In logistics, the supply chain is a complex network that describes every point, process, and company involved in the manufacturing, handling, and transportation of a specific product—from receiving the necessary raw materials to final delivery to the end user. Each step toward completion is known in the industry as a “link.”
But, how do you know if each link in your supply chain is strong enough to ensure everything moves smoothly? One way to find out is through supply chain analysis.
Supply chain analysis is a process that involves evaluating each link in the chain, both separately and together, with the end goal of making the supply chain as cost-effective and efficient as possible, while also attempting to shorten the total time it takes to get a product from its earliest formative stage to completion.
In the past, forms of supply chain analysis were done manually, but today advanced technologies leverage vast amounts of data to give logistics companies a clearer, more accurate picture—often in real-time. But before we dive into how this is done, let’s take a look at why performing supply chain analysis is key to optimizing your logistics business.
How Can Supply Chain Analysis Benefit Your Company?
A comprehensive analysis can benefit your company in several ways:
- Shorter Production Time: Identifying inefficiencies in the supply chain can get your product into the end user’s hands much sooner, leading to increased capacity, new business, and happier customers. A supply chain analysis will show you where bottlenecks occur and make it easier for you to find ways to speed up the process, whether it’s sourcing raw materials from a closer supplier, hiring additional staff to increase output, or changing the way you handle your transportation.
- Increase Your Bottom Line: Your company exists to make money, but having too much (or not enough) of a certain product can seriously affect your bottom line. A supply chain analysis can help you forecast more accurately and save you money on scheduling, ordering, and planning.
- Identify Weaknesses: A chain is only as good as its weakest link, and once that link finally goes, the chain is useless. Analyzing where your weak links are can help prevent a costly breakdown of your system, giving you time to fix the issue before an inefficiency becomes a complete work stoppage.
Start Supply Chain Analysis Now
Supply chain analysis begins by creating a flowchart to show each point and process a product goes through from beginning to end. Including every step along the way is crucial to the success of your analysis; Even one missed link, no matter how small and seemingly inconsequential, has the power to derail your efforts.
But it’s not enough just to map out the chain from Point A to Point Z—you also need to know how each point in between interacts with the other. If the flow is interrupted in the middle of the chain, does the product go back two points, or all the way back to the beginning? If Point H is backed up, is the product able to go on to Point I and return to Point H once the backlog has cleared?
Knowing the answers to these questions can help you identify more efficient solutions and collect solid data on each link, thereby allowing your entire chain to be more flexible from beginning to end.
Supply Chain Analysis Flowchart Example
The above example shows a complete flowchart for a rice distributor. Note how the chart not only concentrates on the physical movement of the product from the paddy to the retailer, but also provides price points along the way.
A good flowchart should show you the big picture – movement, direction, cost, etc. – through each link in the chain. This makes it simple to see both inefficiencies and successes!
How Does Supply Chain Analysis Work With Logistics Management?
A logistics company will typically coordinate one or more activities along the supply chain. For instance, the warehouse that manufactures your product from raw materials may or may not be the same warehouse that will package it up and ship it to the customer—and a logistics firm will manage the in-between.
However, supply chain analysis is essential for logistics management, since it will determine how and when your product will be handled, allowing you and the logistics company to work together to shorten lead time, save money, and reduce inefficiencies.
A comprehensive analysis is time- and labor-intensive. While some companies go it alone and perform the analysis in-house, others enjoy fantastic results by outsourcing the task to an outside company, which may have more precise software options available.
Whichever way you choose to go, a supply chain analysis is one of the best things you can do for your business—and your customers.