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We cannot talk about sustainable procurement without talking about supply chain mapping. It is a necessary process of establishing sustainable supply chain practices and it is therefore imperative that companies embarking on sustainable supply chain management understand this topic.
In this article, we explain what supply chain mapping is, why it’s important, how and where to start, and the benefits of mapping your supply chain.
Supply chain mapping is the act of documenting all the inputs, activities, and processes in a company’s supply chain. The exercise collects information on your entire supply chain, from raw inputs to the delivery and sale of finished goods, giving you a comprehensive understanding of what goes on in these complex networks.
Many ESG risks are buried within the supply chain. Mapping dramatically increases transparency, enabling you to identify potential ESG risks and address them.
Supply chain mapping is essential to sustainable procurement. Without the knowledge of where and how in the supply chain, risks may arise, and sustainable procurement would be an exercise in blind faith – worse still, a poor risk management practice. Investing resources into the mapping exercise will pay off in the long run for the reasons listed below.
1. Take stock of your supply chain and existing information
The mapping process begins in your own supplier database. This is where you already have key information on your supply network, including their geographical location, organisation size, number of employees, etc.
A point to consider is how many tiers in your supply chain you want to map. If going beyond the first tier, you also need to gather information on suppliers of suppliers to create a global map of their supplier network.
2. Risk Assessment
A risk assessment may be the most important part of the mapping activity. This is where you identify risks at every point of the supply journey. At each farm, warehouse, transport hub, or other nodes, the materials and/or product passes through many hands and processes before arriving as a finished good.
At any point along its journey, multiple risks exist that could disrupt this flow. A natural disaster could happen at one of the factories, damaging physical assets such that resources or infrastructure become inaccessible, affecting production lead times. Raw materials are at risk of becoming in short supply if geopolitical tensions arise in the source location. All these factors must be accounted for in the risk assessment, and any data that does not exist in your database should be collected from your suppliers.
The data serve as indicators to assess the level of risk. Take the time to determine and catalogue metrics and indicators to measure each risk. At this point, you should also define what a healthy metric is, what actions you can take to address one that is outside of the healthy parameter, and how you will monitor each metric over time. These risks should be measured consistently and regularly over time as part of the risk management process.
Not all risks are known, but having a proper supply chain risk management framework in your company can help you to be prepared for any unexpected risks. Strong governance controls and response mechanisms can help you detect unknown risks earlier. A risk management framework should consist of a matrix that ranks each risk on a scale of severity of its impact on the business, the likelihood of it happening, and your company’s preparedness to deal with it.
Risk assessment tools are available to assist with this process. If you want to take it a step further, these tools can perform advanced analytics that weighs your overall risk exposure and regularly monitors data changes and exposure levels.
3. Engage with suppliers to collect information
Before you engage with your suppliers to collect information, decide what information you need. This should be based on three factors:
4. Verify the information
Conduct checks on your suppliers to ensure the information shared is true and accurate. Checks are often conducted via visits to supplier premises. This also gives you the opportunity to pick up on risks during the visit that was not identified prior.
But physical visits are not the only way to audit the data. Asking for further specific information could lend insight into the discrepancies between statements on paper and actual practices.
Pay attention to ‘grey area’ ESG issues such as practices to avoid modern slavery, fair trade certifications, eco- or green certifications. Where certifications or labels are involved, it does not take much to verify them. In some places, for instance, there is no formal organic labelling system that can be verified by an independent third party. In such cases, labels should be researched and verified based on the issuing organisation and its legitimacy.
The most valuable benefit of supply chain mapping is risk management. It allows you to identify risks in your supply chain that may present operational challenges or reputational damage to your business. A sustainable supply chain can only be achieved by mapping your supply chain, which unlocks ESG funding opportunities.
Monitoring data in your supply chain is an exhausting activity that involves large amounts of time and resources. This process can be automated and organised easily in a cloud platform with the use of sustainability software designed for this very purpose. Software like this collects information on your behalf, tracking data changes right down to the data source, and even matches the data to ensure alignment with regulatory or reporting frameworks. We highly recommend using ESG software for supply chain mapping.