What is a supplier audit, and why is it for an organisations supply chain? - HQTS

What is a supplier audit, and why is it for an organisations supply chain?

Within today’s globalised market, there are many choices as to whom organisations choose to work with. This is especially true with suppliers. Due to this, careful thought and consideration are needed from manufacturers and retailers to make sure the correct suppliers are chosen to collaborate with. 

There are several processes that can assist in this decision making process. One of these is supplier audits. These audits are carefully orchestrated to ensure suppliers are using best practices and are up to the level needed, allowing an organisation to confirm if the supplier is of quality to collaborate with. Allowing an organisation to continually review these suppliers to ensure quality and best practices are upheld. 

This article aims to inform the reader on what a supplier audit is, how they are conducted. And finally, its importance.

 

What is a supplier audit? 

A supplier audit is, in essence, an inspection of a suppliers usage of industry regulation practices. This includes health and safety and correct manufacturing processes.

A supplier audit covers a large area with several different practices. Therefore they are usually bespoke to the organisation’s requirements. This means it can be specific for each industry, from food to electrical goods. Due to the particular nature which is required for audits, this can be done by an organisation’s internal term or done by a 3rd party organisation which is more common. Audits should be conducted every two years to make sure the supplier is up to standard.

 

Types of supplier audits

Supplier audits can be broken down into three major types in the way they are implemented. Allowing for a more robust strategy to ensure suppliers are up to standard. These types are:

 

 

 

 

 

 

 

 

Announced audits

This audit involves giving prior notice to suppliers before an audit is conducted. Both parties agree on this before the inspection occurs, allowing for ample preparation time. Although this style is effective, it can somewhat lack genuineness as any issues can be hidden before the selected date.

Unannounced audits: 

Unannounced audits are when no prior knowledge of the date of inspection is given. This is a growing style of inspection as it allows for an insight into the daily operations and practices used onsite. Making sure that nothing has been prepared beforehand (which can occur in announced visits). 

Desktop audits:

Desktop audits do not require an inspector to visit the site in person. However, this is more focused on checking that documentation and certificates of the supplier is up to date. These can be things like the ISO 9001 certification, which certifies their quality management system to ensure they are up to the required and agreed level set out by the organisation collaborating with the supplier and governing bodies that regulate the industry. 

 

Supplier Audit Procedure

A Supplier audit is bespoke to the organisation’s needs; therefore, it can differ between inspections. However, in general there is a common guideline that is used. Below will go through a typical “announced audit” and the processes which follow: 

  1. Pre Audit questionnaire and pre-inspection meeting

This involves the collection of information regarding the supplier and which processes and procedures are in place. Allowing for a clear purpose and list of objectives to be made. 

  1. Team selection 

From here, a team will be created to best match the audit type. These staff members will be chosen based on the expertise within this audit type to conduct the inspection correctly. 

  1. Notification of audit to supplier

After a team is selected, a notification is given to the supplier in writing (with several months notice) to allow them to prepare. Written notifications also contain:

  • The purpose of the audit
  • The schedule of the inspection
  • Names and details of the auditors
  1. Pre-inspection meeting 

This involves a brief introduction to the auditors and finalising any changes to the inspection schedule. 

  1. Execution of Supplier audit 

After the meeting is adjourned, the inspection will begin in which the auditors will inspect each aspect of the brief using a checklist based on the original goals and objectives. This checklist comes in the form of an observation sheet (OS) which records the inspector’s findings. 

  1. Reporting on findings and closure of audit

Once the audit is completed, the auditor’s group together to compare and discuss the findings. Once this is done, a report is made based on the inspection with feedback for improvements or if they are up to the requirement which has been set out. Once this has been sent, the audit may be closed.

 

Tips to help when conducting a supply audit. 

When organising a supply audit. There are certain factors to be aware of which can assist in producing a more robust audit. These things include: 

Research customer complaints

Customer complaints can be a useful resource for understanding key danger points with a supplier. If an organisation is researching a specific product or service of the supplier, requesting previous complaints which have been formally submitted can give insight into failures within the service. If there is repetitiveness within these complaints, it can indicate that the product or service is not up to standard. 

Check if a supplier is outsourcing

Suppliers can often outsource work to subcontractors to assist in the completion of orders and provide for clients. Understanding if suppliers partake in this can help clarify their performance and, ultimately their final product. It is important to ask whether or not they do use subcontractors and, if they do, are there correct quality agreements that align with your organisation requirements. 

As well as this understanding, the relationship between the supplier and its subcontractor can illuminate potential issues if the relationship is poor. 

The importance of implementing a supplier audit

As organisations grow their supply chain, choosing the correct supplier is imperative. As their reputation and quality can assure that a business can run smoothly without any issues or risks. Because of this, a supplier audit is almost essential to assist in the decision making process. Some of the benefits of implementing a supplier audit are: 

Reveals potential risks 

A supplier audit can review all production processes, including shipping, manufacturing, and quality processes. Giving insight to gaps they may have and check if these will cause any issues with the delivery to a client. Therefore potentially mitigating delays or deformities in the product.

Improves customer satisfaction 

An organisation relies on its reputation with customers. This is done through the quality of the products put forth to them. Implementing strong standards and ensuring a supplier is following them allows for customer satisfaction to be upheld. A supplier audit can assist in the quality control processes of a supplier to potentially mitigate any product quality issues or safety issues. It is also a way for an organisation to measure the performance of the supplier. 

Helps build communication with suppliers

A supplier audit is also a way to improve and maintain strong communication with a supplier. Having clear visibility and understanding of suppliers activities can assist with improvements and the business relationship. Regularly scheduled audits can ensure objectives are being met and can be constantly developed depending on the organisation’s needs. 

 

The supplier audit report

 

 

 

 

 

 

 

 

 

 

 

 

 

When supplier audits are conducted, an organisation will follow a laid out procedure to consistently measure supplier’s quality and compliance. This is recorded in a supplier audit report. This report contains all the details of the audit, this includes:

  • Details of the factory, including key team and location. 
  • A summary of the audit results. 
  • Key attention points that provide more details regardings the faults and general comments. 
  • A list of follow up suggestions to improve the supplier.  
  • A full audit list that includes general information and all the detailed inspection findings that work in an ABC quality scale. 
  • Finally, a section for images taken whilst on location to provide evidence of any faults. 

If you would like to see an example of a supplier audit report to understand the format in more detail. Click below to download our free example. 

 

HQTS provides supplier audits services in greater Asia 

We at HQTS provide a range of high quality supply chain innovations and solutions, including supplier audits. With over 25 years of experience within the quality control industry. We understand the importance of clear information for organisations to make valuable choices. Contact us to learn more about our supplier audit services and how we can help your organisation with their supply chain needs.

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