The Focus on Supply Chain Increases Dramatically at America’s Top Companies

This is the third in a series of articles for SupplyChainBrain analyzing how often the term “supply chain” appears in the annual reports of S&P 500 companies.

The first article, published in 2017, covered the period from 2005 to 2015, revealing a sharp increase from 860 mentions to 1,762. The second article, published in 2020, showed continued growth, with 2,264 mentions in 2019.

This latest study analyzes the S&P 500 annual reports from 2020 to 2023. As shown in Figure 1, mentions of “supply chain” nearly tripled from 2019 to 2022, largely driven by the COVID-19 pandemic, which put supply chains in the spotlight as companies faced widespread disruptions.

However, there was a slight decline from 2022 to 2023, with most industries mentioning “supply chain” 5% to 10% less than in the previous year.

In this article, we’ll explore key themes from the S&P 500 annual reports, highlight the companies that reference supply chain the most, and conclude with what many companies described as a “return to normal” in 2023.

 Figure 1: Supply Chain Mentions

Impact of the COVID-19 pandemic. This was a dominant theme, frequently cited as a major disruptor of supply chain efficiency and reliability. Many companies reported increased lead times, rising supply chain costs and reduced capacity. Additionally, social distancing and employee safety measures were added to many annual reports in 2020. 

Inventory-management strategies. The pandemic also increased lead times and influenced discussions on inventory levels. Many companies adjusted their strategies to mitigate longer lead times and demand fluctuations. 

John Deere worked with suppliers to ensure optimum inventory levels. Align Technology maintained inventory levels greater than historically required, and Generac experienced higher working capital investment, primarily driven by further elevated inventory levels. Zebra Technologies anticipated inventory levels to remain elevated from historical levels for the foreseeable future.

For some companies, higher inventory levels were instead discussed as a risk-mitigation strategy. Illinois Tool Works increased inventory levels to help mitigate supply chain risk and sustain customer service levels. When supply chains normalized in 2023, the company was able to reduce working capital. 

Earlier in the pandemic, PVH suffered from delayed inventory availability for its stores and digital commerce businesses. The following year, it noted that, to mitigate supply chain and logistics disruptions, it increased its core product inventory levels.

Technology and supply chain optimization. Over the last four years, many companies cited technology investments as a key ingredient for achieving this objective. Dollar Tree’s 2022 annual report shared plans for investments that it said would provide increased supply chain efficiencies, competitive pricing, and enhancements to technology infrastructure.” The company also outlined plans to modernize and optimize its stores, distribution network and technology.

In 2019, Stanley Black and Decker recognized the need for a “much more agile, adaptable and technology-enabled supply chain.” A supply chain transformation was initiated in mid-2022, perhaps delayed by the pandemic, to improve fill rates and transform the company’s manufacturing and distribution network “from a decentralized and inefficient system of sites built through years of acquisitions to a strategically focused supply chain.”

Target positioned supply chain and technology as critical to delivering an enhanced shopping experience. In its 2022 report, the retailer specifically mentioned that it intended to accelerate investments in its supply chain to drive future growth.

Who mentioned “supply chain” the most in 2023? In its 2023 annual report, Domino’s Pizza mentioned the term 128 times, more than twice as often as the second-ranked company (see Figure 2). This dominance is partly due to its unique terminology — while most companies refer to their facilities as “distribution centers,” Domino’s calls its regional dough manufacturing facilities “supply chain centers,” a term that appears 43 times in the report.

A relative newcomer to the S&P 500, joining on May 12, 2020, Domino’s was not included in the 2019 rankings. However, had it been, it still would have claimed the top spot, with 107 mentions of “supply chain” in its 2019 report.

Figure 2: Top 10 Mentions of Supply Chain

Companies with the largest increase in “supply chain” mentions from 2019 to 2023. Several companies significantly increased their use of the term in their annual reports for that period (see Figure 3). 

Arista Networks mentioned supply chain 13 times in 2019, primarily in risk disclosures with statements like “We may be subject to supply chain delays.”  By 2023, that grew to 60 mentions, with the company highlighting “significant” supply chain investments and its work with contract manufacturers to ramp up production. Arista also described efforts to increase its supply chain diligence activities due to the Uyghur Forced Labor Prevention Act (UFLPA). 

Baxter International saw a similar rise, increasing its use of supply chain from 10 in 2019 to 50 in 2023. In the third quarter of 2023, Baxter completed implementation of a new operating model intended to “simplify and streamline” its operations, while better aligning manufacturing and supply chain functions with commercial activities. Baxter said it was also working to create a more resilient supply chain and optimize supply chain and finance functions for greater efficiency. 

Figure 3: Top 10 Increases in Supply Chain Mentions

Increased focus on supply chain. Since 2019, many companies have introduced a dedicated supply chain section in their annual reports. FirstEnergy, Kroger, and Keurig Dr Pepper and are just a few examples. In this new section, FirstEnergy describes “increased supply chain lead times across numerous material categories, with some as much as tripling from pre-pandemic lead times.”  Kroger discusses its diverse sourcing strategy from “a wide variety” of domestic and international vendors. Keurig Dr Pepper uses its new supply chain section to explain the company’s focus on supporting “regenerative agriculture and conservation,” and “improving livelihoods for the people in KDP’s upstream supply chain.”

In some cases, companies have combined the new supply chain-focused section with other strategic concerns. For example, Hasbro and Hologic both introduced a “Supply Chain and Manufacturing” section. 

Beginning in late 2022, Hasbro launched a multiyear initiative aimed at transforming its global supply chain into a “best-in-class network.” The company was refining all aspects of its supply chain “to deliver improved capabilities and provide a productivity pipeline” for growth. Hasbro also used this new section to explain how it had decreased its dependence on Chinese manufacturing by increasing production in Vietnam and India.

Hologic acknowledged that global supply constraints had resulted in increases to the costs of production, and that it might not be able to pass these on to customers. The company also highlighted its reliance on “a limited number” of suppliers for some key raw materials, and that some of these suppliers were also competitors. F. Hoffmann-LaRoche and GE HealthCare Bio-Sciences were specifically mentioned as both suppliers and direct competitors.

Other companies have taken a broader approach by linking supply chain management with corporate responsibility and ethics.

Hewlett Packard added a “Supply Chain Responsibility and Human Rights” section in 2022. “In an effort to prevent intended and unintended harm, we continue to consider who purchases our offerings and how they are used,” the company said. HP believes that a diverse supply chain and equity in sourcing “not only creates opportunities for underrepresented and underserved communities, but also contributes to the resiliency of our supply chain.” 

The growing prominence of dedicated supply chain sections in annual reports reflects the increasing strategic importance of supply chain management.

A return to normal? A few companies identified 2022 as the year that their operations recovered from the pandemic and returned to normal, particularly in the communications services sector. Comcast noted that the scheduling of major sporting events had stabilized, while Live Nation Entertainment reported an “almost full return” to normal operations.

However, for most companies, 2023 marked the true return to pre-pandemic operations. Pool Corporation, Corning and Home Depot all cited 2023 as the year that their inventory levels returned to normal. Trane Technologies, IDEX, Tapestry and Dover reported experiencing normal lead times in 2023. 

The evolution of supply chain at the S&P 500 companies reflects how integral supply chain management has become to corporate strategy. While the pandemic initially drove a surge in focus due to disruptions and risk mitigation, 2023 marked a return to stability for many companies. Businesses are now shifting their attention to long-term improvements, including technology investments and supply chain resilience. The addition of dedicated “supply chain” sections in annual reports further underscores its growing significance. As companies adapt to new challenges and opportunities, supply chain management will remain a key driver of operational success and competitive advantage.

Mark Kosfeld is director of the University of Wisconsin-Milwaukee Supply Chain Management Institute. Sydney Teare is a University of Wisconsin-Milwaukee Senior Supply Chain Student.