Why Supply Chain Mapping Is the Foundation of Supply Chain Risk Management

Over the past two decades, the field of supply chain risk management (SCRM) has been steadily expanding. Once a niche discipline practiced by a modest minority of companies, SCRM has grown into a billion-dollar industry viewed by many as an essential facet of responsible business management. 

Businesses operating today must navigate labyrinthine supplier networks that span multiple continents and manufacturing tiers, regulatory environments that are increasingly restrictive and scrutinizing, and protectionist trade policies with serious financial consequences for firms that fail to adapt. The strengthening case for supply chain risk management is exemplified by the field’s growth projections over the remainder of the decade. While the market is valued at around $3 billion today, that figure is forecast to more than double by 2031, ultimately reaching nearly $7 billion. 

This burgeoning field encompasses a broad range of strategies and technologies, but one measure stands as arguably the single most important aspect of effective SCRM: supply chain mapping. To borrow from a 2022 paper on the subject published in the International Journal of Production Economics, “Mapping the supply chain is the first stepping-stone for effective strategic supply chain management.” Supply chain mapping, in other words, is the bedrock of managing risk among suppliers and manufacturers, and a myriad of the most proven SCRM strategies depend on accurate, comprehensive supply chain maps. 

What Is Supply Chain Mapping?

In contrast with the steep challenges associated with actually creating these detailed graphics, the concept of supply chain mapping is clear and straightforward. 

Supply chain maps are comprehensive visualizations that show a given business’s direct suppliers, subtier vendors, manufacturing locations, and the products, subassemblies, and components produced by these businesses. In some cases, supply chain maps may also include other relevant information such as raw materials, distribution centers, and the flow of goods through a firm’s logistics network. 

For a more formal, technical description, we can refer back to the 2022 academic paper. The authors define a supply chain map as a “diagrammatic representation, providing a ‘likeness and a simplified model’ of a supply chain with both visualization and information about key features.” These maps, they continue, “should present appropriate and accurate information in a manner that can be easily understood and, at the same time, be sufficiently informative to aid supply chain visibility, analysis, and integration.”

How Can Businesses Carry Out Supply Chain Mapping?

Despite the clear advantages supply chain maps offer organizations, most manufacturers still don’t have comprehensive visibility into their supplier networks. A 2022 survey conducted by Deloitte found that only 13% of companies have fully mapped out their supply chains, while over 70% had limited visibility—or no visibility at all—beyond their Tier 2 networks. The scattershot nature of much supply chain mapping across a range of businesses and sectors is largely attributable to a simple, indisputable reality: mapping supplier networks is a labor-intensive undertaking. Accurate supply chain maps require sourcing professionals to gather data from a slew of disparate sources; pore over dense, often obscure technical documentation; and communicate with suppliers in an effort to coax out information they may not be eager to turn over. 

The scattershot nature of much supply chain mapping across a range of businesses and sectors is largely attributable to a simple, indisputable reality: mapping supplier networks is a labor-intensive undertaking.

Fortunately, manufacturers don’t have to carry out this large, unwieldy project on their own, and there are established techniques for mapping supplier networks effectively. Iowa State University’s Center for Industrial Research and Service (CIRAS), a program focused on helping businesses increase their efficiency and profitability, has published a blueprint for supply chain mapping that’s seen wide adoption among industry professionals. CIRAS’s blueprint consists of five key actions:

Gathering Data

This is the foundational step in conducting effective supply chain mapping. Companies must obtain data on suppliers, parts, and locations, among other crucial variables. 

Identifying Subtier Suppliers

The vast majority of businesses today draw on supply chains that comprise multiple tiers, and illustrative mapping requires companies to successfully identify their suppliers’ suppliers (Tier 2), those suppliers’ suppliers (Tier 3), and sometimes even tiers beyond that. 

Mapping Out Transportation Routes

Rather than pinpointing manufacturers and their products, this step requires organizations to ascertain the geographical paths materials, components, and goods take before arriving at their factories and distribution warehouses. 

Developing Supplier Risk Scores

To paint a comprehensive picture of supply chain risk, businesses should evaluate various risk factors associated with individual suppliers, including financial health, geographical location, and any active litigation against the company. These risk factors can then be combined into a weighted score that reflects the total threat posed by a given manufacturer. 

Analyzing and Acting Accordingly

Finally, it’s not enough for companies to simply obtain all the requisite data and incorporate it into a diagram of their value chains. Firms need to carefully analyze these networks and the vulnerabilities embedded within them, developing and implementing strategies that mitigate or eliminate the risks their mapping efforts unearthed. 

Risk Management Measures That Rely on Supply Chain Mapping

Supply chain maps are not static, inert resources, and their function is not solely to provide teams with a useful visualization of the vendors and flow of goods that sustains their businesses. Instead, these tools should be seen as insightful, dynamic tools that proactive organizations can utilize to animate a number of key supply chain risk management measures. 

Derisking 

In an era in which a heavy reliance on Chinese manufacturing is increasingly perceived as a vulnerability, more and more businesses are looking to diversify supply chains to other countries where possible. In order to carry out derisking measures, however, firms need to understand what parts and subassemblies are originating in China. Suffice it to say, this is rarely a simple process, as most manufacturers operating today are working with direct suppliers tethered to sprawling, opaque subtier networks. 

Supply chain maps can serve as a critical tool in a company’s efforts to successfully assess these dependencies. Comprehensive mapping can show organizations what raw materials and components are coming from manufacturers based in China, thereby allowing them to swap out certain subtier suppliers or investigate nearshoring or onshoring opportunities for specific parts. A popular coinage emblematic of many of the current trends in geopolitics, sourcing, and “slowbalization,” derisking in any meaningful way simply isn’t possible without supply chain maps illuminating the way. 

Assessing Risk in Subtiers

Whether it’s precarious financials, factory shutdowns, or regulatory noncompliance, supply chain risks are often buried far beneath a company’s direct suppliers. In fact, statistics have shown that more than half of all supply chain disruptions occur within a firm’s subtiers. In order to identify these vulnerabilities and develop strategies for mitigating them, however, businesses first need to know who their subtier suppliers are. Supply chain maps supply this information in an intuitive, comprehensible format, giving firms the actionable data they need to pinpoint risky subtier manufacturers and carry out the work of restructuring their sourcing accordingly. 

Identifying Alternative Sourcing Needs

“Dual sourcing” is another term that’s gained significant traction in recent years, as procurement teams allocate more resources toward fostering supply chain resilience and minimizing costly disruptions. While dual sourcing—also often referred to as multi-sourcing and alternative sourcing—isn’t always necessary for every single component and subassembly a company sources, it can be an essential risk management measure under certain circumstances. 

For example, manufacturers based in geographical regions with a high frequency of extreme weather events are at a higher risk of suffering from factory shutdowns that can lead to supply shortages and disrupt continuity. Companies that secure alternative sourcing for these types of suppliers are bolstering their SCRM and fostering greater long-term resilience. In addition, firms that source from suppliers with single-site dependencies are taking on a significant level of risk, and dual sourcing strategies targeted at these specific manufacturers can provide an essential buffer to potential disruptions. 

In order to analyze their suppliers and determine where the greatest need is for alternative sourcing, companies need to draw on the data and visualizations provided by supply chain maps. By utilizing these tools, sourcing teams can make more informed, insightful decisions about where to allocate the necessary time and resources to establish viable alternatives.

Enhancing Collaboration and Transparency 

Because of the staggering scope of today’s supply chains, companies may feel a natural inclination to minimize the importance of any one single supply chain partnership. But cultivating strong relationships with suppliers can be a meaningful SCRM measure in and of itself. Robust partnerships drive transparency and a sense of accountability between organizations, encouraging suppliers to share data, risks, and ongoing developments with their customers. Over time, these relationships can also inform and sustain a more collaborative operational approach, as businesses and their manufacturers streamline their processes and work together on regulatory compliance obligations. 

Read Also: Best Practices for Supplier Vetting That Will Future-Proof Your Chain

Supply chain mapping helps firms foster stronger partnerships by providing the visibility necessary to understand the full sweep of a network’s stakeholders and the specific roles each company plays. When teams understand who their manufacturers are with a high level of detail and specificity, they can reach out to those companies and gradually cultivate reciprocal relationships across their direct supplier tier. The end result is a culture of communication and transparency that stretches across stakeholders, encouraging companies and their manufacturers to share information, convey risks, and act with a high level of integrity and accountability.

Turbocharge Your Supply Chain Mapping with SCRM Software

While credible sources like Iowa State University’s CIRAS program offer valuable blueprints for piecing together a detailed supply chain map, even the most resourceful, strategically-minded companies are going to struggle with the task’s high bar. To effectively map a supply chain, teams must scour their internal records, scrape the internet, and reach out to direct suppliers—often repeatedly—to obtain manufacturing data. While the right amount of persistence and ingenuity may help professionals procure much of this information, gathering intelligence beneath Tier 1 remains a formidable obstacle that often proves insurmountable. And this isn’t a minor issue, either: more than half of all supply chain disruptions strike in a company’s subtiers, and the entities that populate these levels of the manufacturing ecosystem tend to carry higher risk in categories like labor practices and regulatory compliance. 

Companies seeking to construct a robust foundation for their supply chain risk management can get a decisive boost from bringing on a SCRM tool like Z2Data. Z2Data’s industry-leading platform can help businesses build out multidimensional supply chain maps with features like part-to-site mapping, advanced subtier intelligence, and in-depth details on manufacturing locations. While the old-fashioned, shoe-leather approach to gathering data can be a very effective first step in constructing a map of your supplier network, it’s rarely enough to get you to the level of comprehensiveness that sustains high-level risk management and yields a true competitive edge. 

To learn more about Z2Data and the suite of functionalities that can inform and strengthen your business’s supply chain maps, schedule a free demo with one of our product experts.