Supply chain maps can be important tools for improving efficiencies and reducing risks for businesses of all sizes. Creating an effective supply chain map can be especially important now, as many business leaders work to build resilient supply chains and weather disruptions.
Supply chain maps could help businesses gain better visibility over supply chains, strengthen supplier relationships, reduce costs and manage risks. Here’s a look at the importance of supply chain maps and how they can be used to help your business thrive.
What Is Supply Chain Mapping?
Supply chain mapping is the process of documenting information about a company’s suppliers, manufacturers, distributors, and other parties involved in the supply chain. The goal is to create a detailed map of the company’s supply network. For example, a supply chain map often includes the suppliers of raw materials and their locations, the types of transportation used to move goods, and shipment timetables.
Armed with a comprehensive diagram illustrating the flow of products from supplier to customer, businesses can analyse supply chains to identify areas of improvement and mitigate risks. This allows the company to quickly make informed decisions that keep goods flowing to meet customer demand.
SUPPLY CHAIN MAPPING HELPS BUSINESSES PUT STRATEGIES IN PLACE TO REACT RAPIDLY WHEN PROBLEMS ARISE.
Why Is Supply Chain Mapping Important?
Supply chain mapping may help you put strategies in place to react rapidly when your business faces supply chain problems, such as a supplier falling short on materials, a sudden surge in customer demand, or other unexpected events, such as natural disasters, global health crises, economic downturns, and geopolitical shifts.
A comprehensive supply chain map may help you develop a deeper understanding of all related costs, timeframes, and risks involved in producing and distributing your products and services. This may help you gain an advantage over competitors who lack this important knowledge.
Understanding Your Supply Chain
A supply chain has two main components:
- Entities: the businesses you rely on to help you source, process, pack, and ship both materials and finished goods. These entities include wholesalers and vendors, warehouses, transportation companies, distribution centres, retailers, and customers.
- Functions: the processes that connect the various entities in the chain and facilitate the flow of goods and services from raw material suppliers to end customers, such as logistics companies.
The Benefits of Mapping Your Supply Chain
By mapping your supply chain, you can:
1. Gain increased visibility to identify where value is added or lost
Supply chain mapping can provide a clear view of the entire supply chain, which may be able to help you pinpoint both strengths and weaknesses to determine whether changes are necessary. For example, if quality issues with the supplier of your raw materials slow down the manufacturing of certain products, you may decide to partner with a new materials supplier.
2. Mitigate the impact of potential risks
A detailed map of your supply chain may help you anticipate potential risks, so your supply chain remains resilient when faced with challenges. For example, could an impending hurricane impact your shipping routes? If a third-tier supplier is accused of violating environmental laws, will certain materials you depend on get recalled? Awareness of potential situations may help you proactively plan alternatives.
3. Strengthen the entire chain
A key part of developing an effective supply chain map is contacting and developing an authentic connection with each link. Bolstering supply chain relationships through clear communication may help partners better understand their place in the business ecosystem, including your company’s expectations and goals. You can also get a better understanding of their processes and practices, helping you strengthen your supply chain strategy.
4. Streamline and speed up processes
By analysing the connections between the entities in your supply chain, you may be able to spot where redundancies are occurring and delays are originating, so you can focus on correcting bottlenecks. For instance, if a small independent bakery uses supply chain mapping to outline the sources of its ingredients, the owner might find working directly with local farmers leads to faster procurement of ingredients.
5. Reduce costs
Your supply chain map may help you identify inefficiencies, allowing you to take steps to minimise waste, reallocate resources, and reduce total expenses. In addition, small businesses may face delayed payments or lack of payments from customers, which can interfere with their ability to pay their vendors and cover operational costs. If mapping your supply chain shows your cash flow is at risk, for instance, you could take proactive measures to keep processes moving, perhaps by taking advantage of invoice factoring, cutting unnecessary spending, or giving customers incentives to pay off invoices sooner.
6. Improve customer satisfaction
Mapping your supply chain and strengthening your relationships with suppliers, distributors, and other partners may help you deliver products and services to customers more efficiently. This will likely boost customer satisfaction and loyalty.
How to Map Your Supply Chain
Mapping your supply chain is a five-step process that involves creating a visual representation of all the entities and functions your supply chain depends on.
At each stage, you can ask questions to determine whether the process could be more efficient, or less risky, expensive, or time-consuming. Here is a five-step process for creating a supply chain map.
1. Identify your stakeholders
Consider documenting all suppliers, wholesalers, distributors, and other companies that contribute to the production, storage, and distribution of your products. Your business may create more than one supply chain map, since the list of contributors may differ for different products.
- Questions to consider: are you using the most efficient channel to communicate with other businesses? Perhaps you could create a dedicated space for consistent, real-time communication with the contractor who handles shipments.
2. Understand your supplier relationships
Try to understand the relationships between all parties involved in your supply chain, including those who provide materials to your suppliers. For example, is your partner the sole supplier of materials or one of many?
- Questions to consider: are your first-tier suppliers – partners you directly conduct business with, such as manufacturing facilities – willing to facilitate your mapping process? If so, they can also extend an invitation to second-tier suppliers, or the subcontractors who provide materials to your first-tier suppliers, and so on. Each entity should detail what they sell, to whom, and what they buy next in the chain. As the map expands, you and your suppliers may get a better view of potential risks and bottlenecks, allowing you to avoid relying on single suppliers and businesses with long lead times.
3. Establish prices and timelines
Work out the costs and timeframes involved in each part of the chain to help ensure the efficient flow of goods and services.
- Questions to consider: which functions offer the most and least value to your business? It can be helpful to think of the supply chain as a “value chain” by considering how these costs and timeframes produce or prohibit value. You can calculate how long each step in the chain takes on average, including small tasks, such as processing an order with your supplier, and bigger responsibilities, such as the transportation of goods to the customer.
4. Analyse your risks
Carefully acknowledge the risks associated with each entity, including political and economic threats, and use that to inform your next steps and wider strategy.
- Questions to consider: are silos slowing down any of the processes between your business and your suppliers and customers? Are any of your subcontractors located in areas of Australia that are vulnerable to bushfires or flooding? Understanding potential risks can help you prepare contingency plans for a disruption or emergency.
5. Track your data
Finally, make sure you track the flow of information and data through the supply chain. Efficiently transferring information, including orders, shipments, and returns, is often just as important in controlling costs as the timely movement of physical goods.
- Questions to consider: can you use automation software to streamline the flow of information, including invoices, payments, order fulfilment data, and inventory updates? Such software can help minimise human error, from typos to misplaced invoices or bills of lading.
Key takeaway
In the wake of major supply chain disruptions, businesses are working to improve visibility over their supply network. Developing a supply chain map may help you keep close tabs on your business’s domestic and global supply chains, so you may be able to manage risks, improve efficiencies, reduce costs, and keep the flow of products and services running smoothly.