Mapping Your Supply Chain is Costly, Time-Consuming, and Labor Intensive – Yet Critical to Protecting Your Business
As of this writing, a report from Bloomberg indicates that Apple is continuing to diversify its supply chain by announcing plans to source chips from the Arizona-based Taiwan Semiconductor plant that is expected to be operational in 2024. And while this announcement isn’t surprising given the cross-industry redoubling of efforts to build more resilient supply chains, it’s a testament to just how much work still needs to be done and how challenging it can be.
At Pivot International, we are one-source product development and supply chain leader that has successfully seen our partners through geopolitical, climatic, and pandemic-driven disruption for over fifty years. With access to a global supply network, 320,000 square feet of tri-continental manufacturing space, and top DFM talent, we provide sourcing alternatives and innovative engineering hacks that help companies break through short- and long-term barriers to successful product launch.
Given the now widely understood need for supply chain risk mitigation strategies, why are so many companies still struggling to protect themselves? Ongoing sourcing challenges aside, the reason often lies in poorly identified roadblocks that prevent companies from mapping their supply chain. In this piece, we’ll identify these roadblocks and offer three insights for breaking through them.
Roadblocks to Enhanced Supply Chain Resiliency
There are two main roadblocks that many companies run into when mapping their supply chain. The first concerns cost investment. Companies have been burned by 2-plus years of disruption and are painfully aware of the imperative of supply chain mapping. At the same time, these same companies are still reeling from pandemic impacts and struggling to find their financial footing, making them reluctant to invest in the costly, time-consuming, and labor-intensive exercise of mapping their supply chain.
The second barrier can be boiled down to businesses disregarding the maxim, “Trust, but verify.” In other words, many companies continue to take the accuracy of their top and secondary-tier supplier reports at face value. These reports are often more guesswork than fact. (Though the acceleration of digital transformation and advanced analytics is helping to mitigate this hazard.) But even when these reports are accurate, they are often not documented. And when they are documented, they are often siloed, making essential information unavailable or vulnerable to being lost through personnel changes.
3 Insights for Breaking Through Roadblocks
Insight #1: The Value of Mapping Your Supply Chain Exceeds the Expense
Supply chain mapping is challenging in the best of times and all the more difficult amid ongoing disruption and current geopolitical tensions. But this is precisely why companies can’t afford to backburner this critical activity. In the end, the map (and the high-performing supply chain it leads to) will be more valuable than the cost required to create it.
The most straightforward way to begin mapping your supply chain is by identifying your company’s top five revenue-driving products and correlating them with a bill of materials. Next, identify the suppliers of parts and components. Last, identify suppliers of raw materials. Map as many tiers as possible to leave no stone unturned. Be sure to identify:
Primary supplier activities:
- Suppliers with identical or similar capabilities that might act as alternatives or backups
- Lead time differences between current and alternative suppliers
Insight #2: The Road to Revenue Loss Begins With Short-Term Focus
A blind commitment to short-term growth at the expense of longer-term resilience has proven over the last two years to be a near-certain path to revenue loss. While procurement teams are now far less likely than in early 2020 to resort to extreme measures to cut costs, it’s natural that companies are still tempted by this devil’s bargain. When they succumb, companies often put themselves in a position of needing to rob Peter to pay Paul. Why? What superficially appear to be cost-saving strategies in procurement drive up costs in other, more hidden parts of the business that only become apparent over time. This is why it’s just as essential to map the interdependencies within your own company as it is to map your relationships with your suppliers. Only then can you see the bigger picture and gain visibility into the longer-term risks of short-term focus.
Insight #3: New Metrics are Needed for Assessing Supplier Performance
In times of disruption, buyers and suppliers alike take the hit, which means that companies need to update their supplier performance reports to include disruption-related metrics. When negotiating a contract with a new supplier, outline expected recovery strategies and timeframes. Also, include a clause requiring your supplier to take part in annual supply chain mapping activities. When force majeure events strike, such as COVID-19 or the war in Ukraine, these maps can offer guidance in finding your way successfully forward.
Looking for a Proven Supply Chain Partner?
If you haven’t already mapped your supply chain, it’s time you did so. If you’re looking for a proven supply partner with alternative solutions and a track record of seeing customers successfully through disruption, Pivot is the partner you’ve been looking for. With design and engineering expertise that spans fourteen industries and a portfolio of internationally award-winning products (including innovations launched at the height of the pandemic), we will work collaboratively with your team to achieve successful launch. Contact us today for a no-cost consultation if you’d like to learn more about how we can help you grow your business.