Supply chain governance can help companies streamline and organize their supplier quality and performance. Apart from this, it makes organizations to identify, mitigate and organize supplier risks for key procurement and manufacturing process. Supplier audits and inspections is an important process that supports quality and compliance management while dealing with vendors, suppliers and contract manufacturers. World-class organizations are viewing to incorporate best practices in supplier audit management when implementing supply chain governance and performance management programs.
The price and complexity of supplier audits run high and rise disproportionately with the size of an entity. Companies soon outgrow manual and rudimentary supplier audit processes as they turn excessively time consuming and adversely impact the 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 remain scattered and unutilized.
Modern companies these days are having thousands of suppliers in the preferred list for procurement of essential and non-essential goods and services. Entities face the doubts of supplier quality and efficiency issues with suppliers who supply key products and raw materials for the manufacturing process. Inadequate supplier quality auditing processes can be a serious danger to the 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 focus production and revenue targets and expose the companies to brand and legal risks.
Organizations are required to constantly audit product and service of suppliers considering it a part of their quality assurance process. They are required to develop a checklist of processes and areas in order to review, 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 chain audits may be highly time-taking and resource intensive, especially for companies with different suppliers situated in different geographies. organizing audits for multiple suppliers is difficult and, typically, companies invest one to two days creating for each audit, two to four days communicating with a supplier, and almost one to two days replying to the audit report. Moreover, they may have to do this number of times a year for different suppliers. A big organization with thousands of supplier will be investing on an average of two weeks on every supplier audit. Clearly, efficiency achieves and the elimination of redundant activities can bring down the price and difficulty importantly. 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 very beneficial for companies in order to perform supplier audits across multiple areas and multiple suppliers across multiple geographical locations. Such audit systems not only help organization structures with different product lines, areas 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 aware of an audit task through email and this makes the supplier prepare for an audit. Communication and teamwork on complex audit processes across the supplier base improve due to an automated workflow system. Automation helps to eliminate audit mistakes and inconsistencies with a standardized process across the business. It helps companies to achieve enterprise-wide visibility on supplier achievements and makes effective supplier governance.
For big organizations facing price pressures, integrating supplier audits and vendor inspections on a common platform which shows an opportunity to reduce the difficulty of supplier quality, performance measurement, and risk management while reducing the cost of operations. Efficient utilization of internal resources and expensive external contractors often used for supplier audits offers a clear ROI for such a system.
Creating a common pool of audit data and knowledge makes a structured database where information can be saved and stored and retrieved conveniently by all audit staff members. It may consist of easy-to-search articles and documents, tracking and looking for staff-submitted information to the database, an automated notification updates staff concerning latest and mandatory information. Various organizations use audit management as a tool in order 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.