draw on the extensive knowledge of the Gartner experts and academics who research the companies’ supply chains and the practitioners from peer companies who trade or compete directly or indirectly with the listed companies. The peer panel is open to supply chain professionals and academics from around the globe, and we strive to make it a truly global panel. For company voters, only one panelist is allowed per company. Consultants, technology vendors and people who don’t work in supply chain roles (e.g., those in public relations, marketing or finance) are not invited to join the panel.
The Gartner expert panel and the peer panel use the exact same polling procedure. Panelists are reminded that they should vote based on their individual assessment of a company’s end-to-end supply chain maturity, leadership and community impact.
The polling is conducted using a web-based tool. Panelists are then presented with all the companies in the company list and can review the total list or filter by industry. They then create a shortlist before ranking their personal top 25. Being placed first earns a company 25 points, 24 points for a No. 2 ranking, and so on. All points are tallied to give a total for each company across all voters on the peer panel and a separate total for the Gartner expert panel. We normalize based on the single company with the highest total points and that receives a score of 10 down to zero for zero points. At this point, any company that receives a combined score of less than 0.5 across both panels will not be assigned an overall ranking regardless of how good their quantitative components are.
Composite Score and Ranking
Each company’s component scores are weighted and combined to give a total composite score. The composite scores are then sorted in descending order to determine the company ranking.
If a company is in the Masters category, we report it separately to the Top 25 rankings. But to remain in the Masters, it must score in the top five composite scores for at least seven out of 10 years. Then the rankings are created without the Masters, with the highest composite score for a non-Master being ranked No. 1, and so on down to the lowest-ranked company in the Gartner Supply Chain Top 25 ranking.
Shaping the Future Methodology
Your feedback will continue to strengthen the Supply Chain Top 25 and help raise the supply chain profession. As we review suggestions for methodology changes, we will need to use metrics that are authentic, simple and equitable (i.e., supported by credible, publicly available data across geographies and industries). We will balance an incremental approach to enable year-over-year comparison with a need to remain relevant as supply chains evolve.
Questions we’d like thoughts on regarding that evolution include:
- As supply-chain-as-a-service models increase and the transition to circular economy models accelerates, what limits should we place on industry inclusion?
- Are there better ways to assess how well companies leverage fixed assets to generate returns?
- We currently focus on how well a company manages its inventory. If we broaden the scope of working capital, we could consider how well different companies manage the whole cash conversion cycle from inventory to receivables. Will that be universally comparable across industries?
- The global ESG reporting landscape is shifting from voluntary to mandatory. With the introduction of the European Union’s Corporate Sustainability Reporting Directive (CSRD) that requires companies to report on their environmental and social impacts, and other global reporting mandates, the question becomes, will reporting still be a differentiator? And should we be considering other areas, such as the supply chain’s impacts on nature and biodiversity, and its level of circularity?
- We invite community peers and Gartner experts to vote for their own individual Top 25 companies each year — what, if any, guidance should we provide to focus their votes?
- What measures might we be missing? Do you feel there are areas we could better cover with a more quantified approach?
If you’d like to share your thoughts on these or other topics, brief Gartner experts on your company’s initiatives or be considered for the community peer panel, please contact us at supplychaintop25@gartner.com. See The Gartner Supply Chain Top 25 homepage for more information.
Frequently Asked Questions About the Community Peer Vote
Question: What is the community peer vote?
Answer: The Gartner Supply Chain Top 25 includes a community peer vote component in its ranking methodology. This component comprises 25% of the total score on which the final ranking is based. The goal of the community peer vote is to draw on the extensive knowledge of the professionals that, as customers and/or suppliers, interact and have direct experience with the companies being ranked. Additional knowledge of companies on the list is gained by exposure to periodicals, websites, white papers and conferences.
Question: Who is eligible to participate in the community peer vote?
Answer: Supply chain professionals and academia are eligible to be on the global peer opinion panel which contributes the community peer vote, however 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 (such as public relations, marketing or finance). Gartner monitors total representation, with an eye on reasonably balancing the panel across geographies, companies, industries and functions, and reserves the right to accept or reject any offer to be a panelist.
Question: How do those on the global peer opinion panel vote?
Answer: The polling procedure is administered as a simple, web-based survey form. Detailed instructions are provided. There are no other absolute responsibilities for participants in the community peer vote.
Question: When does the polling procedure take place?
Answer: Polling is typically held in late March/early April. Eligible panelists are notified of their acceptance and are emailed a link to the polling website on the day that it opens.
Question: How does the polling procedure work?
A. The polling website contains a master list of companies to consider compiled from the Fortune Global 500 and the Forbes Global 2000. Each panelist goes through a four-page system to get to a final selection of leaders.
The first page provides instructions on how panelists are asked to rank the top companies.
The second page asks for demographic information.
The third page provides the complete list of the companies to consider. Panelists are asked to choose 25 to 50 that, in their opinion, most closely fit the ideal of high supply chain maturity. This is done by checking off the boxes next to those companies.
The fourth page automatically brings up just the chosen companies. Panelists are asked to rank the companies from 1 through 25, with 1 being the company that, in their opinion, most closely fits the ideal. Panelists are then asked to submit their final ranking.
All individual votes are then tallied across the entire panel, with 25 points earned for a No. 1 ranking, 24 points for a No. 2 ranking, and so on. This procedure is identical to the polling procedure used for the Gartner analyst/expert vote component.
Question: Are there any preparatory materials available?
Answer: Yes: Gartner has a number of published documents that provide background on definitions, terminology and reference models that panelists may find useful.
Question: How much time and preparation are required to vote?
Answer: Average time to complete the vote is 15 minutes, and no panelist should take more than 60 minutes. Panelists aren’t expected, nor are they encouraged, to conduct external research to place their votes. By definition, each person’s expertise is deep in some areas and limited in others. The panel, as a whole, draws on the extensive, collective knowledge of the professionals that, as customers and/or suppliers, interact and have direct experience with the companies being ranked. Additional knowledge of companies on the list is gained by exposure to periodicals, websites, white papers and conferences. The polling procedure is designed to accommodate differences in knowledge, relying on what author James Surowiecki calls the “wisdom of crowds” to provide the mechanism that taps into each person’s core kernel of knowledge and aggregates it into a larger whole.
Question: How many panelists are there?
Answer: Each year the panel includes 150-200 supply chain executives from a wide range of industries.
Question: How do I become a panelist?
Answer: Apply at supplychaintop25@gartner.com
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