Step 1: Map the physical structure
Step 1 is concerned with mapping the physical structure of the network. If our supply chain is simple we may simply know what it looks like and be able to draw it out on a piece of paper. However, most networks are in fact quite complex and will need some brainpower and data gathering in order to complete one.
FIGURE 12.11 The process for supply and value chain network mapping
Within the seven value stream mapping tools proposed by Hines and Rich (1997), a tool called the Production Variety Funnel is included which they describe as a tool to help understand how a firm or supply chain operates by using IVAT analysis; classifying the supply chain according to its shape and which of the four IVAT letters it most resembles. For example, where a limited number of raw materials from one or few sources are processed into a wide variety of finished products then the chain looks like a 'V. Networks may not necessarily conform to the shapes of letters but IVAT does highlight the fact that different types of networks will naturally have different shapes. If letters help then I would add the letters O and X as these shapes are also possible; giving us OXIVAT. This is not only a good starting point, as it helps us to ensure we have a big enough sheet of paper available, but it helps clarify what we are expecting to find as we map the network and therefore ensures a greater likelihood of success. Figure 12.12 gives the different physical structure types of supply network.
FIGURE 12.12 The different OXIVAT shapes of supply and value chain network
Figuring out who supplies whom can be a challenge. We understand our suppliers, but it can be hard enough to understand our suppliers' suppliers, let alone going any further upstream. The problem is this information may not be readily available and suppliers may be reluctant to share due to fear of loss of competitive advantage or a hidden agenda for backward integration, especially if the supplier is adding little value and fears the consequences of sharing such information. Here we need a bit of detective work, which will be helped if the team doing the mapping has been selected to have as much expertise as possible. Ways to help understanding the structure of a network include:
• ask the supplier;
• break down the product (or service) into its constituent parts and attempt to identify where these might be sourced from, eg by looking at any identifying markings;
• ask an industry, product or logistics expert; and
• create an obligation for the supplier to be transparent (eg batch and material traceability is often expected in defence and food industries).
Step 2: Network environment and context analysis
Step 2 is concerned with considering the environment and context within which the supply and value chain network exists. The nature of the environment and context is highly relevant to understanding a network, especially in terms of risk or to explain how certain players might behave or choose to interact. Key considerations here include:
• countries and geographies involved;
• cultural differences;
• prevailing political and economic climates;
• end customer changing needs and aspirations; and
• environmental considerations.
Environment analysis is accomplished using the PESTLE Analysis tool (political, economic, sociological, technological, legal and environmental). Here we consider the forces, drivers, trends or prevailing conditions under each of these headings both upstream and downstream in our supply and value chain network that could impact on the network. Work through the PESTLE analysis listing all risks and opportunities relevant to the network under each heading. Figure 12.13 shows how PESTLE analysis can be used in supply and value chain network mapping.
Understanding the context of the network is about considering all the unique factors that could individually and collectively present challenges or require specific provision and therefore compound potential risks or present opportunities. These include:
IGURE 12.13 PESTLE analysis used in supply and value chain network mapping
• complexity - of the network, processes;
• range variety or lack of standardization;
• product difficulty or complexity;
• customer requirements and uniqueness of individual requirements;
• market difficulty and inability to switch providers;
• organizational complexity and internal handoffs; and
• flow of information and how difficult it actually is in practice.