Since the pandemic, supply chain disruptions have become a regular challenge for manufacturers. They can happen at any time, and have a significant impact on operations.
To avoid or minimize the damage that such disruptions can cause, it’s important for companies to assess potential risks and develop a plan to manage those risks. However, this isn’t always easy. If you lack a dedicated supply chain team, the right tools or sufficient training, addressing these risks can be especially challenging.
Even if your company has limited resources, you can still effectively manage your operations by mapping the supply chain of one of your key products. This provides a way to gain valuable visibility for a modest investment. An effective way to do this is with a visual aid, as opposed to a dense spreadsheet. It provides insight into where increased safety stock and inventory buffers may be needed. It can also help identify risks and opportunities, as well as provide a roadmap for a more effective supply chain risk management review.
To get started, collect the needed data and create a visual map that illustrates:
- Where materials are purchased from,
- Where suppliers get their materials, and
- Where and how everything is shipped.
The supplier information can then be summarized to build in performance metrics.
An efficient mapping program does several things: It identifies weaknesses, risks, and opportunities, as well as illustrates a deeper understanding of the costs and interdependencies related to suppliers. This supply chain data can be easily reviewed, shared and updated regularly. The data should show the geographic locations of suppliers and their suppliers, where the most critical and at-risk parts and materials come from, and sourcing for the highest-volume materials or most common parts.
Such data can shed light on where Tier 2 and 3 suppliers are located. It also may reveal that you’re more dependent on overseas shipping than you think. Or, it could prompt you to pursue other options for your most critical materials or hard-to-find parts. In short, the data will help identify potential bottlenecks and opportunities for improvements.
Following are steps to successfully mapping a supply chain:
Gather data. Identify which key supply chains (such as high-volume or critical products) you want to map. Collect detailed information such as supplier data, part numbers, lead times and costs. Organize the data by categorizing parts — this will help you identify trends, risks and areas where improvements can be made.
Identify key supplier relationships. Look beyond your direct suppliers and at your suppliers’ suppliers. They’re important to understanding the full scope of your supply chain, and any vulnerabilities in sourcing raw materials or components.
Begin the mapping. Create a visual map of your supply chain, outlining how materials and components flow from suppliers to your manufacturing facility. Identify routes and transportation modes, which can reveal excess movements and risks from weather or port congestion.
Create a supplier risk index. Assess the risks associated with each supplier by evaluating factors like on-time delivery, responsiveness to issues, quality consistency and financial stability. Create a weighted risk score for each supplier based on these factors. This will become part of the traditional risk review of the overall supply chain.
Analyze and act. Regularly analyze your supply chain map and risk score to identify potential bottlenecks or disruptions. Brainstorm possible mitigation strategies (such as alternative suppliers, adjusting order quantities, and increasing safety stock). Develop a plan to address these risks, and implement a regular risk-review process.
Additional tasks may include categorizing and segmenting purchased parts. Some are subject to many outside forces, some unique ones might be hard to source, and others might be more critical to your product. You can map any or all of these factors.
It’s important to identify your Tier 2 and 3 suppliers and do your research to learn which of your partners want to be more relational versus transactional. Are they eager to work with you? Do they even respond to your request?
Risk mitigation is an extremely important part of supply chain management, but there’s also great value in knowing how you can leverage your supply chain to play to your strengths. The more information you have, the more successful you’re likely to be.
Many manufacturers want to improve their supply chain management but don’t know where to start. Supply chain mapping is a great first step. It can provide valuable insights for more effective supplier performance reviews, and strengthen your overall supply chain risk-management strategy.
Melissa Burant is supply chain project manager and supplier scouting leader, and Marc Schneider is industrial specialist and project manager, of CIRAS, part of the MEP National Network.