Supply Chain Mapping: Definition, Benefits and Process
What is supply chain mapping?
Supply chain mapping (SCM) is the process of mapping out supply chains. Documenting information between companies, suppliers, or individuals Who are involved in the supply chain of the company to create a global map showing their supply network. for example. The exact source of the materials and All shipments used will be mapped.
The supply chain map is used to identify potential opportunities and reduce risk in the supply chain.
Why is supply chain mapping so important?
Supply chain mapping is possible You need to have strategies in place so that you can quickly react When there is a supply problem like a shortage facing a supplier, An order is lost in the system There is a sudden surge in demand or something else entirely. Also, you will gain a deeper understanding of the surrounding costs, timeframes, and risks, and This knowledge will give you an edge over your competitors.
Understanding your supply chain
Two main components make up a supply chain:
- Entities: The businesses that you can rely on to source materials, process them, and pack and ship final goods. These businesses include vendors and wholesalers, warehouses, transport companies, distribution centers, retailers, and customers.
- Functions: The connections between the entities in the chain. for example, You can be connected to your supplier via sales and finance channels by email and phone calls. You can connect to customers via your online store or retailers; Your product is connected with wholesalers in Your warehouse and your buyers via physical transport
Benefits of mapping your supply chain
You can map your supply chain to:
- Determine where value is added/lost. For example, Slowing down production could be due to quality issues in your raw materials
- Prevent the effects of potential risks. For example, how would your brand be affected by a third-tier supplier breaking environmental laws?
- Strengthen the entire chain. You can improve relationships among companies in your supply chain through clear communication. This will help them understand each other’s place in the business environment, as well as your expectations and goals.
- Streamline and speed up processes. Analyzing the relationships between entities in your supply chain will help you spot potential delays and then focus your efforts on fixing them. For example, you have three suppliers who purchase the same materials. One supplier is 30% quicker at fulfilling your orders than two others. Are you able to order more from the faster supplier or can you negotiate with other suppliers to speed up your orders?
- Discover the elements that most affect your cash flow. Customers may pay more quickly than others and suppliers might have shorter payment terms. According to research from FSB, the greatest risk to small suppliers’ supply chains was customer fails to pay for goods and services. A Business Card could be a good option to pay for expenses if your supply chain maps show that cash flow is at high risk.
You can use a business card to combat late payments, Try to align your supplier payments with the statement cycle you prefer.
How to map your supply chains
You can map your supply chain in five steps. This will allow you to create a visual representation that includes all entities and functions within your business.
Each stage is described below. You can ask questions to determine if there are ways you could make the process more efficient. or less risky, expensive, or time-consuming.
1. Identify stakeholders
Identify all people involved in the production, storage, and distribution of your product. You can document the name of the business and contact information on paper, or use supply chain planning software. Different products may require different supply chains.
Is your communication channel the best for key business? You might suggest setting up a dedicated channel on Slack to allow for constant, real-time communication between you and the contractor handling your returns.
2. Understand supplier relationships
Understanding the relationships between all parties (e.g. are they one another’s sole suppliers or many? ).
Ask your first-tier suppliers if they are interested in joining the mapping process. The invitation can be sent to second-tier suppliers. Each entity lists what they sell, who they are selling it to, and what it will be buying next. The map grows, giving you and your suppliers a better understanding of potential risks and bottlenecks. The dangers of relying solely on suppliers or businesses with long lead times.
Also read: 8 Ways to Solve Supply Chain Problems
3. Set costs and times
It is important to calculate the time and costs involved in each step of the chain.
What functions add the most value to your company? You can think of your supply chain as a value chain by considering how time and costs either create or prevent value. Calculate the average time it takes for each element, including smaller things like receiving an email response from your supplier and larger things such as transporting goods to the customer.
4. Acknowledge risks
Acknowledge the risks associated with each entity, including legal, political, economic, and environmental threats.
Unseen silos could increase the likelihood of disruptions, For example, procurement between sales, marketing, fulfillment, and procurement. Or between your business, your suppliers, or your customers. These silos can be removed by improving knowledge sharing.
5. Data tracking
Monitor the flow of information through the supply chain. As important as moving physical goods, efficient information transfer, including orders, shipments, and returns, is crucial for controlling costs.