Separating the wheat from the chaff – mapping your suppliers
Who are the stars and the poor performers in your supply chain suppliers? Which from these are the critical suppliers but you can’t afford to fail? This article looks at ways you could’ve map and classify suppliers to maximise the resilience of your supply chain.
Mapping your supply chain suppliers
Key takeaways in this article:
• A number of models can help us identify where the key risks and opportunities may lie within our supply chain
• The procurement professionals can analyse their supply chains and build supply chain resilience and sustainability
In business, just as in our personal lives, times of adversity show us who our real friends are and those relationships that will endure and strengthen.
We’re all reading and hearing about how the pandemic is shining a spotlight on the fragility of what we thought were pretty robust supply chains. In this article we’ll describe some immediate actions you can take to identify where the big opportunities and threats lie within your supply chains from the perspective of supply chain relationships. we’ll describe some simple tools that will help you spot incongruence and misalignment, which in turn helps identify those links in the chain that represent the highest risk of supply interruption.
You might be feeling the pain or losing sleep because of those supply chain partners who appear to have self-preservation as their sole priority. Maybe you are heartened by the way some of your suppliers have really stepped up and worked with you to ensure that you both survive and thrive through this crisis. Are you seeing any great examples of creativity and innovation which will build resilience and agility in your supply chain and help you cope with the next crisis even better?
But what about proactively identifying those supply chains where you need to focus your energy to build resilience?
In our globalised economy, even the simplest supply chains are actually quite complex. We read that 94% of the Fortune 1000 organisations have or had Tier 1 or 2 suppliers in Covid-19 impacted regions in China (https://fortune.com/2020/02/21/fortune-1000-coronavirus-china-supply-chain-impact/). Despite heralding supply sustainability as a top strategic objective to appease shareholders, tax payers or media, price still seems to trump sustainability in the majority of sourcing strategies, to the detriment of supply chain resilience. The proof of this comes to the fore when a global pandemic comes knocking.
So, how can we identify where the cracks may be that will have a significant detrimental impact on our organisations? We’ve probably got 100s, if not 1000s of suppliers within our supply chains. It isn’t practical, nor necessary, to develop close collaborative relationships with them all. So how do we separate the wheat from the chaff?
Here’s 3 actions you can take straight away to reduce your supply interruption risk and deliver the value you expect from your supply chains.
Action 1) Let’s map our world
1. Segment your suppliers. Where are you spending most of your money? Apply a Pareto 80:20… you will probably find that 80% of your spend is with 20% of your suppliers. This top 20% are your Category A suppliers and should be your initial focus.
2. Segment your purchases. The Kraljic matrix (Fig 1) is a useful tool to map your purchases in terms of organisational impact (things to consider here include; business interruption risk, loss of sales risk, proportion of your organisation’s total spend) and how difficult it is to source product or service (considerations here include the number of suppliers, type of supply market, time it takes to onboard suppliers, regulations and legislation
that impact the purchase).
3. Data does nothing without application. Use your analysis from actions 1 & 2 to prioritise where your greatest risk could be hiding and where you need to focus your efforts first;
1) Category A suppliers
2) Most important procurements – Strategic & Bottleneck items
How many of your Category A suppliers map into the Strategic & Bottleneck boxes? Does this feel right?
Mark Blanchard, Principal Consultant