Obsolete Audits Find More Than a Suitable Replacement

It is a well accepted view that we compete as supply chains.  Our time to market, quality, cost and even some compliance requirements are constrained or enabled by our supply chain partners.  On that basis, we should know their strengths and weaknesses as well as we know our own.  But have we created a climate that promotes that transparency?  Before we look upstream in the supply chain, let’s look in the mirror.  Has your company shared or synchronized supply chain strategies?  Do your customers know where the risks lie in your processes or would an impromptu visit reveal any surprises?  A constructive format to understand limitations and where appropriate, collaborate on a path forward is necessary if we want to compete as supply chains and win.

Imagine your own companies in what can be a vulnerable position such as, exposing details like system glitches, aging equipment or labor limitations. This is exactly where our thought process to examine our suppliers should begin.   There is a significant and obvious advantage in a deeper awareness of our supply chain partners weaknesses as well as strengths.  In fact a partial view of our supplier’s best practices does not allow us to exploit (and in this context exploiting is a good thing) their very best performance. 

We have been contemplating this challenge for some time and believe there is value in resurrecting an old methodology with a new twist of course - Audits.  Many companies can recall carrying out or submitting to audits and chances are they bring back some anxiety.  "Have we asked the right questions?" "Did we give them the answers they were looking for?" They were probably very tedious for both the auditor and auditee but we made our way through the process and found a new supplier or customer.  Exhausted from the process and maybe secretly wondering if it was worth the effort there was no race to schedule the next audit.

A different attitude, approach and maybe even a new audit tool are necessary to support this view of competing as supply chains.  Of course we are looking for the best partners possible but we would benefit from the realization that even the best companies achieve perfection temporarily at best. In fact be wary if you are working with anyone that believes they are there.  Our supply chains are in a constant state of evolution and every link in the chain has to be committed to improvement efforts – hard to do if you believe you think you are already there. 

A fresh approach is possible if we genuinely have a constructive agenda.  We don’t need to elaborate much here, as you and I know what that means. In both the overt and covert way we communicate and react to information shared between partners we are reinforcing or destroying that constructive message. The best way to hold ourselves to this fresh approach is to carry out bi-directional audits.  The way we ask and answer a question is just a little different when we know the tables are going to run shortly. So in requesting a supplier to participate in an audit, invite them in to audit you as a supply chain partner as well.

The third element of this tri-fecta is a tool that might not resemble the spreadsheet that you have filed away under Audit.  Let’s start by giving it a new name - Supply Chain Audit.  This new phrase is probably not in the old supplier handbooks or if it is the definition might require an update.  This audit will regularly assess both parties to highlight competencies and practices that can contribute to or detract from their supply chain’s ability to compete.  An integral part of the audit will check progress toward stated goals and include a balanced set of supply chain metrics.

We can go further in characterizing the Supply Chain Audit and offer the following points as you take a candid review of tools that are currently used with suppliers.  Who knows you might even find it worthwhile to forward this list to customers that you value and seek long term constructive relationships with.

Consider these categories to frame your audit:

• Strategy
• Process
• Systems
• Peformance
• Policy
• People

A Supply Chain Audit that examines each of these categories, across a customer and supplier, provides a 360° view of the current state of the supply chain operations based on

1. Strategy
   The objective of the Supply Chain Audit should go beyond publicly stated visions but to understand one another’s business strategy. Supply chain strategies and their execution components should be aligned with the business strategies to support the long and short term objectives. The outcomes of the Audit should recognize points of consensus and variance.  This is the basis of dialogue that is necessary to mutually assess supply chain partner alignment.  Significant misalignment can save both parties from going through the balance of the audit or worse down a path that is not likely to contribute to their competitive success. 
   
2. Processes
   Processes are the lifeline of a supply chain. The Supply Chain Audit collects process documentation, validates their application and assesses the end to end strength Plan, Source, Make, Deliver and Return. The processes should be examined across three dimensions
   
   • Whether the process is in place (Process design)
   • Is the process being managed effectively
   • How is the process performing

   The result of the Audit is identification of processes that are effective or ineffective in supporting the supply chain strategy. Improvement opportunities become clear and can be converted into projects based on effort/impact analysis.
3. Systems
   Information Technology (IT) infrastructure plays a critical role in supporting the execution of objectives and goals of a company. The Supply Chain Audit should assess the capabilities of the current IT infrastructure and provide a report of systems that need to be modified or upgraded to enable real time information exchange.
   
4. Performance
   Beyond qualitative assessment of the processes, the Supply Chain Audit should emphasize the quantitative evaluation using metrics to gauge the performance. The Audit ideally addresses the process for metric calculation, ownership, how are they tracked and used for process monitoring and evaluation. The results can be structured to provide a balanced scorecard for the supply chain.  As an extended step they can also be used for benchmarking purposes to ascertain the performance of the supply chain with the rest of the industry or best in class.
   
5. Policy
   Supply chain policies also play a critical role in supporting the execution of strategy. The Supply Chain Audit confirms if critical business rules have been defined, documented and are accessible to process owners. This results in identifying whether standard and consistent procedures are being followed across the organization, for reacting to certain situations that arise in the day to day operations of the supply chain.  An understanding of related policies allows supports the ability to anticipate a partners response to supply chain dynamics.
   
6. People
   The Supply Chain Audit should assess roles and responsibilities that have been defined to support the execution of the strategy. Beyond understanding how to leverage partner resources effectively this can lead to objective recommendations on individual and team utilization.

A Supply Chain Audit presents an in-depth view of a company or partner and is contingent on the right attitude, approach and tool.  A commitment to this audit process beyond initial supplier selection or through a merger acquisition is necessary to achieve an outcome other than what our old approach has delivered.  Only through regular assessment and dialogue can we expect a level of trust that enables this transparency and fuels supply chain improvement.

For additional information on eKNOWtion’s Supply Chain Audit offering, send an email to scaudit@eKNOWtion.com