Supply Chain Mapping

How does our SC work? Can I use mapping to assess and improve my company’s
position in the chain?

The Supply Chain Road Map

Designing the Global Supply Chain

• What Must Be Done to Compete and Win?
• Who Should Do It?

How Do We Fit? How Should We Fit?

As-Is Supply Chain To-Be Supply Chain

Environmental Scanning Based on the understanding developed

during the SC design process, create the
• What are the competitive rules?
capabilities needed to…
• What skills does the SC need?
1. Help our SC meet customers’’ real needs
Supply Chain Mapping better than competing chains:
• What are the SC dynamics? • Identify the right players for the SC
• Is our company positioned for success? • Define the right relationships
• Assign the right roles & responsibilities
Strategic SC Costing • Design the right structure & systems
• What are the relevant costs??
2. Securely position the company as an
• What are the cost trade-offs?
e-of
indispensable member of the SC by
Competencies & Outsourcing • Refining our customer value proposition
• What are our valued competencies? • Developing needed competencies
• What activities should be outsourced? • Leveraging core technologies
Rationalization & Role Shifting • Establishing efficient processes
• Where can we rationalize the chain? • Creating appropriate customer linkages
• Where can we refine assigned roles?

From Supply Chain Management: From Vision to Implementation, Stanley E. Fawcett, Lisa M. Ellram, Jeffrey A. Ogden.
Copyright © 2007 by Pearson Prentice Hall. All rights reserved.

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 After reading this chapter, you will be able to:

1. Discuss the concept of SC design and its importance.

2. Explain process mapping and describe mapping’s role in SC design.
3. Describe several popular approaches for SC design.
4. Map out a supply chain. Describe key insights a manager can gain
from an SC map.

Opening Story: Olympus’s Quest for Supply

Chain Visibility
Doug and the SC team had been thrilled when Joe Andrus and the
executive committee had given them the green light for a broad SC
program. Their 6 months of hard work documenting the potential benefits,
barriers, and bridges to SCM had paid off. However, the reality of the work
that lay ahead sank in when Joe Andrus stepped into Doug’s office during
the team’s brief celebratory discussion and said, “We really like what
you’ve done so far. Your presentation today made supply chain
management look attractive. If you can deliver on those benefits, our ability
to cut costs and serve customers will go up dramatically. So will our
profits and our stock price. Just make sure you get it right. Supply chain
management is too important and too resource-intensive to fail. Good
luck.” With the weight of Olympus resting on their shoulders, the team’s
enthusiasm turned to sober reflection. Now what?

THREE WEEKS LATER . . .

Although Doug was gaining a degree of acceptance for SCM across many
functional groups, many areas in Olympus’s internal supply chain needed
improvement. Inventory levels were high, and despite steady improve-
ments in service levels, complaints from key customers were as loud as
ever. However, the reasons for these problems were not readily apparent.
Doug needed to gain an understanding of supply chain operations across
business units, functions, and in relation to external SC players. Doug
knew the clock was ticking, and Doug still needed to make the case for
specific change. He knew that operating performance wasn’t what it
needed to be, but how could he identify why, and what could be done?
Doug didn’t want to sound like he was accusing the other functional areas
of negligence or telling them how to do their jobs. A knock at his office
door interrupted his thought.
Startled, Doug responded, “Come in.” Bob Moyers, a quality assurance
director, pushed the cracked door open and entered, pile of paper in hand.
“Hey, Doug. I hope I am not disturbing you. I know that you are up against
a lot of pressure right now trying to figure out how to move ahead on our
SC initiatives. Well, I don’t know much about that specifically, but I do

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know that one of the reasons that our inventory is high is because we
have some quality problems with the suppliers. The folks in the factory
have been asking for bigger order releases than they really need because
we have so many quality holds. It seems to me we have some real
problems with the way our processes link up internally, as well as how
they link up with suppliers.”
Doug nodded, recognizing the connection with SC design. Bob
continued, “Like I said, I don’t know much about SCM, but I know a lot
about how to identify problems from my role as QA director. One of the
things that we rely on when we are trying to identify and solve problems
is process mapping.”
Doug nodded, “Yes, I’m familiar with the concept.” Bob said, “Great!
When we find a quality problem, we observe the process where the
problem occurred, talk to people involved, and then we draw a picture of
what we see going on—a process map. We run this map by the people
involved. Sometimes they make corrections; other times, they point out
something going on, like a missing or unnecessary step. The map helps us
identify problems and solutions. Sometimes, a simple fix is possible, but
sometimes the map becomes the starting point for the redesign of the
entire process. We draw the process as it should be in an ideal world, and
then work to make the needed changes. We create buy-in by getting
everyone involved—we really believe that people support what they help
create. Anyway, I thought mapping might help you get started with your
SC program. I’ll leave you some materials from a training class I give if you
are interested.”
Doug nodded, thinking about just how he could use this approach.
“Thanks, Bob. This might be the tool I’m looking for. I appreciate your help.
Maybe we can call on you for some training too, if needed?”
“I’d be happy to help. Anything that helps the supply chain perform
better will make my job easier, and will fatten up everyone’s bonus check.”
Bob left, smiling. Doug looked over the familiar explanations of process
mapping, wondering how to begin.

Consider As You Read:

1. Does “drawing a picture” of Olympus’s core process seem like a good
way to identify improvement opportunities? Why or why not?
2. Does extending the idea of process mapping to the supply chain make
sense? In what ways would you expect SC mapping to differ from
process mapping?
3. Where would you begin in drawing the SC map? Who should be
involved?
4. SC mapping answers the questions, “How do we fit?” and “How
should we fit?” Why begin with a map of your current process before
drawing a map of how you would like things to be?

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 Supply chain design is just too important to leave to chance.
Just as genetic engineering has begun to shortcut the process
of species evolution, proactive chain design will shortcut and
forever make obsolete the slow, incremental processes of
industrial evolution.
—CHARLES FINE1

I NTRODUCTION
How does a company determine what its supply chain should look like? Given the
ideal supply chain, how does an organization determine how to move from where it
is today to where it would like to be? This chapter will help you answer these ques-
tions by introducing process and value stream mapping, supply chain design, and
supply chain mapping. Process mapping is a tool to chart how individual processes
are currently being conducted and to help lay out new, improved processes. Value
stream mapping is a type of process mapping that visually depicts the product’s or
service’s “current” and “ideal” flow of information and materials throughout the
supply chain. It specifically focuses on reducing waste throughout the system, in line
with lean production concepts.2 SC design creates a vision for where the company
would like its supply chain to be. SC mapping provides a picture of the dynamics
that govern how an organization’s supply chain works today and can be used to
provide a road map for the future.
Recall our definition of SCM:

Supply chain management is the design of seamless value-added processes

across organization boundaries to meet the real needs of the end customer.

As you might guess, great supply chains must be consciously designed to effec-
tively meet the needs of customers and other stakeholders. SC design is not a small
or a simple task. It involves aligning customer needs with both internal and supply
base capabilities. It involves determining who is the best party in the SC network to
perform the required tasks. It involves coordinating physical, financial, and informa-
tion systems to improve responsiveness and efficiency. All of these activities must be
performed to create value for the customer and profitability for all SC players.

T HE I MPORTANCE OF S UPPLY C HAIN D ESIGN

What if an organization does not design its supply chain, but simply allows the chain
to evolve based on a series of processes and choices that are made independently
over the years? We can expect the following:
• Poor coordination of effort
• Incompatible information systems
• Long cycle times

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 • Communication problems
• Customer service issues
• Excessive waste and environmental degradation
• Relatively high inventory for the level of customer service achieved
• Lower than optimal profit
So why do all of these problems occur? Because no one planned SC processes to
achieve system-wide goals. Because the supply chain lacks transparency, decisions
have been made independently to optimize local results without considering the
effects on the rest of the chain. For example, a choice of low-cost packaging may fail
to protect the product, drive up shipping costs, and drive away customers. Yet pre-
dicting those results might be politically and operationally complex. Such complex-
ity is certainly one reason why SC design is still an uncommon practice. The designer
must first make the chain visible. Managers must be able to see how processes are
conducted, how processes affect other processes, who is doing what, where it is
being done, and why it is being done. Visibility is critical to effective SC design and
management.
Some believe that an organization’s key to success is its ability to design and
manage the supply chain in a nimble way, assembling and reassembling the “right”
chain of capabilities as the operating environment changes.3 Let’s look at an example
of an organization that has successfully designed its supply networks.

Nokia
Nokia is the world leader in mobile phone sales. Although the company was
founded in 1865, it was only in the 1960s that it entered the telecommunications
business. In the early 1990s, Nokia divested its noncore operations so that it could
focus on digital telecommunications technology. One of Nokia’s core philosophies
is to take a cradle-to-grave approach in designing not just a product but also its
supply chain. Thus, Nokia realizes that its suppliers play a huge role in Nokia’s
and the overall chain’s performance, environmental impact, and ability to meet its
customers’ needs.
Because Nokia outsources a great deal of its manufacturing and assembly,
it establishes close working relationships with its suppliers, focusing on excellent
communication and coordination. This reduces SC inventory and the associate
risk of obsolescence. As part of Nokia’s approach to improved SC design and life
cycle management, David White, environmental and safety manager, notes that
Nokia “. . . works with suppliers to help them develop their own environmental
management systems if necessary. This avoids the need for costly, specialized
processes later on in the supply chain. By working with suppliers to minimize
the amounts of hazardous constituents in a component through design, we save
money for everyone. The environment benefits, we benefit, and suppliers benefit.”4
Nokia’s approach to SC design and management is not limited to its supply
base. Internally, it focuses on energy consumption, waste reduction, and improved
sorting of waste. This reduces SC costs. Another measure that reduces SC costs,
improves efficiency, and benefits the customer is Nokia’s logistics network design.
It locates its facilities centrally to minimize transportation and to respond rapidly
to its customers. By taking a big picture approach to SC design, Nokia has contin-
ued to profitably grow its global market share, despite increasing competition and
difficult economic times.

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 P ROCESS M APPING
A process is defined as an activity that transforms or changes inputs into a new output.
For example, a haircut is a process: You enter with one style, undergo the process, and
exit with a new and improved look. A process map is a graphic representation of a sys-
tem that contains a sequence of steps that are performed to produce some desired out-
put. The primary goal behind process mapping is to make complex systems visible.
Once the system is depicted and understood, the maps become the focal point for iden-
tifying the unnecessary process “complexity” that arises and leads to inefficiencies.
The important point here is that process mapping can break down a system into
subsystems where the boundaries of a subsystem under analysis depend on the prob-
lem being studied. Therefore, it also becomes important to decide the extent of the
supply chain for which the mapping will be conducted. A supply chain is made up of
a series of manufacturing or service processes, including procurement, new product
development, transformation of raw materials, delivery, and customer service.
Figure 1 shows a simplified SC process map. The process mapping symbols
identify input and output, processes, delays, decisions, and flow. The input-process-
output sequences highlighted in Figure 1 are typical of manufacturing processes. In
this supply chain, we see that materials are transformed by two manufacturing
processes. The chain also involves three warehousing delays and five transportation
processes before the final output is delivered to the customer.
By creating a high-level process map, we can better understand the interdependen-
cies and flows within supply chains. We can then look more closely at particular
processes to explore whether opportunities exist to improve or eliminate those processes.

Figure 1 A Simplified Manufacturing Supply Chain Process

Input Process Output Process Delay

Transformation Warehouse
Procurement Materials (Manufacturing/ Component Movement
Service Operation) (Transportation)

Process
Movement
(Transportation)

Output Process Input Process Delay

Transformation Warehouse
Component Movement
Finished Good (Manufacturing/
(Transportation)
Service Operation)

Process Delay Process Output

Movement Warehouse Delivery Customer

(Transportation) (Transportation) Receives
Finished
Goods

Process Mapping Symbols

Input or Output Process

or Delay Decision Flow

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 People map processes for many reasons. They hope to gain insight into current
activities; drive candid discussions regarding current processes; identify areas for
improvement or radical changes, train new employees; and provide a framework for
how things should operate.
When developing a process map, the suggested approach is to
• Determine why you want to draw a process map—this will affect the level of
detail and the boundaries of the map.
• Determine who has the required information or experience.
• Determine the level of detail required for the map to support the goals.
• Establish the process boundaries by identifying the processes of interest.
• Analyze the process through observation and interviews, and record the steps.
• Draw the map.
• Have the people who are involved in the mapping process as well as others
(including those who actually perform the process) review the map for clarity
and completeness.5
Figure 2 provides a detailed process map for baking a cake. Note that the process
times have been added to this process map. To take into account variability of

Figure 2 A Manufacturing Process Map with Timing—Baking a Cake

Yes
Stage
Measure Mix Pour into
Inputs Oven in Until Oven
Ingredients Ingredients Baking Tin
Use? Is Free
(.01 hours) (.05 hours) (.01 hours)

No

Wait for
Proper No Correct
Adjust
Heat Temperature Temperature?

(.05 hours)
Yes

Bake
(.5 hours)

Cool Cake Cool Cake

(.75 No Yes (.75
Frost Yes Cake Bake Cake
hours) hours)
(.10 hours) Done? (.01 hours) Done?

No

Frost
(.10 hours)

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 process times, many maps also show a range of times that the process may take
(standard deviations may also be included). Processes that are extremely variable are
more difficult to manage. Including times helps identify bottlenecks in the process.
In addition, the name of the function and/or individual responsible for each step can
be added to improve the clarity and depth of understanding of the process. Again,
depending on the rational for mapping the process, inventory levels, quality defects,
and other issues may be depicted. The cake-baking process map is simply an expan-
sion of one rectangle representing one manufacturing process in the simplified SC
process map shown in Figure 1.

P ROCESS A NALYSIS
Analysis for the purpose of process improvement is one of the main goals of map-
ping. Let’s explore how to conduct process analysis.

1. Begin process analysis by examining the time, cost, resources, and people
involved in each step.
• Identify the steps that consume the most time or resources.
• Identify processes that take too long or vary greatly in time.
• Identify points of delay.
• Estimate the value added by each step and judge the value against the cost.
• Consider the reasons for problems and how to improve specific activities or
processes.
2. Reexamine each decision symbol.
• Determine whether the decision is necessary; does it add value?
• Consider combining decisions or moving them to another point in the
process to create more value.
3. Check each rework loop. A rework loop involves iterative processes, like repeat-
edly checking a cake until it is done baking. Here, consider how rework can be
reduced, eliminated, or combined with another step.
4. Finally, look at each process step again. Sometimes a process is done out of
habit without verifying its value.
• Verify that the step adds more value than its cost.
• Judge if the step is redundant.
• Consider how steps could be recombined for greater efficiency.

Process mapping can also be very beneficial in identifying non-value-added

activities. Looking at the process map in Figure 2 for the cake-baking process, there is
one activity that clearly does not add value. That is the constant checking as to
whether the oven is free and the temperature is set after we have mixed the cake.
That should be the first step of the process. The process has been modified to reflect
this as shown in Figure 3. We know in advance that the oven is the right temperature
and that it is available before we begin mixing the cake batter.
A major computer company that was looking for a way to reduce its costs pro-
vides a real-life example of the benefit of process mapping as a tool for identifying
waste. When managers mapped out some of the process steps in the assembly
process, they noticed that the company was spending about $1.00 per unit to put
very high-quality brand tags inside the computers! This process step and its associ-
ated cost were easily eliminated without affecting the customer value proposition.

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 Schedule Measure Mix Pour into
Preheat
Inputs Oven Ingredients Ingredients Baking Tin
Oven
for Use (.01 hours) (.05 hours) (.01 hours)

Bake
(.5 hours)

No

Cake Bake No Cake

Done? (.01 hours) Done?

Yes Yes
Cool Cake
(.75
hours)

Frost
(.10 hours)

Figure 3 Improved Cake-Baking Process

Value Stream Mapping

Value stream mapping is a specific application of process mapping, based on lean
manufacturing principles. As you may recall, lean manufacturing principles focus
on eliminating the nonvalue or wasteful activities from processes. Value stream
mapping generally includes much more information than a typical process map,
such as times for each process, details on process performance characteristics, and
information flows as well as physical flows. When applied, value stream mapping
shows the current state of a process as well as the desired future ideal state. The
goal is to better understand the current process, and to improve it so that it works
more like the ideal process. The processes analyzed in value stream mapping tend
to be broad processes, such as mapping the flow of product and information from
manufacturer to customer. This is in contrast to traditional process mapping,
which may vary in focus from very narrow processes to mapping the entire
supply chain.
United Technologies has become an avid believer in the worth of value stream
mapping. It not only value stream maps every major process in its own manufactur-
ing operations but it is also working to teach suppliers value stream mapping tech-
niques. United Technologies holds what are called “value stream mapping events.”
Managers from several suppliers come to a central location where they are taught the
basics of value stream mapping. They tour United Technologies facilities and see

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 how value stream mapping is used in daily practice. They may even participate in a
process improvement activity. Supplier managers are then expected to return to their
companies and begin to map key value streams. Supplier maps are then overlaid on
United Technologies’ maps to provide a continuous view of key processes across
companies’ boundaries. Of course, as suppliers reap the benefits of mapping, they
are expected to help their suppliers build similar skills. The goal is to build intercon-
nected value stream maps all the way up and down the chain.
As mentioned earlier, a supply chain is made up of a series of processes.
Mapping the processes creates visibility of the activities and processes being per-
formed as well as who is performing them. This is important in redesigning and
improving existing supply chains. It is just as important when an organization is cre-
ating a new product or service and has the opportunity to create a supply chain from
ground zero. What should the supply chain look like? What processes must it
include? Who is the right party to execute the processes? By laying out the ideal
processes, the organization can greatly reduce the waste, redundancy, and ineffi-
ciency within its supply chain. By questioning each process and interface in the
supply chain an organization can come as close as possible to the ideal supply chain.

S UPPLY C HAIN D ESIGN

Designing a supply chain is a relatively new concept. Historically, supply chains
evolved, responding to changes in the business environments. As noted earlier, sup-
ply chain design involves planning and developing your supply chains to support
the value proposition and goals of the organization. It is a proactive approach to
serving the customer rather than chasing after changing needs. To clarify design
specifics, managers should follow these steps:

1. Begin the process by identifying the chain’s end customer.

2. Determine the supply chain’s value proposition.
• Identify the key players at each supply chain level and the value they add.
• Determine where your company is in the supply chain and the value it adds
to the supply chain.
3. Analyze who possesses the power in the supply chain: manufacturer, distribu-
tor, retailer, or other party.
• Determine who has the best linkages with the end customer.
• Establish the key technologies that drive supply chain success.
• Assess the core competencies that drive supply chain success.
4. Isolate the major processes required to support the supply chain’s value
proposition.
• Determine where there is a significant amount of time and variability in the
supply chain.
5. Establish what the ideal supply chain would look like.
• Ascertain the as-is value-added roles of the various supply chain members.
• Analyze how much control over supply chain activity we want or need.
• Clarify the should-be value-added roles of the various SC members.
These high-level questions help managers identify key processes in the supply chain.
Once these processes are identified, managers can begin to define ideal processes.

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Table 1 A Comparison of Traditional and Supply Chain Process Focus
PROCESS TRADITIONAL SUPPLY CHAIN

Inventory management Only company-owned Whole chains, high turns

approach
Cost management approach Price focus Total cost
Coordination of sharing Limited Long horizon for planning
and monitoring in chain
Amount of coordination Limited Extensive
of multiple levels in the chain
Planning in supply chain None Integrated with information
technology
Supplier management Arms-length and/or Close relationships with key
adversarial suppliers
Leadership in supply chain None Leadership roles defined among
players
Sharing of risks and rewards None Defined with key players
Speed of operations, Slow, limited Rapid, extensive
information/inventory flows
Information technology Not an issue; internal Extensive improvements and
focus in supply chain linkages
Team process None with customers Joint teams with key customers
or suppliers and suppliers

They can also determine which processes should be performed internally and which
should be outsourced. Table 1 contrasts some of the process differences between an
SC focus and a traditional approach to management. These perspectives should be
considered when designing the supply chain. For example, in a traditional approach
there is generally a very limited place for sharing information with others in the sup-
ply chain, no process for joint planning exists in the supply chain, no sharing of SC
risks and rewards occurs, and no joint teams are in place.
Designing a supply chain implies starting with a new product or service. This
“blank slate” approach creates a tremendous opportunity to assess the ideal supply
chain. In reality, most supply chain design is supply chain redesign. For example,
Hewlett-Packard (H-P) has established an internal group called SPaM (strategic planning
and modeling) to work with H-P businesses on supply chain design. Most of SPaM’s
work is directed at improving current SC configuration and execution. The SPaM group
at H-P has been involved in many SC redesign initiatives, including efforts to
• Address obsolescence issues. This resulted in the use of postponement and stan-
dardization so that product differentiation could be delayed to a time when
actual demand was known.
• Assess the global supply chain for printer manufacturing. This resulted in plant
closures and relocations with an increased reliance on contract manufacturers.
• Determine where H-P should source its parts. The decision was made to move
away from some “low-price” suppliers that actually created higher total costs
in the form of long lead times, transportation costs and delays, increased
inventory levels, and higher obsolescence costs. Not only did H-P reduce
costs by reevaluating its sourcing configuration, but it’s ability to respond to
changing customer demand also improved.

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 Design for Supply Chain Initiatives
The 1990s ushered in an era of “design for . . .” initiatives, often referred to as DFX.
These designs for initiatives were directed at the fact that designers of new products,
services, and processes often failed to consider certain key elements of product/ser-
vice performance that were very costly, and often very difficult to change once the
product or service had been designed. The overriding principle of DFX is to create an
atmosphere where designers work with other key players internally or in the supply
chain to ensure that the critical issues are considered and integrated into design.
DFX initiatives remind us to
• Design for manufacturability.
• Design for distribution.
• Design for disassembly.
• Design for environment.
• Design for supply.
• Design for the customer.
The list goes on. None of these initiatives alone is sufficient to ensure that the
organization designs products, services, and processes that meet customer needs
efficiently and effectively. The organization must look at the bigger picture of design
for supply chain: How do the issues faced by each function and level in the supply
chain affect others? For example, we can design a product that is relatively easy to
manufacture, but might be very difficult to disassemble and repair or recycle.
Customers may shy away from it because repair costs are high. Thus, it is important
to keep the perspective of the supply chain as a whole in mind, not simply the inter-
nal perspective or the functional perspective.

Approaches to Supply Chain Design

The following section presents several approaches for designing supply chains.
None of the approaches provides a complete “cookbook” methodology for designing
supply chains, because each situation is unique. However, each approach provides a
different perspective on what should be emphasized in designing supply chains.
These approaches could be used together, to provide a big picture of some of the
concerns and influences in SC design. SC design is enhanced by supply mapping, an
important tool for understanding and improving your current and desired state in
terms of SC design and management.
All of the approaches to SC design have some common elements. After we have
identified the customers and the value proposition, there are three decisions
involved in SC design. Conscious decisions are required to determine (1) the mem-
bership of the supply network (who will participate in manufacturing or services),
(2) the structure of their relationships (who will supply what to whom), and (3) locus
of control (who will actively manage the network).
The membership of the supply networks entails two primary types of deci-
sions. The design engineers first make the creative decisions to design the product
that meets the customer’s needs. The parts and subassemblies required to produce
this product are listed in the bill of materials (BOM). Then, the sourcing managers
take this BOM and engage in the make-or-buy decision, which requires the identi-
fication of the parts and subassemblies that need to be produced or procured from

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outside sources and the selection of the suppliers for these items. In cases where
the design engineers have leveraged the expertise of an existing supplier in the
design process, the decision of who will produce the part has already been made.
It is now up to purchasing and supply to negotiate the terms and conditions of the
agreement. Alternatively, the general terms and conditions may already exist between
the buying and supplying companies, and only the specific details need to be
worked out.
Management of the supply network entails supplier selection, evaluation, and
oversight. This encompasses managing for cost, quality, and delivery of parts from
suppliers. In the last two decades, we have seen many large final assemblers
(e.g., Ford, General Electric, Hewlett-Packard, IBM, Lucent) delegating these
responsibilities to the large top-tier suppliers who perform the manufacturing and
create subassemblies. However, many of these large assemblers are very selective in
delegating these activities to their suppliers. For instance, the large assembler may
still select second- and third-tier suppliers, and engage them in product development.
This is known as buyer-directed sourcing. For instance, if there is a part or module
common across several product lines (e.g., fasteners or door subassemblies), the
buyer may require its first-tier suppliers to use these common parts or modules
from a particular supplier. In spite of this, they may delegate the responsibility for
day-to-day management and supplier evaluation to their first-tier suppliers, but
retain the control for cost in-house, leveraging volume with a sub-tier supplier
across several products and first-tier suppliers. Whether and how much buyer-
directed sourcing is done determines to a large extent the structure of the relation-
ships in the supply network.
Various approaches have been suggested for most effectively designing supply
chains to meet the organization’s needs. This section briefly reviews the SCOR
model, and introduces models based on product “clockspeed,” product characteris-
tics, and product life cycle.

SCOR Model
The SCOR model is very process-focused. It proposes that the supply chain is made
up of a series of linked, plan-source-make-deliver-and-return processes. These
processes can be mapped, measured, and better understood in order for the organi-
zation to improve. It suggests a 4-step approach to SC design that supports the plan-
make-source-deliver-return process:
• Analyze the basis for competition: What do you need to do well in order to
succeed? How can you measure and monitor your progress in these key areas?

Plan
Source Make Deliver

Return Return
Figure 4 The Supply-
Chain Council’s Supply-
Chain Operations
Reference Model (SCOR)

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223
 • Configure the supply chain as it is and as you would like it to be. Include
geographic locations and flows.
• Align performance levels, practices, and systems across information and work
flows.
• Implement SC processes and systems, including people, processes, technology,
and organization.6

Although this is presented as a series of steps, each step involves a signifi-

cant amount of work, dedicated cross-functional team effort, and top manage-
ment support. It requires a commitment of internal resources and a vision of
what should be. This approach relies heavily on mapping current and ideal
processes.

Supply Chain Design and Evolution: The Double Helix7

Another way to look at SC design is to understand that supply chains are
constantly evolving and changing as the environment in which they compete
changes. Some supply chains evolve very rapidly, like those of high-technology
industries. Others change very slowly, like the mining industry. Regardless of the
rate of change, the design of the supply chain is very important. Companies
should look at trends that are occurring in the supply chains of industries that
evolve faster than their own in order to anticipate and prepare for changes in
their own supply chains. They should then look at their own supply chain in
terms of their organizational structure, leading technologies, and their own capa-
bilities. Because supply chains are constantly changing, it is the ability to design
and redesign supply chains proactively that creates a real opportunity for com-
petitive advantage.8
Within industries, power is constantly shifting and companies are evolving from
relatively vertically integrated, self-sufficient organizations to firms that heavily
outsource and are very dependent upon suppliers. This happens as suppliers
develop better ideas and competencies, and vertically integrated firms decide to
focus their own operations on areas where they feel they excel. As vertically inte-
grated firms grow, their organizations often become rigid, impeding innovation.
Niche competitors may gain advantage in certain areas because they are more agile.
In addition, as products become more complex, niche competitors may also be at an
advantage in focusing resources to develop highly profitable proprietary systems
utilizing new technology. This is how both Intel and Microsoft were able to grow and
gain significant advantage over IBM in the PC market. IBM’s response in “dis-inte-
grating” its PC operations and focusing on full-service IT solutions demonstrates
that the helix is dynamic. Those who can accurately predict the shifts of the helix
stand to profit greatly. Likewise, in order for organizations to be proactive in design-
ing their supply chains, they need to understand how their industry is evolving. This
evolutionary concept and the pressures present at various stages are shown in
Figure 5 and illustrated in the following example.
Organizations need to be aware of where they are in the evolution of their
supply chains for a particular industry, and plan accordingly. For example, the
modern automotive industry began with Henry Ford as a highly vertically inte-
grated system. Ford Motor Company owned everything from rubber plantations
to metal foundries on to final assembly and sales. As time passed, niche competi-
tors developed who specialized in making components like tires, radios, or micro-
processors. These agile, smaller specialists could provide equal or better parts at

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 Niche Technical
Competitors Integral Modular Advances
Product Product
Vertical Horizontal
Industry Industry

High- Supplier
Dimensional Market
Complexity Power

Proprietary
System
Organizational
Profitability
Rigidities Pressure to Pressure to
Dis-Integrate Integrate

Figure 5 The Dynamics of Product Architecture and Industry

Structure: The Double Helix
Source: Fine and Whitney; Muffatto and Pawar9

lower cost. Their size and specialization allowed them to focus more effectively on
technology, and change more rapidly.
This created pressure to “dis-integrate” and create modular products that outside
suppliers could create, as was seen in General Motors’ spin-off of Delphi, its captive
parts supplier. Today, the automotive industry is moving into modular products in a
horizontal industry. Based on Fine and Whitney’s model, shown in Figure 5, suppliers
may begin to develop critical, proprietary technology, gaining market power. Thus,
auto manufacturers need to be aware of their potential growing dependence on sup-
pliers, and may even have to shift some production back in-house, vertically integrat-
ing. They need to take care not to become too dependent on suppliers for knowledge
and capability, which are difficult to imitate and replace. They also need to monitor
how quickly their industry is changing by paying attention to the most rapidly chang-
ing technologies, to allow them to respond positively, rather than take a reactionary
approach.10
Finally, as a company designs and redesigns its supply chains, it must take full
advantage of the DFX approach presented earlier in this chapter. Specifically, a company
must design its products and services, processes, and supply chains simultaneously.11
The interdependencies among these must be recognized and leveraged to create a com-
petitive, responsive supply chain. This approach relies heavily on mapping processes
and the supply chain. But an organization can never rest. Managers must be looking
ahead at the next supply chain changes as it prepares for the changes beyond, because
“supply chain design and development ought to be thought of as a meta-core compe-
tency—the competency of passing judgment on and choosing all other competencies
and the strategies for competency development.”12

Nature of the Product or Service

Another approach to SC design suggested by Marshall Fisher13 is to design the supply
chain based upon whether the product or service that you are selling is innovative or
functional in nature. Innovative products may be fashion or fad items that have a very

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 short life cycle. Examples are the latest video game and high fashion clothing items.
They have relatively high profit margins and very unpredictable, short-lived demand,
so the firm must be very flexible in meeting customer needs. On the other hand, the
risk of obsolescence is also very high, so inventory levels should be kept to a mini-
mum. The optimum buffers are speed and flexible capacity and distribution. Demand
may shift rapidly, and carrying high inventory levels to respond to estimated peak
demand can result in costly write-offs when demand shifts. Thus, the ideal supply
chain for innovative products is best described as responsive.
Functional products are those items that fulfill a basic need, such as staple foods
like sliced bread and basic cars like the Honda Civic. Demand is relatively pre-
dictable, the products have a longer life cycle, and there are plenty of substitutes in
the market. The ideal supply chain for functional products is an efficient one. The
supply chain should minimize handling and transport costs, and provide predictable
supply at the lowest possible cost.
Fisher’s approach allows an organization to better match the SC design with the
type of product or service offering in order to achieve the best fit between customer
demands and the firm’s profitability. It provides a basic framework that can comple-
ment the SCOR or double helix models (presented earlier) or the product life-cycle
model (presented next).

Supply Chain Design and the Product Life Cycle

Product life cycle (PLC) is a marketing concept that has been around for many
years, but is still a valid one. This concept states that products and services evolve
through a life cycle, and that the specific management concerns vary with each
stage of the life cycle. In the high-tech arena, where the PLC might be months
rather than years long, the organization has to focus on rapidly adapting its
supply chain focus and capabilities to support the appropriate stage in the PLC.
Figure 6 shows how Intel, a company that faces very short product life cycles

Figure 6 Product Life-Cycle Concept

Sales
Volume

Time
Introduction Growth Maturity Decline
Demand Uncertain/Low Rapid Growth Stabilizing Declining
Input Prices High Uncertain Declining Declining
Cost Pressure Low Low, Increasing Increasing High
Goals Gaining Share Gaining Market Stabilizing Reducing/Managing
Share, Profit Volume, Holding Decline
Price
Market Price High High, Declining Declining Declining

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 and very high volumes, applies the PLC concept to its products. This varies
slightly from the standard PLC model you might see in a marketing text because
Intel’s product life cycles are extremely short. The elements listed in Figure 6
illustrate how Intel’s focus changes over the PLC. Such an approach to designing
and managing supply chains might be more important to companies that offer
products and services that would be classified as innovative based on the needed
characteristics.
In the introduction phase, the company focuses on gaining product acceptance,
or market share. In the growth phase, sales volume increases. Although demand is
uncertain, sales prices are high and cost pressure is low. As the product volume
grows, competitors enter the market and sales prices begin to decline. Input prices
are declining due to economies of scale and cost pressures on suppliers. Once the
product matures, the cost pressure is very high, as prices continue to decline due to
excess industry capacity and potentially shifting tastes. During decline, the item is
being phased out, and the volume is dropping.
To support its short life cycles and demands to get its products to market quickly,
and respond rapidly as the product moves through various PLC stages, Intel relies
heavily on DFX initiatives. These include design for manufacturability and design
for reuse, which incorporates existing parts, processes, and suppliers wherever it
makes sense to do so; and design for material/purchasing. All of these DFX initia-
tives make Intel more agile.14

S UPPLY C HAIN M APPING A PPROACHES

There are numerous reasons for SC mapping. For example, an organization may
decide to map its supply chain when the chain is not performing up to expectations,
when it needs to reduce costs or time in the supply chain, or when it wants to gain a
better understanding of its supply chain. The rationale for the mapping will affect
the level of detail of the SC map. In general, it is good to begin with a high-level sup-
ply chain map so that the organization can identify the major linkages and bottleneck
areas. Unlike the process maps shown earlier, SC maps should consider linkages
with customers and key suppliers.
It would be nearly impossible for a complex organization to ever map its entire
supply chain in detail. This would likely entail thousands, if not tens of thousands,
of linkages. An organization should determine where it believes the greatest oppor-
tunity lies before it begins the detailed mapping process. If outsourcing entails
simple parts or materials, the SC map will simply be a chain of dyads or simple
triads. One of the goals of process mapping may be to identify the unnecessary
process “complexity” that leads to inefficiency. In much the same way, the SC map
can be a useful tool for identifying the unnecessary complexity in the supply
network so that the SC manager can make a conscious decision whether and how to
remove it.
For example, process complexity can be defined as the unexpected steps that
must take place to compensate for errors that occur. There are a series of steps in the
system that the engineer has designed and the customers are willing to pay for; how-
ever, due to unforeseen events and errors, extra steps are required for corrective
purposes or to compensate for them. Complexity includes steps that do not add
value to the process or output, but simply add cost and/or time to the supply chain.

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 For instance, in a supply chain, a buying company may have chosen a particular
supplier for its special technical capability, but in reality this supplier may lack this
capability and, unknown to the buying company, subcontracts to another more tech-
nically advanced supplier. To the extent this addition of another supplier in the
supply chain has lengthened the delivery lead time, it might be said that additional
complexity has been added.
The same basic approach may be used for SC mapping as is used for process
mapping. Figure 2 showed an example of an SC map using the conventions and sym-
bols of process mapping shown earlier in this chapter, where each major process is
identified and laid out. Much information can be added to this map: company
names, inventory levels and values, and even a contact person for a specific process.
There are so many ways that companies and researchers map supply chains that
some have even called for standard practices in SC mapping.15
One particularly useful type of SC map is known as the “pipeline map.” This
type of SC map is noted as a way to “identify the current competitive state of the
supply chain.”16 An example of the pipeline map for men’s underwear is shown in
Figure 7.
A step-by-step approach for mapping the SC pipeline for a particular item
is provided here. This approach focuses on understanding and improving SC
performance.

1. Identify the item that you wish to map.

2. Identify all of the processes that occur on the physical pipeline for that product,
including supplier processes. For example, in the case of the men’s underwear
example, there is the spinning of yarn to make fabric, the knitting of the fabric,

Figure 7 Men’s Underwear Example

Source: Scott and Westbrook16

(20) (20)

(15) (15)
Distribution
Component
Center (2)
(10) Cutting
(10) (5) (10)

(5) Dye (5) (5)

and
Spinning Knitting Finish Sewing Transportation
(15) (10) (7) (18) (19)
Commodity End
Market User

In Transit Store
Yarn Grey Stock
Fiber Finished-
Finished Finished-
Goods Yarn Raw Cut Work
Fabric Goods
Store Store Material Buffer Store
Store

Underwear Logistics
Spinning Fabric Supplier Manufacturer Provider Retailer

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 the dyeing and finishing of the fabric, the cutting of the fabric, and the sewing
of the underwear. In addition, there is transportation and storage of goods in
a distribution center and at the retail level before they are sold to the end
customer.
3. Determine who performs each process in the chain. For simple processes, you
may know who the players are. For more complex processes, you may have to
ask your suppliers, or your suppliers’ suppliers.
4. Talk to each of the entities that performs a process for you and determine how
long the process takes them, and how much inventory they have at the begin-
ning of the process (raw materials or components) and at the end of the process.
Also find out how much they have in transit on average, and the transit time. In
this example, the location differences of the spinning, fabric, and manufacturing
firms are negligible, so this is not an issue. There is, however, a 19-day transit
time from the underwear manufacturer to the distribution center and another
2 days from the distribution center to the retailer.
5. You are now ready to draw the SC pipeline map from raw material to end user.
The pipeline map is simply a series of horizontal and vertical lines.
a. Begin by drawing a horizontal line from the commodity market to the end
user.
b. Sum the times for all of the processes. Note that there is no transportation
included other than shipping of finished goods from the underwear
manufacturer to the distributor. This is because the spinning, fabrication, and
manufacturing all take place in close proximity with negligible transit times.
If the transit times were a day or more, they would need to be included in the
SC pipeline map. In this case, spinning is 15 days; knitting, 10; dyeing and
finishing, 7; cutting, 5; sewing, 18; transportation, 19; and distribution,
2 days. The sum is 76 days. The length of the horizontal line you have just
drawn is equivalent to these 76 days. This is the average time spent in the
processes between the stockholding points, and is known as the pipeline
length.17
c. Starting with the earliest process, write the name of the processes in order,
above the horizontal line. After the name of the process, indicate the length
of time that the process takes. In this case, spinning takes 15 days. Allow
space equivalent to 15/76 days to represent the length of the process; then,
write in the next process, etc., until you have divided the line for all of the
processes, accounting for the full 76 days.
d. Now draw vertical lines at the beginning and end of each process to indicate
the average amount of inventory that each party has on hand in terms of
raw materials (at the beginning of the process) and goods that it has trans-
formed (at the end of the process). These represent the average inventory
that any party in the supply chain is holding at any point in time. If the prod-
uct is not physically transformed by the process, as in transportation, distrib-
ution, and retail, then only one inventory level is shown. If you add all of
these figures on the vertical lines together, the total is the entire inventory
in the pipeline that is waiting in some form of processing or finished goods.
In this case, that totals 20
10
5
15
5
10
5
20
15
10  115
days. This represents the amount of “non-value-added” days of inventory,
in all forms, in the supply chain. This is simply buffer inventory, because
nothing is actually happening to this inventory during this time. The orga-
nization may want to evaluate how much of this inventory is really needed.

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 e. As an enhancement, you could also use flow modeling to “. . . identif(y) both
the time and cost associated with a process.18 This involves 76 days of in-
process inventory and 115 days held in buffer stock. You may want to focus
on the processes with the highest value and the longest delays.
6. Analyze the supply chain for opportunities.
a. Look at the pipeline length, which we calculated in step 5b as 76 days. Does
this seem long? Consider that in order for you to “work off” the entire inventory
in the supply chain in case of a decline in demand, it would take 76 days for the
fiber in beginning inventory now to work its way to the end of the supply chain.
Examine the pipeline map created in step 5c to understand whether any of the
processes look particularly long for the activity being conducted. You may need
to contact some of the suppliers, or even make site visits.
b. Map relevant SC processes, as shown in the example in Figure 2. Look for
unnecessary processes and delays as a starting point. Where are parts being
moved multiple times and/or long distances? How does this affect SC costs
and lead times? Identify potential improvement opportunities.
c. Look at the level of buffer inventory identified in step 5d. This is 115 days.
This represents assets that SC members have tied up. This increases the cost
of doing business, and lowers the agility of the chain. It increases your risk: If
a dramatic change occurs in the environment, various members of the chain
will have to absorb write-offs of inventory, or may attempt to pass them
along to others in the chain. Analyze where you believe the inventories are
too high, and may be lowered. Again, you may be best served by talking to
or visiting your SC members and focusing on areas with the highest value
and longest delays, as suggested by flow modeling.
7. Prioritize your ideas from step 6. Work with the team, suppliers, customers, and
other affected parties to implement, manage, and monitor the changes. Don’t
limit yourself to the first-tier suppliers or customers, as the suppliers’ suppliers
and customers’ customers may also provide excellent ideas or opportunities for
SC improvement.19
8. Analyze the new supply chain, revisiting step 6 until you are satisfied with the
improvement results or they are no longer cost-beneficial.
9. Repeat the procedure with other supply chains where you believe there is
opportunity for improvement.

This practical approach to SC pipeline mapping creates an excellent basis for

understanding the organization’s “as-is” supply chain situation, and a starting point
for mapping the “should be” supply chain. With the help of detailed process maps to
illustrate key areas of improvement opportunity in the supply chain, SC pipeline
mapping can yield excellent results, supporting reengineering efforts and smaller
improvement efforts. Mapping creates an improved basis for communicating within
the organization as well as with external SC members.

C ONCLUSION
The idea that a supply chain can and should be designed is a relatively new concept.
Yet designing supply chains can be important to the success of the organizations
involved in the supply chain. Whenever an organization does not systematically
design its supply chains, and even when it does, it may find that the supply chains

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 are not as effective as the organization would like them to be. Thus, the organization
should map the supply chain in order to better understand the processes involved,
and where inefficiencies may be occurring. Once potentially inefficient processes
have been identified, those processes should be mapped in order to identify
improvement opportunities. SC mapping, supplemented by process mapping or
value stream mapping, can be an effective means to identify inefficiencies and poten-
tial solutions. These tools can also be an effective way to communicate internally, and
with SC members. Although we have shown a standard method for process and SC
pipeline mapping, these methods are extremely adaptable. Organizations should
adapt the information that they include in supply chain and process maps to best suit
their needs.

SUMMARY OF KEY POINTS

1. Supply chain design is a relatively new concept that double-helix model based on SC evolution;
advocates organizations to plan their supply chains a model based on the nature of the product or
rather than allowing them to “happen.” service; and one based upon the product life cycle
2. A supply chain is made up of a series of processes concept. Each of these approaches can provide
that involve an input, a transformation, and an valuable insight to help design a supply chain. It is
output. also useful to combine these different approaches
3. Process mapping can help managers under- to gain a broader perspective of SC design issues.
stand how a process operates and how to improve it. 7. Organizations need to adapt the SC design process
4. Value stream mapping is an application of process to fit their situations.
mapping, developed to apply lean principles to 8. SC mapping uses process mapping techniques to
process improvement. help understand and improve supply chains.
5. A DFX initiative is a product development mandate 9. SC pipeline mapping includes useful information
to improve a specified supply chain factor, X, about the organizations involved, the key SC
through careful design. For example, products may processes, how long the processes take, how much
be “designed for” optimizing manufacturing, inventory is being held, and where it is being held in
supply, and/or usability. the chain. Flow mapping focuses on process time
6. There are numerous popular approaches for and costs.
designing supply chains. These include the SCOR 10. Organizations need to control the complexity of
model, proposed by the Supply-Chain Council; the their SC maps to focus on their goals.

REVIEW EXERCISES
1. Discuss the importance of SC design to an organiza- 5. Define DFX. Describe how it relates to SC design.
tion’s success. 6. Describe the SC design and evolution approach
2. Describe taking a class at a university as a process. presented by Charles Fine.
Be sure to include the inputs, the transformation, 7. Is there one right approach to supply chain design?
and the output(s). Justify your answer.
3. Explain why managers map processes. Identify at 8. Discuss at least three reasons why an organization
least five questions that a manager would answer would engage in SC mapping.
through the use of a process map. 9. Describe the key steps in SC pipeline mapping, with
4. List the key steps in process mapping. Describe the an emphasis on how to analyze the supply chain for
role each step plays in the mapping process. improvement opportunities.

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