Bill of Supplier
a concept to control the supply chain
The current corona crisis has a major impact on the functioning of the supply chains worldwide. Companies are directly confronted with the measures of the local authorities, but also indirectly by measures of governments elsewhere in the world with which the supply chain of the products is related. (Measures are unknown, one feels in the dark, location of supplier is decisive for deliveries etc.)
Supply chain not transparent
The indirect effects, in particular, cause a lot of worries for many companies. Problems arise unexpectedly. Procurement items appear to contain parts from countries that are unknown. Who is the supplier of the supplier? (Peer-2 supplier). These problems often only come to light later, for example: if the stock levels fall below the minimum stock and the supplier can suddenly no longer deliver. The information about the availability of the articles is then very uncertain and difficult to check. The Corona measures taken in the country of the Peer-2 (or further, Peer-X) supplier are not always clear. When it is possible to restart and when the required part can be delivered again, is difficult to estimate. In addition to the physical components and availability of these components, supply chains also depend on the available (international) transport routes and possible deliveries of logistics services (For instance: programming and call centers).
Insight into the supply chain through the Bill of Supplier
In order to overcome the above-mentioned problems, insight is needed into the dependencies of the supply chain. Which suppliers are involved in which products and who are the suppliers of those suppliers? From every supplier (from Peer-1 to Peer-X) you have to know who they are and where they come from. This is the so-called Bill of Supplier (BoS).
This Bill of Supplier (BoS) is used to make dependencies and risk analyzes in a stable situation and in case of crisis, this information can be used directly to launch possible interventions.
Drawing up an adequate Bill of Supplier
Generally, production companies have a Bill of Material (BoM) in their ERP / MRP system, with every purchase component, the BoM naturally contains the supplier with all the necessary information. The suppliers of the suppliers (Peer-2) are not interesting for these ERP systems and are often unknown. There can be engineering systems in which the technical specifications of the parts are kept, but not especially where these parts come from.
There is lack of data in the existing systems to control the reliability of the supply chain, therefore we need to set up the BoS.
Setting up a BoS in a supply chain requires only limited registration of data from the Peer2 to PeerX suppliers. Which data this is may differ per situation, but the country of origin may be all we need to set up an adequate risk analysis. This makes it a lot easier to ask suppliers (Peer-1 to Peer-X) for transparency in their sourcing channels. In the case of more complex article structures, chain integration will have to be digitized in order to quickly and easily reveal the amount of data.
Where suppliers are still reluctant to open up their systems, this can be a nice first step in connecting systems.
Example of a simplified Bill of Supplier:
In this example of a BoS, it appears that in addition to the country where the Peer-1 suppliers are located (NL, ES, IT, IN), there are also strong dependencies on the countries where the Peer-2 suppliers are located (BR, CN, DE, TR). With the help of this data, the dependencies can be identified and acted upon immediately in the event of a natural disaster, political unrest and other provisions.
The BoS can be used preventively to identify the risks so that appropriate actions can be taken, such as sourcing other suppliers, making new agreements with existing suppliers or by building (extra) strategic safety stocks.
In practice, we see that the dependencies in the supply chain are often much greater than people assume. By determining the risk elements in the supply chain in combination with a well-designed BoS, risks can be limited and, in the event of an emergency, more adequate and proactive action can be taken. How the BoS is set up, and the desired level of detail, differs per organization and per product, as well as the associated risk analysis. Supply chain digitization can be a great catalyst for keeping information accurate and up to date, and vice versa, identifying the BoS can be a first step in supply chain digitization and transparency.
This article was written by Maarten Bongaerts and Eric Yntema, both of whom work at WeY Strategy Realization (www.wey.nl). Since 2003, the agency has specialized in managing changes in supply chain and operations for multinationals and large SMEs. WeY is like the fire department for supply chain challenges for many companies.