Having a clear view of your supply chain is something that every business should be prioritising, but unfortunately, many of them do not.
This is for a range of reasons, but generally, mapping your supply chain past your first-tier suppliers can be a challenging and time-consuming task, especially if you don’t have great supplier relationship management (SRM) in place, or if the chain of suppliers is particularly complex.
Figures show that only 6% of businesses believe that they have achieved full supply chain visibility, reflecting the sentiment that businesses simply do not prioritise procurement nearly enough.
However, that isn’t to say that mapping your supply chain mapping should be put on the back burner like other businesses. On the contrary, doing it now will place you ahead of your competition in multiple respects. Having a robust view and understanding of your suppliers end-to-end has significant benefits which save you money and reduce multiple risks.
What are the benefits of mapping your supply chain?
- Risk reduction- read more here
- Better contract management- read more here
- Improve supplier relationship management- read more here
- Have the opportunity to be more innovative- read more here
- Implementing category management- read more here
- Reduce the total cost of ownership- read more here
- Better corporate social responsibility (CSR)- read more here
If you are new to supply chain mapping, follow some of our top tips on how to get started.
1. Recognising risk
If you have a supply chain, there’s always going to be risk attached to it. The trick is to identify these risks and manage them.
The result is that you will adopt a much more proactive approach, so you’ll deal with risks before they become a reality. If you don’t map your risks, you probably won’t be aware that some of them even exist, making your approach more reactive. This means you’ll only deal with risks after they’ve become a real problem.
As part of identifying risks, you need to consider some of the following:
- How many tiers are in your supply chain
- Which suppliers are most critical to you
- Where your suppliers’ manufacture (location)
- Whether all of your suppliers have up-to-scratch environmental and labour policies
- What would be the impact if a supplier down the chain collapsed?
- The changing costs and availability of materials for different suppliers
This is just a snapshot of elements to consider as the list can go on and on, but it’s all about finding what’s relevant to your business.
Once you have thought about what risks may affect you, it’s time to assess them in more depth and rank them in order of priority.
The items at the top of the list will take precedence and need to be dealt with quickly to mitigate the biggest risks to your business.
Once this has been done, you will have to implement a system to monitor any changes to the existing risks and to recognise and deal with new risks as they arise.
2. Look past your first-tier suppliers
You should already know who all your first-tier suppliers are, as well as information, including where and how they operate and so on.
However, not many businesses have much visibility past their immediate suppliers. In fact, research shows that around 40% of UK businesses buying in the have no information on their second-tier suppliers and 18% that buy internationally have no information on their second tier.
The fact that almost a fifth of companies have no information on their global suppliers’ past immediate suppliers is a big cause for concern. If your suppliers aren’t meeting the right standards with their corporate social responsibility CSR, your association with them could result in brand damage.
Alternatively, if one of your critical first-tier suppliers is relying on a single supplier for an integral part of their operation, if that single supplier collapses, your first tier supplier won’t be able to deliver what you require.
Ultimately, there’s no unimportant link, no matter how far removed they are from your immediate view of the supply chain. To protect your own profitability and reputation, you need to understand this.
3. Get your suppliers involved in helping you gain visibility
Mapping your supply chain when there are multiple tiers of suppliers is no easy feat alone.
However, if you have good SRM, getting your first-tier suppliers to help shouldn’t be a problem. You can request information from your immediate suppliers about their suppliers, and ask them to do the same and repeat.
If all goes smoothly, each supplier at every tier will eventually share information about their suppliers, creating a full picture of who is included in the supply chain.
Doing so will allow buyers to identify which suppliers pose potential risks and lessen the possibility of relying on a single supplier.
4. Work on your SRM
Without effective SRM, mapping your supply chain can quickly become a nightmare. This is because of a crucial component of getting a clear view of all of your tiers requires plenty of communication as well as transparency.
Managing and regulating communication with your critical suppliers is essential. With a positive and communicative relationship, they’ll be much more willing to help you with your supply chain mapping efforts.
It’s also worth remembering that if you have a clear view of your supply chain, so does will your supplier. It is well worth outlining the mutual benefits to them to motivate them to prioritise it, too.
Collaborating in this way should hopefully mean things happen more quickly, and the shared effort spreads the workload.
Overall, it’s clear to see how the overarching benefits of mapping your supply far outweigh the investment it takes it requires. Understanding what components are at play in your supply chain makes it much easier to take action to mitigate risk, protect your profitability and grow through supplier innovation.
Even so, if you haven’t done it before, it’s challenging to know exactly where to begin. If this is the case for you, ensure you consult experts who can educate and advise you, or even outsource the task all together if you don’t have the time.
At Bromley Wood Associates we have considerable experience in helping businesses to assess, manage and prioritise suppliers so that you can not only manage risk and compliance but, more importantly, drive innovation to help grow your business. If you would like to speak to us more about Supplier Relationship Management and how you can improve it in your business, contact us today.