Organisations need greater visibility over their supply chains than ever before, in order to find areas for improvement and greater efficiency, reduce the chances of disruption and stay competitive.
As international trade becomes increasingly efficient and companies continue to expand their networks, the need to establish and maintain a detailed understanding of your supply chain becomes more significant.
But what’s the reason behind this? Why do you need to map out your supply chain? Well, not only is it crucial for the purposes of compliance and regulation, but it also gives you far greater flexibility when it comes to monitoring threats and avoiding possible disruption.
Supply chain mapping: why it’s important
As touched on above, the more expansive supply chains become, the more opportunities there are for these intricate and time-sensitive networks to become disrupted in some way.
According to this article by Supply Management / CIPS, the main causes of global business interruption loss (by total value) between 2010 and 2014 were:
1. Fire and explosion
3. Machinery breakdown
4. Faulty design / material / manufacturing
5. Strike / riot / vandalism
6. Cast loss (entertainment)
9. Human error / operating error
10. Power interruption
Of course, mapping supply chains goes beyond merely taking into account the disruption risks posed by your suppliers – you also have to bear in mind who your suppliers’ suppliers might be.
Supplier mapping goes beyond your own suppliers
Imagine if you are a manufacturer reliant on one part that’s only made by one supplier worldwide. Or if you need a product that consists of different components, but your supplier’s suppliers are the ones who are disrupted, meaning the supply chain breaks down.
Or it could be even worse than that if, say, the cost of components increases because of a supplier further down the supply chain going bankrupt – something potentially very disruptive that might not be immediately apparent.
Taking these potential supply chain map disruption examples into consideration, it’s clear that it’s no longer enough to only be aware of who a small percentage of your suppliers are. When building out your supply chain mapping framework, you need to think of as many different potential risks as possible, however unlikely or rare they may seem.
If your supplier’s factory was destroyed by an earthquake, what products would be impacted? What stakeholders need to be involved in creating a plan of action? Are there other suppliers you can turn to in such a situation?
Supply chain mapping: example questions to consider
A few examples of key questions you must have answers to include the following:
- Which suppliers are you dependent on? From both a cost and revenue point of view.
- Which locations can be impacted that are relevant to your business? Covering both your operations and those of your suppliers.
- What are the ‘arcs’ between your suppliers? Transportation links between your suppliers (shipping, rail, roads, etc).
- What measures can you put in place to make sure you quickly become aware of any potential supply chain disruptions, including but not limited to bankruptcies, natural disasters or ‘man-made’ issues such as strikes, or even conflicts.
With supply chain mapping software such as HICX, you can gain visibility over your entire supply chain and ensure that – should something happen completely out of the blue – you are ready to meet the challenges head on. Click here to learn more about supply chain mapping and how HICX can support you.