What Is Supply Chain Analysis?

Supply chain analysis is the process of evaluating each stage of a business that is delivering a product to customers. The analysis requires an evaluation of each step, from the time the business purchases the raw products or supplies from suppliers or vendors up until the time the business delivers the products to the customers. The purpose of the analysis is to determine which stages of the process can be shortened, refined, or made better, to shorten the time it takes to deliver the product to customers without sacrificing the quality of the product or the customer service level of the business.

The thought process behind supply chain analysis is that the more flexible a business can be, the more likely it is to be able to respond to customer needs. Several other benefits may come to a business that undergoes supply chain management analysis as well. These benefits include having just enough inventory rather than having excessive or not enough inventory, improvement of forecasting estimates, and an improvement in scheduling and planning.

Supply chain analysis starts by mapping out the production process of a business from the beginning to the end. A flow chart is the typical representation to map out the process. The chart identifies all of the players of the chain, including the suppliers for the raw products the business uses to manufacture or produce the product it sells. It also maps the interaction of the players, such as how the raw materials reach the business.

An assessment of the flow chart and the interactions between the players helps the analyzer to determine where changes can be made to improve the flow. For example, the chart may reveal that all of the raw materials for production are coming from different providers that are spread out throughout the country. He or she may identify that one of the suppliers the company works with can supply all of the raw materials. While the cost of the raw materials might be slightly higher, the shipping and delivery cost could drop dramatically and having the supplies coming from one supplier could also speed up the delivery process.

Supply chain analysis works together with logistics management — how the product or information flows from one point in the process to another. Logistics analysis and supply chain analysis allow the business managers or owners to determine how to speed up the transferring of goods and information at each point of the process. This speeds up bringing the product to market, which is what makes the business money.