January 9, 2013

Supplier Management Trends in 2013: Trend 3 – Supply Chain Mapping

The first geovisual map, drawn by the French engineer Charles Joseph Minard in 1861, shows the tremendous losses of Napoleon’s army during his Russian Campaign of 1812.  Perhaps ahead of its time, this 152 year old map highlights the importance of movement, location, time, while keeping a relatively low size and low perceived complexity. Hence, in its most simple terms using pen and paper, creating a  good supply chain map is a multi-step process with each step having a number of individual requirements.

Minard

Traditionally, a good modern supply chain map represents how a company’s products are sourced throughout its suppliers, and sub-suppliers. Information that needs to be gathered includes how the supply being mapped fits in the company’s tactics, how the supply process relates to the company’s values, and ultimately how the supply process relates to the company’s bottom line goals. The goal of the supply chain map is also to help a company evaluate and monitor the efficiency by measuring total production lead time and total value added time of its processes. But holistic supply chain mapping today is not just about linear efficiency and optimization – but like Minard’s map, must complete a picture that can tell a story.

This raises the question – what are the requirements of supply chain mapping in 2013?

Today organizations outsource much of their manufacturing processes globally and where many Fortune 500 companies in industries such as automotive or pharmaceutical have upwards of 50% or more of their suppliers based globally.  Increased complexities with suppliers and heightened concern over areas like quality and risk, demonstrates the need for supply chain mapping to also track elements such as supplier performance and risk. As a result, the dynamics of global supply chains today requires a much deeper understanding of  “n-tier” suppliers. This is further supported based on research, where according to a study by the Business Continuity Institute in August 2012, 39 percent of analyzed disruptions originates from below the immediate supplier.

Further the the need for mapping supply chains is also not just a concern for buyer and supplier relationships, but may also be part of a regulatory compliance framework.  For instance, understanding products in a supply chain that contains 3TG (Tungsten, Tin, Tantalum, and Gold) now requires due diligence in monitoring sub-tiers for compliance which has become particularly important for industries like Consumer Electronics and Medical Devices that source 3TG materials..

Ever since the SEC passed the final rules implementing the conflict minerals disclosure required by Section 1502 (Conflict Minerals) and 1504 (Natural Resource Payment Disclosure) of the Dodd-Frank Wall Street Reform and Consumer Protection Act this summer, there has been an increased need to fully understand supply chain maps. Section 1502, for example, requires companies to examine their supply chains to determine and disclose if their products contain minerals from the Democratic Republic of Congo, or adjoining country.  Section 1504 requires companies to disclose to the SEC, all payments made to the US or a foreign government, for the extraction of oil and minerals.

Regulation on conflict minerals reporting is also not limited to the federal U.S. law. State and local governments like California, and other countries like Australia and the EU parliament all have passed bills and resolutions around conflict minerals. These bodies of legislation are a representation of the trend that  sustainability and corporate social responsibility efforts will escalate and likely expand into other, and deeper areas in the future.

As a result of accelerated compliance needs and increased monitoring of business behavior globally, supply chain mapping will increasingly require the ability to go beyond product requirements, but understand suppliers, the relationship of  the sourced service or material, and requirements under which they may be regulated. Supplier Management has, therefore, transcended basic information tracking towards tracking suppliers, throughout the chain, by relationship, product, material, regional risks, and more.

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Our next segment on supplier management trends in 2013, will address the increased need for actionable intelligence through third party data collection, and what this means to supplier management.

WEBINAR ALERT:

If you are interested in a wider discussion on supply chain mapping, I would encourage you to join HICX with our special guests from Rapid Ratings, Razient and Zurich Insurance in a webinar entitled Reducing Supply Chain Disruption with Supplier Risk Intelligence – on Thursday, January 17th.

 

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