Heatmap in supply chain management (SCM)
A Heatmap in Supply Chain Management is a powerful visual method for turning complex data into easily understandable insights. Color-coded maps are used to identify areas of high risk, critical activity, or optimization potential in the supply chain. Heatmaps enable decision-makers to see where the focus should be and make data-driven decisions in a matter of seconds.
What is a Heatmap in SCM?
A Heatmap is a graphical representation where data about inventory, products, suppliers, or customers is displayed with colors that indicate values or critical points. The color scale typically goes from "cold" (blue/green for low risk/good performance) to "warm" (yellow/red for high risk/poor performance).
Heatmaps is a essential tool in Business Intelligence (BI) og SCM because they:
- Make complex data intuitive and easy to decode.
- Help discover patterns and outliers that would otherwise stay hidden in conventional spreadsheets.
What are Heatmaps used for in the Supply Chain?
Heatmaps are used to prioritize areas of focus, understand patterns in data, and make faster decisions. The primary purpose is to transform data into action.
Specifically, they are typically used for:
- Risk Management: Visualizing supplier risk, delays, or bottlenecks in the production flow.
- Inventory Optimization: Mapping the inventory's capital tied up and risk, e.g., by showing items with high value and low turnover rate (potential C-items).
- Performance Analysis: Identifying products with high revenue but low margin, or customers with low profitability.
- Geographical Analysis: Displaying the concentration of orders, suppliers, or logistics costs on a map.
When are Heatmaps relevant?
Heatmaps are used when a quick, visual overview of large data volumes is needed.
They are particularly relevant when you want to:
- Perform ABC Analysis: Visualize the segmentation of inventory in a matrix to define differentiated management strategies.
- Monitor KPIs: Get an immediate overview of which departments, locations, or products are performing below target.
- Prepare for S&OP Meetings: Present complex data intuitively for cross-functional teams.
- Identify Obsolescence: Show where the risk of obsolete items is greatest (e.g., items with long dwell time).