The coronavirus pandemic brought the term “supply chain” into the public consciousness. Before 2020, many of us didn’t think about how—and from where—things got to us. But as the global supply chain broke down across everything from toilet paper to automotive microchips, companies started to examine the sustainability and resiliency of their supply chains.
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For a business to examine its supply chain, it must first map it. Supply chain mapping is essentially performing due diligence to understand where the raw materials come from that comprise your finished good. If you don’t produce a physical good, supply chain mapping extends to your vendors and service suppliers (e.g., for a digital product, this would be your tech stack, servers, web services, etc.). And when it comes to supply chain management, it’s all about how you create resiliency to minimize disruptions, risk, and, most recently, carbon emissions.
Transparent tracking technologies, like blockchain and digital labels, trace materials in some industries and hold suppliers accountable for their sourcing practices. But we have yet to see the proliferation of that tech at scale, so it’s up to you to map your supply chain in their absence.
Supply chain mapping is an ongoing process that requires you to identify the risks and opportunities—including financial, quality, social, and environmental—at every production stage. While detailed maps take months to complete and could require you to involve many parts of your organization, for the sake of this post, we’ll focus on small, initial steps, like collecting and organizing your suppliers and gathering a manageable set of supplier data.
Benefits of mapping your supply chain
Resiliency and risk management – The world is no stranger to supply chain disruptions, but what if they could be prevented? Mapping your supply chain can help you better understand lead times, highlight weak points, or if one supplier could hamstring your business. For example, if a critical supplier is located in an area known for natural disasters or at high climate risk, you might want to have a backup plan.
Transparency – If you’re upfront with your customers about your business practices—like where you source material—it builds trust. And suppose you’re a supplier to other suppliers (i.e., a tier 2 supplier, or even tiers 3 and 4). In that case, there’s a strong chance your customers expect a certain level of transparency because it impacts their business. It wouldn’t look good if a t-shirt company worked with a supplier that used child labor to harvest its cotton. And if you can show you don’t, it gives you a competitive advantage.
Avoid legal issues – Modern slavery and nefarious labor practices can topple companies—so supply chain mapping can help you weed out bad actors. Plus, forthcoming legislation could require you to track your scope 3 emissions—which means requesting annual emissions from your suppliers.
Sustainability – If you want a complete emissions picture, you need to account for the emissions your suppliers create on your behalf through all of the goods and services that contribute to your business (scope 3).
How to map your supply chain
Mapping your supply chain is the critical first step before doing a supply chain assessment. For complex supply chains, the mapping process can be time-consuming, so let’s break it into manageable steps:
1. Create a basic map. Use sticky notes, a visual collaboration software, or a flow chart tool to create a high-level outline of your product flow from the source to the finished product. Then map your priority suppliers based on what’s important to you—where you spend the most money, the most critical materials to your product, etc. Include the type of operation (e.g., manufacturer, farmer, service provider) and the product or service they deliver.
2. List must-have supplier information. Include company name, headquarters and manufacturing locations, contact information, products or services, annual spend, and supplier tier.
3. Organize. Involve your sourcing or procurement team to help get and organize supplier information. If they don’t already collect the information you need, create a plan to close the gaps (e.g., gather from public sources, contact suppliers).
4. Ask suppliers for additional contacts. Sourcing teams often list only an account manager, but you may need to speak with buyers or compliance representatives. Add new contacts to your supplier database.
5. Identify your business priorities. You’ll likely need to consult internal teams, investors, and external stakeholders like customers and the community to help identify what’s truly material to your business. Is it fair labor and working conditions? Environmental stewardship? Cutting your use of conflict minerals? For example, if your supplier operates in a country at risk for corruption, human rights violations, or environmental degradation, you might want to put them on your priority list.
6. Survey and assess your supply chain. Once you’ve mapped your supply chain, you’ll want to assess each supplier’s risk to the criteria most material to your business. This requires annual surveys and data collection—more on that in our next post.