Rapidly evolving technology, cloud adoption, and enterprise networks have made mapping cost effective, scalable, and rapidly achievable.
Supply chain disruptions are a fact of life. Over the last decade we’ve seen catastrophic earthquakes, flooding, nuclear disasters, and fires; all have blindsided supply chains. But it’s not all doom and gloom, especially if we learn from them.
Covid-19 for example, vividly revealed the vulnerabilities baked into lean, cost-optimized supply chains. It also highlighted the need for building supply-chain-resilience capabilities. During the pandemic, companies that had solid monitoring and supplier mapping capabilities — down to the sub-tier site and part level — had a complete picture of how the evolving crisis would affect their supply chains. This helped companies take action before the disruption hit. Some were able to avert any negative impact.
While historically it’s been costly for companies to develop and maintain an accurate map of their supply chain, today, with the right partners, the process can be much more streamlined and efficient. Rapidly evolving technology, cloud adoption, and enterprise networks have made mapping cost effective, scalable, and rapidly achievable. What’s more, the new generation of software companies providing mapping capabilities go far beyond what could be accomplished with emails, phone calls, and spreadsheets.
Let’s discuss some of the options as not all mapping is created equal.
There are a few types of mapping available; all provide different levels of value depending on a company’s needs. The simplest method involves mapping based on publicly available data including news and other information disclosed by large, direct suppliers about their production and logistics sites.
With this research, an electronics manufacturer that is sourcing from large suppliers can map the countries and regions where those suppliers’ operations are located. Then, when an event such as an earthquake or hurricane happens, the company has visibility into potential delays due to disruptions or closures in that region. While this method has the advantage of not requiring any input from suppliers, it also doesn’t allow for much transparency beyond the first supplier tier and may generate irrelevant data—noise—that must be filtered out to find the actionable data. This is because larger suppliers operate across many countries and not all sites may be relevant to a specific manufacturer.
To cut through the noise and increase visibility, OEMs should engage with suppliers to provide increasing levels of data. This data map can be achieved by starting with the locations of the suppliers’ own production and logistics sites and culminating with a comprehensive map detailing the linkages between tier-one, tier-two, and tier-three suppliers. The goal is to be able to trace individual parts to the exact site where they’re manufactured.
This ultimate level of “part-site” mapping adds the most value because it enables manufacturers and companies to know exactly what parts or materials may be delayed by an event affecting a specific site. The map should also include information about which activities a primary site performs, the alternate sites the supplier has that could perform the same activity, and how long it would take the supplier to begin shipping from the alternate site.
Whatever technology platform a company uses to map its supply chain, a core best practice is to prioritize mapping those parts and materials that impact high-revenue products. Take this example: a company with $5 billion in revenue discovers that it has a single second-tier supplier for a low-cost connector that goes into its highest-revenue products. Without a mapping system that prioritizes revenue, the company would probably not pay much attention to that vendor because of the relatively low annual spend associated with it. But this sole-source vulnerability could derail production of a product that brings in hundreds of millions of dollars annually. In the case of the semiconductor shortage that struck in late 2020, the inability to get a $5 chip from a tier three supplier derailed the automotive industry, causing hundreds of billions of dollars in losses.
This is why mapping is so important. Whether contending with fires at one essential producer of high-performance raw materials or a pandemic that affects most of the world, supply chain mapping provides a foundational knowledge base and core asset that can be leveraged to build strong programs such as quality, compliance, sustainability, and supplier corporate social responsibility, to name just a few. This data allows companies to identify and anticipate vulnerabilities in their supply chain. It unlocks predictive analytics capabilities and enables them to act proactively. It allows them to respond to disruptions faster and more economically. It allows them to go from reactive to resilient.
As OEMs in the electronics sector invest in supply chain resiliency, their top priority should be developing an accurate map of their supply chains, ideally down to the site and part level. Only with a thorough understanding of their existing supply chain and its many linkages can a company knowledgably plan strategies for resiliency. The journey to a diversified, supply chain risk management strategy begins with mapping.
This article was originally published on EPS News.