Supplier audit checklist
by Duncan Geddes
Without properly auditing the businesses you work with, you can’t always be sure of the time-scale of operations or the quality of their work. The knock-on effect of an inefficient supplier is not always immediately obvious until a supplier audit is conducted. And if you’re auditing, you’ll need to address a number of specific things.
When creating a supplier audit checklist, it is important the contents of your template will make the most of the audit. Auditing your suppliers is crucial – it can ensure you trust them, save you money in the long run and provide you with the peace of mind that your standards are being met. If when you conduct your audit, however, you don’t address the necessary topics and ask the right questions, it may be a waste of time and money.
It is important to remember that supplier evaluations will vary across industries, meaning no checklist will be exactly the same. However, this is a general guide on what to feature when reviewing a business.
Read this article to find out what to feature in your supplier compliance checklist.
When auditing a supplier, you should ensure that all the members of their team are fully trained and qualified to conduct their job as effectively as possible. You may find that some additional training for members of staff will increase productivity within your supply chain, making both your businesses more efficient.
Checking that requirements are being understood and met is an important aspect of an audit. Maybe how and when you relay your needs should be updated, ensuring that your supplier has enough time to deliver and knows exactly what you expect.
Are your deadlines being met? If the answer is no, then it is important to check during your audit why this is the case. Have a good understanding of if the missed deadline was a one-off, or if your supplier is likely to be late again. If your supplier is struggling to stick to deadlines, are they going to cut corners that could reduce the quality of their service? Or is your supplier wasting time during the process? Are missed deadlines going to have a knock-on effect to your operations? These are all things to consider in order to have the most efficient system in place, while also delivering high quality.
As well as assessing how well the supplier fits within your supply chain, it is worth inspecting theirs. Are you happy with how their raw materials are sourced, or how long a process takes before they get involved? When assessing a supply chain, you should consider both the quality of materials and the ethics of the process – from environmental damage to avoiding modern slavery – as well as the time each step takes.
Additionally, if you decide to increase productivity at any point, will other members of the supply be able to keep up with demand? This relies on using an open supply chain and communicating with all suppliers. Regarding your supply chain is transparent, you should be able to pinpoint any issues with productivity and demand, and deal with them appropriately.
When conducting your audit, you should inquire about their inspection processes, ensuring you are happy with how your supplier assesses quality. The inspection process should follow a standardised and formulised system using appropriate tools, ensuring each inspection is as good as the next.
Many suppliers will establish their own regulations and standards to work against, ensuring they deliver each time. You can check that you are happy with these standards.
Are you happy with the process your supplier undergoes in order to meet the requirements of your contract? This should cover all aspects of production, from checking material availability to machine and labour allocation – if there are issues in the beginning of the production process, they may affect the rest of the operation.
When addressing potential obsolescence, you should take into account and mitigate the risks of discontinued materials or products, and supplier bankruptcy to avoid issues with continuity and efficiency. It is important to have a good understanding of the businesses within your supply chain, knowing their strengths and weaknesses, so you can be prepared for anything, and plan this into your Risk Management Strategy. Always have a plan B as to who can supply to you if need be.
Waste and obsolescence management is an important aspect of any business. Ensuring that as little material is wasted as possible is better for efficiency, costs and the environment. The more materials wasted, the more that will need to be bought and delivered.
Health and safety
A ‘supplier due diligence’ checklist should include health and safety. Are you satisfied with the health and safety standards your supplier has in place? Health and safety checks will vary in each industry and business, depending on the risks posed in each environment. However, you want to ensure that all risks are mitigated, no matter how small, and that all members of staff are properly trained to undergo the work assigned to them. You should also ensure that the health and safety standards in place meet the requirements of the country they are based in.
The International Organisation for Standardisation (ISO) has a couple of certifications that cover health and safety – ISO 45001 and ISO 90001 – addressing both the safety of environments, and the general wellbeing of employees, such as their mental health. See if your supplier has either of these to demonstrate they are running safe practices and look after their workforce.
As well as fulfilling its most important role of ensuring everyone remains as safe as possible, a health and safety policy can also ensure efficiency.
It is important to evaluate if you are getting value. When you have a good understanding of your supplier’s process, you can fully understand what the costs cover – time, materials, craftmanship. It will often depend on what your customers value in terms of what you choose to prioritise within your costs.
Supplier negotiation is a vital aspect of any audit checklist, as you can utilise the information found to get an appropriate price that suits you and covers the costs of the process.
Once you have ticked everything off your supplier process audit checklist, you will have a better understanding of your supply chain – what’s working, what could work better. This will enable you to target inefficiencies, streamline operations and negotiate better prices. Avoiding waste and obsolescence, ensuring a skilled workforce is used and mitigating any risks will see a better production line that benefits everyone involved.
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