A basic diagram of the supply chain.
Reading a supply chain diagram requires knowing the direction, notation, and scope of the diagram, all of which can vary. Once the basics are understood, the physical product and information flow in a supply chain are important facts when making 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 often show processes in a linear or horizontal fashion. Supply chains are often top-down and up-flow, meaning that products and information can flow in multiple directions on the same diagram. The movement of data ascends towards the suppliers of the company. The information that moves downstream is aimed at customers.
Supply chains can cover all aspects of collection and distribution, from production to inventory to customer service. When reading a supply chain diagram, therefore, keep in mind the chosen scope of the diagram. The actual supply chain can be as long as beginning 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 may therefore be limited in scope.
The supply chain operations reference (SCOR) model is the most widely used variety of supply chain diagram management tools. It starts with the supplier of the supplier, instead of starting with the harvesting of natural resources, and ends with the customer of the customer. SCOR uses process models, performance measures and best practice metrics to identify and diagnose problem areas in a supply chain.
The signs and symbols on the diagram must be understood when reading and evaluating a diagram. Supply chains do not have a defined standard notation, such as business process modeling notation. The software or people creating the diagram often use their own notation.
When reading a supply chain diagram, it is helpful 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. Becoming familiar with diagram-specific metrics, definitions, and collection methods will help readers read a supply chain diagram more effectively. For example, while the definition of inventory turns may be widely accepted, many metrics are industry or business defined.
Knowing if the supply chain is displayed 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 make supply chain management information accessible to all parties in the supply chain, greatly increasing information input.