After two years of declining operating margins, Household Products Companies rebound in margin in 2016. With the reporting of full year results, the industry trend is clear. The margin improvement is due to a rise in price, and focused cost-cutting programs on labor productivity and sourcing. Note the patterns in the Clorox, Kimberly-Clark, and P&G results. P&G is making the greatest improvement in inventory turns while Colgate enjoys the highest margins. With Colgate operating with a tighter asset strategy, the Colgate has almost a 4X Return on Invested Capital (ROIC) when compared to P&G.
In Figure 1, we contrast the patterns of Kimberly-Clark and Clogate while in Figure 2, we contrast the orbit chart patterns of P&G and Kimberly-Clark. The averages for the period of 2006-2016 are listed in the center boxes.
Figure 1. Kimberly-Clark and Colgate Orbit Chart for the Period of 2000-2016 at the Intersection of Operating Margin and Inventory Turns
Figure 1. Kimberly-Clark and P&G Orbit Chart for the Period of 2000-2016 at the Intersection of Operating Margin and Inventory Turns
Who does supply chain best? It depends on what you measure. We share this data to help companies set realistic targets and rates of improvement.
Church & Dwight shows the most improvement on the Supply Chain Metrics That Matter (as shown in Figure 3), but the most balanced performance is Clorox. In Table 1, we share the average results for Household Products Companies on the Supply Chain Metrics That Matter.
Table 1: Household Product Company Average Peformance on the Supply Chain Metrics That Matter for the Period of 2009-2015
Figure 3. Church & Dwight Orbit Chart at the Intersection of Inventory Turns and Operating Margin