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In recent years, businesses have received a crash course in how supply chain disruption can damage business continuity. From public health crises to geopolitical conflicts, external factors have wrought havoc with the supply chains of UK SMEs and highlighted the need for visibility and transparency. This is why supply chain mapping is essential in getting to know your supply chain, identifying vulnerabilities and mitigating future risks.
But what exactly is supply chain mapping?
Simply put, it is the process of visually representing the flow of goods, services, and data from the supplier to the customer via your business. It involves identifying and mapping out the various links that make up your business supply chain. A product supply chain map will typically include suppliers, manufacturers, distributors, vendors, and customers, and the connections between them.
This is essential for effective operations management, empowering businesses to manage risk, improve the customer experience, make operations more sustainable and save money in a turbulent economic climate.
What is the purpose of supply chain mapping?
The purpose of supply chain mapping is to create a centralised repository for supply chain data. This facilitates greater visibility of your company’s supply chain and allows companies to identify any potential vulnerabilities before they can compromise the availability and quality of the products and services they offer.
Supply chains are usually divided into two components: entities and functions. Entities include anyone who helps source, process, pack and distribute goods or materials. These may include wholesalers, vendors, warehouses, distribution centres, logistics providers, retailers, and customers. The second component is functions. These include all the actions and processes that connect the different entities in the supply chain.
Even a simple supply chain map will incorporate a diverse range of data, including:
- A complete inventory of suppliers
- Details of any subcontractors and their relationships with suppliers
- Details of the product or services provided, who provides them, and how they benefit your company
- All data that passes between your company and suppliers (and its importance/value)
- Proof of any necessary certifications (e.g. ISO certification, product certification etc.)
- Any assurance contracts held with suppliers
- Contract terms and when contracts are due for renewal or renegotiation
There are a number of digital tools that can aid businesses with supply chain mapping. These can ensure that supply chain data is always accurate and up-to-date by:
- Monitoring and reconciling supply chain information
- Auto-updating supplier data
- Identifying concentration risk with suppliers, contractors and their subcontractors
- Create a visual representation of your supply chain map that is easy to visualise and interact with
Supply chain mapping examples
There are several common examples of supply chain mapping that we see in the current business landscape. For instance:
- Supermarkets and big box stores buy large quantities from a carefully selected range of suppliers. Stock is held at strategically placed distribution centres before making its way to stores.
- E-commerce merchants typically use their own branded suppliers, stock from independent sellers, or a combination of the two. Fulfilment is then handled in strategically located and highly automated warehouses.
- Specialised supply chains may be required for companies that deal in rare or unique products. Here, raw materials sourced from a range of suppliers are assembled in the company’s own manufacturing centres. These products are usually made to order and transported directory from the factory to the retail outlet.
Benefits of supply chain mapping
The events of the past few years should serve as a stark illustration of why supply chain mapping can be hugely beneficial for businesses. At a time when human resources can be decimated by threats to public health, supply lines can be constricted by red tape, and global conflicts can complicate international trade, a real-time overview of the company’s supply chain map is highly advantageous to business leaders.
Supply chain mapping helps businesses to:
Identify risks
A better understanding of first, second and third-tier suppliers, contractors and relationships makes it much easier to identify potential risks and mitigate their impact on business operations.
Streamline and optimise the supply chain
Supply chain mapping can strengthen the relationships that keep the supply chain in constant motion. It bolsters the supply chain with improved communications which can yield a more comprehensive understanding of the ecosystem in which your business trades.
It also provides entities at every tier with a clear understanding of one another’s needs, expectations and goals.
As well as strengthening relationships, the supply chain mapping process can help to streamline and speed up the supply process. A clearer understanding of the different entities in the supply chain can help to identify potential bottlenecks that could cause delays and circumvent them by using other suppliers or negotiating priority order fulfilment.
Identify propensity for added or lost value
Supply chain mapping empowers businesses to identify where value may be added (e.g. superior components, ingredients or raw materials). It also enables businesses to identify where value may be lost (e.g. quality control issues causing production or delivery bottlenecks).
Create opportunities to improve cash flow
Cash flow is more important to businesses than ever in the current climate. One of the most tangible benefits of supply chain mapping is that businesses can clearly see which aspects of the supply chain have the greatest impact on cash flow. For instance, it can clearly illustrate which suppliers have more lenient payment terms, as well as which customers tend to pay later than average.
This can help to identify cash flow bottlenecks quickly and prevent over-reliance on interest-heavy short-term borrowing.
Identify sustainability opportunities
Finally, supply chain mapping allows businesses to identify opportunities to make their supply chain greener, more ethical and more sustainable. Anything from managing storage depots more efficiently to reduce emissions to swapping out suppliers with a poor ecological track record can go a long way in improving your company’s ethical and sustainability credentials.
Step-by-step guide to the supply chain mapping process
It’s clear to see that supply chain mapping can aid businesses in a number of ways, allowing them to save money, mitigate risk and improve cash flow. But how is the supply chain mapping process implemented?
Step 1- Identify stakeholders and onboard tier 1 suppliers
The first step is to take an inventory of every entity involved in bringing your product or service to market. If a company is involved in the production, storage, or distribution of your inventory, they should be on your supply chain map, even if you do not work with them directly.
The entities you deal with directly are your tier-1 suppliers. They can be invaluable in helping you to fill in the gaps in your supply chain map. Simply send them an invitation to use whatever supply chain mapping software you choose and ask them to fill in a brief survey explaining who they are, where they are, what they sell and who their suppliers and subcontractors are.
Step 2- Map lower-tier supplier relationships
Upon receipt of your responses from your top-tier suppliers, you will have a wealth of new data on their suppliers. But this is just the tip of the iceberg. By requesting that your tier 1 suppliers send the same invitation to their suppliers, you will be able to cascade this assessment down through your entire supply chain.
This will prove mutually beneficial to your business and every other entity in the supply chain as it will facilitate more efficient communications and help suppliers to better understand their own potential risks and operational bottlenecks.
Step 3- Establish timings and costs
Having mapped your supply chain to its full extent, the next step is to establish the lead times and costs connecting each entity in the chain. The more granular detail you can provide at this point, the better. For instance, as well as establishing delivery times, it may be worth including how long each entity takes to respond to emails or calls, or whether they have tiered pricing structures that could make them more economically viable in a cash flow crisis.
Step 4- Identify risks and layer in additional data
Supply chain mapping enables businesses to plan for the worst while hoping for the best. As you build your supply chain map, whether manually or using supply chain mapping software, the potential risks will start to make themselves known to you. This is an opportunity to layer in additional data, detailing what could go wrong and identifying a contingency plan for every event. This will ensure fast and agile decision-making in future supply chain crises.
Step 5- Monitor the flow of data
Finally, now that you have effectively mapped out your supply chain, all that remains is to monitor the flow of data as it moves down your chain and back up again. The efficient flow of data such as order references, invoices, payments and returns through your organisation can be as important for business as the flow of goods and funds.
