What is Supply Chain Mapping? Dimensions

What is Supply Chain Mapping?

Supply chain mapping is a process of identifying and visualizing the various components of a supply chain, including the suppliers, manufacturers, distributors, and customers, and the flow of materials, products, and information between them.

The goal of supply chain mapping is to gain a comprehensive understanding of the supply chain, identify potential areas for improvement, and optimize the flow of goods and services to reduce costs, improve efficiency, and enhance customer satisfaction.

Supply chain mapping is a method of identifying existing supply chain processes. This can be done based on three dimensions:

• The shape of the value-addition curve
  
• Point of differentiation
  
• Customer (entry point) in a supply chain

Restructuring the supply chain process involves altering the supply chain in at least one of these three dimensions. It may also involve altering more than one of these dimensions or altering all three.

Dimensions of Supply Chain Processes

Restructuring the supply chain process involves altering the supply chain in at least one of these three dimensions. It may also involve altering more than one of these dimensions or altering all three.

Let us now discuss each dimension separately and see what kind of restructuring can be undertaken in each of these dimensions.

• Value-addition Curve
  
• Point of Differentiation
  
• Customer (Entry Point) in Supply Chain

Value-addition Curve

A typical supply chain begins with raw materials and information, which are transformed into finished goods and finally delivered to customers. This transformation comprises several activities and each activity incurs cost and time. Moreover, value addition for each activity also takes place.

Here, it has been assumed that all non-value-adding activities have been removed by an organization during the supply chain optimization process. Refer to the time is shown on the x-axis while the total cost (cumulative) in the supply chain is shown on the y-axis.

To map the value-addition curve, a reverse route (backward) from the point where the value is delivered to the end customer is taken and all activities that were performed to make the end product and service available are traced back.

All these activities are mapped in two dimensions:

• Time
  
• Cost

That means the value addition curve mainly captures the way the cost is added over some time in supply chain processes. For example, a bus manufacturer receives engines (an important component for making the bus) from an engine supplier; the received engines have to wait till the machining operation (and engine assembly) is scheduled in the machine shop (production area).

The whole production process is divided into various stages:

• First, machined castings are made which then go to the Work-in-Progress (WIP) store.
  
  
• This WIP inventory is then taken to the engine assembly stage. At this stage, the engine is mounted over the chassis in the bus assembly line.
  
  
• After this, certain other activities, such as fitting and painting are completed and the assembled bus is ready for dispatch to the dealer.
  
  
• After completing a particular number of buses, they are transported to a dealer.

The bus remains in the inventory or showroom of the dealer until a customer buys it. It means that the material in different forms (raw/WIP/finished goods) waits at various stages. If all these operations are added, you will get a curve (as shown in Figure 8.1 also), since costs are also getting added with every subsequent activity in the supply chain process, the y-axis is also showing an increase with time.

Point of Differentiation

Different organizations offer different products to consumers. However, an organization may choose to differentiate a particular product to offer more variety to consumers. The concept of point of differentiation (second dimension) is valid only for organizations that offer product differentiation.

Products are manufactured in a supply chain comprising multiple stages. As the product progresses through a supply chain, it assumes an identity that is closer to the end product. The point of differentiation refers to the stage at which the product is modified or differentiated and becomes a specific variant of the end product.

For example, a toothpaste manufacturer offers one variety of toothpaste in varying pack sizes (such as 50 grams, 100 grams, 200 grams, etc.). In this case, the point of differentiation is the packaging stage.

Similarly, a garment manufacturer produces different styles of a garment using the same material (fabric). Here, differentiation may occur at the stitching stage. An automobile manufacturer may create differentiation based on the colors and models of automobiles. Here, differentiation may take place at the painting and designing stage.

All the aforementioned examples reflect one point of differentiation that occurs during a specific stage. However, organizations can introduce differentiation in products at various stages also. For example, a pizza manufacturer may differentiate its pizzas based on the size and type of crust. It may further differentiate each pizza based on the variety of toppings used. Thus, you can say that a product can have more than one point of differentiation.

However, in practice, organizations focus on one main point of differentiation, which is done during the demand forecasting level. Demand forecasting is a systematic process that involves anticipating the demand for a product/service of an organization in the future under a set of uncontrollable and competitive forces.

Demand forecasting at the aggregate level is relatively simple as this aggregate of individual demands (of all the consumers of a product) is calculated (over some time at a specific price, while other factors are constant). However, demand forecasting at the variant level is quite difficult as in this individual demand is calculated based on the quantity demanded by an individual for a product at a particular price and within a specific period.

For example, an automobile manufacturer may easily forecast the demand for the total number of cars for its next financial period with a great degree of certainty. However, the automobile manufacturer would face difficulty if he wants to predict the demand for a particular car having a particular color. In addition, as the variation increases, the chances of error in forecasting also increase.

The point of differentiation forces the organization to forecast demand at the variant level. The probability of forecasting errors is higher for a longer period. Therefore, if the point of differentiation occurs early in a supply chain, the organization will have to forecast demand at the variant level for a longer horizon.

Customer (Entry Point) in Supply Chain

The dotted line in the time or point (see that this line is parallel to the y-axis) at which a customer places an order. It is the customers’ entry point in a supply chain. In other words, you can say that the customers’ entry point in the supply chain is at the end of the value addition curve and coincides with the delivery time of the product.

In some industries where customers give some lead time to organizations to deliver the product, the customer’s entry point is ahead of the delivery time. This is similar to the Configure to Order (CTO) supply chain situation. The customers’ entry point captures the order-to-delivery lead time.

The importance of this dimension lies in the fact that all previous activities were carried out based on forecasts, whereas after the order placement by the customer, all activities are done based on the order. However, how perfect a forecast may be, there is a scope for errors in it. So a lot of certainties come to the entire operations if most activities are carried out based on the real order rather than forecast.