A basic supply chain diagram.
Reading a supply chain diagram requires knowing the direction, notation, and scope of the diagram, all of which can vary. Once the fundamentals have been understood, the physical product and the flow of information in a supply chain are important facts when conducting an assessment. A supply chain diagram can provide information about product flow, information flow, and financial flow.
A supply chain is an organizational system used by companies to move products from their warehouses to consumers.
Diagrams usually show processes in a linear or horizontal fashion. Supply chains often have both a downstream and an upstream flow, which means that products and information can flow in multiple directions on the same diagram. The data movement ascends towards the company’s suppliers. Information that moves downstream is addressed to customers.
Supply chains can cover all aspects of collection and distribution, from production to inventory and customer service. When reading a supply chain diagram, therefore, keep the chosen scope of the diagram in mind. The actual supply chain can be as long as starting with the collection of natural resources, through various channels and means of construction, to distribution between smaller storage facilities or retail stores. A supply chain diagram is often constructed to assess specific sections of the supply chain and therefore can be limited in scope.
The Supply Chain Operations Reference Model (SCOR) is the most commonly used variety of supply chain diagram management tools. It starts with the supplier’s supplier, rather than starting with the collection of natural resources, and ends with the customer’s customer. SCOR uses process modeling, performance measurements and best practice metrics to identify and diagnose problem areas in a supply chain.
The signs and symbols in the diagram must be understood when reading and evaluating a diagram. Supply chains do not have a defined standard notation, such as the business process modeling notation. The software or people who create the diagram often use their own notation.
When reading a supply chain diagram, it helps to understand the metrics used in the diagram. Supply chain metrics are often included in a diagram to track performance. Metrics include, but are not limited to, inventory turns, cycle time, and fill rate measurement. Familiarizing yourself with diagram-specific metrics, definitions, and collection methods will help readers more effectively read a supply chain diagram. For example, while the definition of inventory turns may be widely accepted, many metrics are defined by the industry or business.
Knowing whether the supply chain is shown in real time is another important aspect of reading a supply chain diagram. Supply chain management software and applications have increased the speed of supply chain assessment. Certain programs allow supply chain management information to be accessible to all parties in the supply chain, greatly increasing information input.