Supplier audits and inspections is a critical process that supports quality and compliance management when dealing with vendors, suppliers and contract manufacturers. World class organizations are looking to incorporate best practices in supplier audit management when implementing supply chain governance and performance management programs.
Supply chain governance can help organizations streamline and manage their supplier quality and performance. In addition, it enables organizations to identify, mitigate and manage supplier risks for key procurement and manufacturing process. Supplier audits and inspections is a critical process that supports quality and compliance management when dealing with vendors, suppliers and contract manufacturers. World class organizations are looking to incorporate best practices in supplier audit management when implementing supply chain governance and performance management programs.
The cost and complexity of supplier audits run high and rise disproportionately with the size of an organization. Companies soon outgrow manual and rudimentary supplier audit processes as they turn excessively time consuming and adversely impact efficiency of the organization. Moreover, as companies grow organically or inorganically, a number of wasteful redundancies crop-up as the same supplier is audited by different business units or subsidiaries, audit resources are not shared between groups due to organizational silos and the knowledge and data from audits remains scattered and unutilized.
Modern organizations today have thousands of suppliers in the preferred list for procurement of essential and non essential goods and services. Organizations run the risk of supplier quality and efficiency issues with suppliers who supply key products and raw materials for manufacturing process. Inadequate supplier quality processes can be a serious threat to organization’s production and business continuity. Suppliers with poor manufacturing processes, inefficient returns management processes, inadequate SLA and contract compliance or poor handling of social and ethical responsibility such as work safety issues can directly impact production and revenue targets as well as expose the organization to brand and legal risks.
Organizations need to regularly audit product and service of suppliers as part of their quality assurance programs. They need to develop checklist of processes and areas to be reviewed, evaluate supplier based on quality management procedures, supplier corrective action request (SCARs) responses, documentation, requirements and specifications, programming, testing, installation, change control, support and maintenance, security and electronic records compliance as well as review legal, ethical and regulatory aspects.
Supplier audits can be extremely time-consuming and resource intensive, particularly for companies with multiple suppliers located in different geographies. Managing audits for multiple suppliers is complex and, typically, companies spend one to two days preparing for each audit, two to four days dealing with a supplier, and one to two days responding to the audit report. Moreover, they may have to do this several times a year for different suppliers. A large organization with thousands of supplier will be spending on an average two weeks on every supplier audit. Clearly, efficiency gains and elimination of redundant activities can bring down the cost and complexity significantly. Automation of supplier audits and inspections can boost productivity and reduce the time spent on recurring and complex tasks such as audit planning, checklist preparation, audit schedule, data collection, record findings, rank supplier for qualifications and risks.
An integrated audit management system deployed for enterprise-wide usage can help companies to perform supplier audits across different locations and multiple suppliers across multiple geographical locations. Such audit systems not only support organization structures with multiple product lines, locations and business units but also allow mapping suppliers who may be large themselves with multiple subsidiaries, sites and product lines. It helps to accelerate the audit process as tasks are automatically assigned and tracked from one stage to the next. Suppliers are automatically notified about an audit task through email and it allows supplier to prepare for an audit. Communication and teamwork on complex audit processes across supplier base improves due to an automated workflow system. Automation helps in eliminating audit errors and inconsistencies with a standardized process across the enterprise. It helps to companies to gain enterprise-wide visibility on supplier performance and enables effective supplier governance.
For large companies facing cost pressures, integrating supplier audits and vendor inspections on a common platform presents an opportunity to reduce the complexity of supplier quality, performance measurement and risk management while lowering the cost of operations. Effective utilization of internal resources as well as expensive external contractors often used for supplier audits provides a clear ROI for such a system. Developing a common pool of audit data and knowledge creates a structured database where information can be stored and retrieved easily by all audit staff members. It can include easy-to-search articles and documents, tracking and visualizing of staff-submitted information to the database, automated notification inform staff regarding new and important information. Many companies use audit management as a tool to measure suppliers against quality standards such as ISO and QS 9000 programs and contract KPIs. Standardized and efficient processes for supplier audits must be considered for better supplier governance.