Supplier audits are often seen as one of the most inconvenient and resource consuming requirements of the ISO standards and therefore the first to go by the wayside when resources become stretched.
If there is one thing recent high-profile cases such as the KFC crisis has shown us, it is that the management of our suppliers plays just as much of a role in our brand reputation as the management of our own internal processes.
In a recent blog, Four key considerations for successful supplier management, we looked at key aspects of developing a strong, well-functioning supply chain that represents an extension of your own standards, but how can this be done efficiently and without tying up those all-important resources?
Determining the level and scope of an audit
Not every supplier has the same level of influence over the quality of your service or product, so subjecting every supplier to the same level of scrutiny is clearly not appropriate. You wouldn’t regularly visit and audit the supplier of your toilet rolls in the same way you would the supplier of your raw materials for manufacture! Determining the risk associated with each supplier is the first step in ensuring that precious resources are focused where they will add most value: suppliers that carry the most risk to your brand.
When developing a tiered system for categorising suppliers, you should consider aspects such as:
- Do you have alternative suppliers for the commodity?
- Does the product / service being supplied directly affect your customer?
- Is the product / service supplied bespoke to your needs or is it a standard supply?
- Are they local and accessible in case of an issue?
- Does the relationship represent a significant proportion of annual spend?
- Are lead times on the critical path of your supply?
Once suppliers can be clearly categorised, the level of resource required to audit and manage those suppliers should be proportionate to the risk they pose your business. For those high risk ‘category A’ suppliers it may be appropriate to undertake a thorough supplier evaluation audit before adding them to your suppliers list, and then revisiting them on an annual basis, whereas a lower category supplier may only require a desk top study and document review.
Supplier evaluation audits
The aim of these audits isn’t to find fault, but to ensure transparency and traceability within the supply chain and to develop a relationship that minimises the risk to your deliverables. Establishing expectations from the outset and ensuring a supplier has the capability to deliver in line with both your current needs and those in the future is an essential part of the evaluation audit. The audits should also be a two-way process: they should not only be an assessment of the supplier, but also provide an opportunity for the supplier to understand the requirements they will be expected to deliver against, and future opportunities.
- Communicating requirements: what information will be required to fulfil requirements? Will there be a single POC? What are the expectations in response time? Is out of hours support available? What form will communication take
- Reporting processes: how often will order updates be issued? How will issues be communicated? How will notifications be issued? How will performance be measured?
- Capability: are there any limits to supply? Are there additional added value services that can be provided? Are the required qualifications and accreditations in place?
- Capacity: are there limits to the volume of work that can be processed? How will the priority of your work be balanced against that of other customers?
- Quality controls: how will your requirements be interpreted and communicated? Are sufficient controls in place to ensure your product / service is right first time?
- HSE management: are there sufficient and appropriate policies and procedures in place to manage HSE aspects?
- Commercial arrangements: are there opportunities for fixed pricing / long term pricing / volume discount agreements? Are there opportunities for pricing reductions through innovation / collaboration?
- Process alignment: are company processes compatible and efficient? Is information available / provided in the required formats?
- Confidentiality: does the supplier work with competitors? Will the supplier need to share your documents with third parties?
Regular audits of the supply chain are a critical part of the ISO 9001 standard, but even if you don’t operate an ISO management system, they are simply good practice. It is here, though, that badly structured auditing strategies can drain resources very quickly. Much like having a single evaluation process for all suppliers, it’s often not appropriate to re-audit every single supplier to the same extent. Why would you focus the same resource on a highly performing supplier as on one who has had delivery issues?
Monitoring performance of the supplier on an ongoing basis is therefore key to developing an appropriate auditing strategy. Utilising a range of document reviews, conference calls and site visits according to their supplier categorisation and performance can significantly streamline the auditing process. Focus should be given to suppliers where there are significant gains to be made:
- Performance improvement is required
- Upcoming increase in demand / change in requirements
- New requirements / changes in legislation or standards
- Change in management / key contacts
- End of current long-term agreements.
Successful supplier auditing strategy
A successful supplier auditing strategy will not only ensure that the overall quality performance of the supply chain is an extension of your own companies but will ensure the process does not consume resources unnecessarily.
Our NEBOSH-qualified and lead auditor qualified consultants can provide a range of auditing services for businesses of any size, including:
- HSE audits and inspections
- Quality audits and inspections
- Supplier assessment audits
- Capability assessments.
For an informal chat on how we can help, call us today.