To get the most value from supplier audits, it’s important to have clear goals in mind.
The five most common goals are typically:
• Assuring quality
• Managing risk
• Building resilience
• Increasing profits
• Improving business performance
When companies audit suppliers, the focus is on quality and performance. Those suppliers that meet specified standards and key performance indicators will thrive. Those that don’t may be subject to further assessments and corrective actions.
Measuring quality and performance is critical as it can mean the difference between success and failure. Take the 787 Dreamliner issue as an example.
The most effective way to identify issues and reduce risk is to conduct frequent supplier audits and assessments.
Improved customer satisfaction and delivery
By improving supplier performance, overall business goals will be met more effectively. In turn, customer satisfaction will improve. Online reviews will improve. And, you are more likely to secure repeat business.
Recovering losses to poor quality in the process
Through managing effective quality audits, businesses can gain an advantage by catching issues early and preventing detrimental effects later on.
Scheduling frequent audits in a manufacturing environment, for example, may help identify errors or defects early. Software automation can play a significant role by enabling an optimum audit cadence, identifying risks early, and initiating workflows to manage corrective action processes and non-conformances.
In this case it is likely that the cost of quality is far less than the cost of poor quality.
While quality is important, it should not be the only way to find value during the auditing process.
Mitigating risks, reducing costs and increasing productivity are often common results.
Mitigating risks are sometimes related to quality efforts. Often, during audits the value comes from identifying unseen risks. There could very well be a practice or procedure that a supplier has in place that may put a company, product, or service in jeopardy.
“There are things known and there are things unknown, and in between are the doors of perception.” — Aldous Huxley
Supplier audits help find, identify and eliminate unknown risks to businesses.
Configurable auditing software solutions have more power to identify potential risks. It achieves this by identifying anomalies or data points and patterns that may be of concern.
Once any issues or concerns have been identified they can be run through remediation and abatement processes for quick resolution.
Increasing or maintaining profits
You may increase profits as it relates to product quality and the procedures in place or quality. There are, however, many more opportunities to increase company profits through supplier audits.
Let’s take an example of a complex manufacturing organization who depends on many suppliers to deliver their final product or solution. There are any number of factors that could impact the performance of those suppliers –economic challenges, political environments, supply chain performance issues, raw material supply issues, ineffective quality processes, health and safety issues. This list goes on.
Having the right supplier on-boarding, audit, and performance management processes and cadences in place can identify and remediate risks early. Any delay or defects can have a significant impact on project profitability. This is particularly important in situations where your organization is managing a fixed price contract where suppliers play a critical role.
Reducing supplier costs
Finding quality improvements help reduce supplier costs. Of course, when costs are reduced, that’s a win everyone can celebrate. When auditing is done right, there are also many other ways to dramatically reduce costs.
Frequent supplier assessments encourage the utmost in quality and continuous improvement. They can also identify and fix issues early, before they become costly.
Performing regular audits on suppliers will impact focus on quality, processes, and procedures. Follow up audits that check on the status of previous improvement plans also build in competitiveness. That natural drive to succeed and improve that comes from a desire to be seen doing an impressive job. When performing audits, if you don’t see that, you may want to find other suppliers, or transfer work to those who you can rely on.
Improving business performance
Managing continuous improvement is essential for long-term business success. Looking for ways to improve communication, implementation, and efficiency is imperative.
Using software to do the heavy lifting of data management for supplier audits is an important step to efficiency gains. And, not only will you reduce labor hours, you will also see better results.
Getting the most out of any audit comes down to the way data is being handled. The days of spreadsheets in the hands of project managers and auditors are becoming a thing of the past. Supplier or vendor management software can prove to be a critical asset in helping you manage data effectively and consistently.
The most effective audits are optimized by information management.
When context is understood and situational awareness is high, organizations can manage risk and create opportunity more effectively.
Today in business, every competitive advantage one can get is a blessing. As business is becoming increasingly global, someone can have a customer today, and lose them to a competitor on the other side of the world tomorrow. So, staying in control of your suppliers by leveraging the data you collect from them is vital.
This means have a central platform and a common language for all supplier audits. When the data collected is easy to understand and use, the better you will perform, as an individual, a team, and an organization.
“Opportunity and risk come in pairs” —Bangambiki Habyarimana
This quote has proven to be very true. For every opportunity, there are risks, and every newly found risk is an opportunity. There may be an opportunity for improvement, or there may be an extra way to save or grow.
Maybe, to be certain as a business leader – one must know the benefits of risk management and the power of audits.
The more informed you are, the more prepared you will be to take action to improve supplier performance. Let us help you improve the way you manage and derive quality and value from your suppliers.