Outsourcing Audits - An Interview With Bruce Rayner

KNOWledge: What exactly is an Outsourcing Audit? Bruce Rayner: Many things to many companies but TFI has adopted a definition that responds to our membership companies’ needs.  These companies have a few things in common.  All of them find themselves as customers and suppliers in various supply chains and the strengths and reliability vary from chain to chain.  Many are considering or are already relying on contract manufacturing to produce components or finished product and most are working to meet or exceed environmental compliance for activities that are executed by partners in the supply chain.  So TFI defines an Outsourcing Audit as a robust analysis that can provide a comprehensive and deep assessment of all three areas in their business.

KNOWledge:
Who should be involved in the Audit?

Bruce Rayner:
Ideally, the audit team consists of the process owners, with involvement and buy-in from senior management. For all three areas – Outsourcing, Supply Chain and Environment – the Audit Team would include operations and supply chain management and staff as well as functional specialists as needed. Of course, senior management must be involved and briefed at all stages in the Audit.

KNOWledge:
What are some of the benefits that companies see in conducting an Audit?

Bruce Rayner:
One of the most obvious benefits is that the Audit will reveal areas for immediate improvement and cost recovery or savings. For instance, reviewing Outsourcing Performance may show that manufacturing in China is more expensive than, say, Mexico. Also, with respect to processes, both intra- and inter-company, the Audit will reveal opportunities for improvement.

In addition, the Audit will allow a company to compare its own performance against that of competitors. TFI Audit metric toolkit is firmly grounded in the data we have collected through our Quarterly Forum Benchmark studies, Charlie Barnhart’s database of hundreds of case studies of actual outsource engagements, and of course, eKNOWtion’s expertise in supply chain and SCOR based audit template.

KNOWledge:
How should companies prioritize the different offerings within the Outsourcing Audit?

Bruce Rayner:
It depends on the company’s unique challenges. For a company in a sector affected by environmental regulations that hasn’t engaged senior management on the importance of taking a strategic approach and reaping profits from environmentally compliant products – and facilities – it might make sense to start with the Environmental Audit. For companies that are finding the challenges of global manufacturing daunting – with executives spending too much time on airplanes to put out fires instead of doing what they should be doing – then Charlie Barnhart’s True Cost Audit, or eKNOWtion’s Supply Chain Audit would be the place to start. The important thing is not where the company starts, but where it ends – the three areas and how they intersect – are critical to leveraging TFI’s Outsourcing Audit.

KNOWledge:
What is the time frame companies can expect for conducting an Audit?

Bruce Rayner:
The typical Audit requires approximately two to three months, allowing for a degree of customization of tools to ensure any auditing team is extension of the company assessing points of interest.

KNOWledge:
How much of a company's resources will be required for the Audit?

Bruce Rayner:
Clearly an audit performed by internal resources demands considerably more time.  When we carry out an audit on behalf of a client we are sensitive to the careful balance of extracting critical information from the team while using their time very efficiently.  Our analysts, under an NDA conduct the on-site kick-off meeting. During this session, they interview key managers from each of the areas, using our proprietary survey instrument. We then provide a detailed customized checklist of documents, contracts and other collateral material typically containing the information we need during the data-gathering phase.  We may conduct follow-on interviews as well. We have experience and methodologies – so these data-gathering meetings are not fishing expeditions and we know exactly what we are looking for – but it will be important for the company to be responsive in order to get the best result from the Audit process. This phase of the Audit will take several weeks, and may involve on-site meetings at each of the outsource locations but the collapsed time is down to days – giving back weeks and months to company productivity.

KNOWledge:
What is the deliverable at the end of the Audit?

Bruce Rayner:
An Audit will provide insights about a company's  supply chain capabilities, outsourcing options and associated costs and environmental compliance gaps.  For each audit, TFI produces a comprehensive report, assessing the client company’s performance against our proprietary benchmarking framework in each area. This report is highly configurable and will reflect the issues and challenges raised by the company at the Kick-off meeting.

KNOWledge:
What are the estimated costs associated with conducting an Audit?

Bruce Rayner:
A complete Audit of all three areas with TFI typically costs $95,000.