Supply chain maps can be critical tools that enable organizations to improve efficiencies and reduce risks. Creating an effective supply chain map can be especially important now, as many business leaders work to build resilient supply chains that can weather disruptions.
Businesses of all sizes could benefit from building a supply chain map to gain greater visibility and control over their supply chain, strengthen supplier relationships, reduce risks, and contain costs.
Here’s a look at the importance of supply chain mapping, as well as how to create an effective map 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 the shipment timetables.
Armed with a comprehensive diagram illustrating how products travel through the supply chain, the business can analyze the supply chain 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 can allow you to put strategies in place to react rapidly when your business faces supply chain problems.
Why Is Supply Chain Mapping Important?
Supply chain mapping can allow you to 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.
With a comprehensive supply chain map, you can also develop a deeper understanding of all related costs, timeframes, and risks involved in both producing and distributing your products and services. This can 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 centers, 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 allow a business to get a clear view of its entire supply chain, helping the company pinpoint both strengths and weaknesses to determine whether changes are necessary. For example, if quality issues with the supplier of your raw materials is slowing 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 helps you anticipate potential risks, so your supply chain can remain 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 can help you proactively plan alternatives.
3. Strengthen the entire chain.
A key part of developing an effective supply chain map can be getting in contact with and developing an authentic connection with each link. By bolstering relationships among companies in your supply chain through clear communication, you can help them 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 develop a more sound supply chain strategy.
4. Streamline and speed up processes.
By analyzing the connections between the entities in your supply chain, you can 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 would allow the bakery to procure ingredients more quickly.
5. Reduce costs.
Your supply chain map can help you identify inefficiencies, allowing you to take steps to minimize waste, reallocate resources, and reduce your 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 own vendors and cover operational costs. If mapping your supply chain shows your cashflow 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.
By mapping your supply chain and strengthening your relationships with your suppliers, distributors, and other partners, you can deliver products and services to your 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.
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 likely 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 own suppliers. For example, is that business 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.
You can work out the costs and timeframes involved in each part of the chain to help ensure the efficient movement of goods and services through the supply chain.
- 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 either 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. Analyze your risks.
You can acknowledge the risks associated with each entity, including political and economic threats.
- 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 the U.S. that are vulnerable to wildfires or flooding? Understanding potential risks can help you prepare contingency plans in the event of a disruption or emergency.
5. Track your data.
You can track the flow of information and data through the supply chain. Efficiently transferring information, including orders, shipments, and returns, can be 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 fulfillment data, and inventory updates? Such software can help minimize human error, from typos to misplaced invoices or bills of lading.
The Takeaway
In the wake of supply chain disruptions that have caused widespread shortages, businesses are working to gain greater visibility over their supply network. Supply chain maps can help businesses keep close tabs on their domestic and global supply chains, so they can manage risks, improve efficiencies, reduce costs, and keep the flow of products and services running smoothly.
A version of this article was originally published on February 4, 2022.
Photo: Getty Images
