Supplier Audit: A Step-by-Step Guide

Introduction:

Supply chain management relies on supplier audits to ensure quality assurance (QA) and standard compliance. These audits provide supervision and insight to identify and resolve issues early, reducing risks and improving supply chain performance. This page covers supplier auditing basics, including types of audits and the supplier audit process from scheduling to report delivery.

Top Takeaways

• Supplier audits increase product quality, verify compliance with in-house and international standards, avert difficulties, and preserve supplier-company communication.
• Supplier audits include system, process, product, and compliance.
• Trusted third parties may tailor an audit programme to your company’s ethical, manufacturing, structural, and environmental weaknesses.

An audit of suppliers

A supplier audit is an impartial evaluation of a supplier’s operations or goods against international or in-house standards. These audits can range from an organization-wide audit to a specific manufacturing step and identify ways to enhance a product, process, or system. Despite their image as dull and nerve-wracking, audits are collaborative, transparent, and useful.

Supply chain audits identify and fix flaws. Audits detect risk factors before they occur and rectify current faults. Quality assurance relies on audits, which should be done regularly.

Supplier Audits: Why Are They Important?

Supplier audits promote visibility and communication with suppliers, maintain quality, and identify supply chain risks and noncompliance. You may monitor manufacturing using a supplier audit to guarantee ethical procedures, on-time production, and destination market compliance.

An audit will verify that your Chinese manufacturing plant is using ethical procedures and safe raw materials in compliance with EU market regulations to make items for your European firm. In lieu of a reputation-damaging recall, you can replace a dangerous ingredient in your product after an audit.

Follow Regulations

Increased factory visibility from supplier audits builds confidence. These audits check suppliers’ procedures, processes, and paperwork for compliance with legislation and standards. production companies learn about their suppliers’ quality management, production, and product safety procedures via these audits. Their suppliers can be assessed for regulatory compliance and industry best practices. Supplier audits assist manufacturers to quickly address supply chain risks and non-compliance. Ultimately, supplier audits help manufacturers guarantee their products fulfil destination market criteria.

Ensure quality

Manufacturers need supplier audits to ensure product quality. By checking suppliers often, manufacturers can spot and fix concerns before they escalate. This lets producers guarantee their goods fulfil in-house and regulatory quality requirements and protect their consumers from quality difficulties.

Learn Vulnerabilities

Supplier audits can prevent and remedy issues. For instance, Chipotle was fined $25 million in 2022 for food safety concerns in the US between 2015 and 2018. After the instances were revealed, sales dropped and customer trust degraded for years. They may have avoided the penalty and reputational damage by auditing their operations regularly.

Increase Supplier Visibility and Communication

Increased factory visibility from supplier audits builds confidence. It’s hard to tell if a product, method, or system meets benchmarks without boots on the ground. Suppliers may boost quality and compliance checks just knowing an audit is approaching.

Importantly, supplier audits allow for discussion. Used routinely, they strengthen manufacturer-supplier relationships, improving productivity, customer happiness, regulatory compliance, and a manufacturer, retailer, or importer’s bottom line.

Supplier audits fall into four categories.

The four main supplier audit categories have particular focuses. This section will describe how each of these factors ensures supply chain quality and performance.

System Checkups

Instead than concentrating on individual components or processes, a system audit evaluates a management system’s efficacy and efficiency. They assess supply chain procedures, personnel, function, timeliness, and location using certain criteria. These audits provide you a high-level picture of your operations to identify supply chain system weaknesses.

Procedure Audits

Detailed supply chain process audits examine specific phases. The performance and outcomes of each phase are assessed. Machinery, staff, and raw materials are examined and compared to guidelines, principles, performance metrics, or instructions to generate the completed product.

Auditing Products

Before shipping to customers or retailers, products are audited for requirements. Functionality, aesthetics, and dimension are required. Product audits may reveal misaligned manufacturing steps or quality system issues that require retooling.

Compliance checks

Compliance audits are distinct from the other three. System, process, and product audits share comments and internal criteria. In contrast, compliance audits validate or reject process and product standards against written documentation. It definitively indicates whether parameters are satisfied.

An external specification, such as government requirements, may need bigger supply chain adjustments in this sort of audit. Audits for ethical, environmental, C-TPAT, and food safety compliance are common.

Supplier Audit Types

Supplier audit programmes abound in these four areas. Each kind lets you assess vendors’ product quality, international, and ethical compliance.

Manufacturing audits ensure suppliers are meeting your specs and following processes.

Compliance audits like ethical audits (SMETA, amfori BSCI) provide safe working conditions. These audits might follow regulations or internal norms.

Compliance audits called living wage audits determine if your employees are earning enough (base pay, cost of living adjustments, in-kind perks, etc.) to live comfortably. Audits might reveal flaws before they escalate.

Your supplier’s buildings are audited for structural integrity, fire safety, and building codes.

Environmental Audits: Audits assure local, regional, national, and worldwide environmental compliance. Environmental audits aid in mitigation and remediation.

Chemical Safety Audits: These audits compare your company’s risk controls to probable chemical dangers. These audits can be done during preventative maintenance, after an incident, or after a process, people, location, or equipment change.

For GMP and regulatory compliance, food supplier audits assess your supplier’s food handling quality and safety.

The C-TPAT audit protects your firm, suppliers, and consumers against security dangers. The programme meets US Customs and Border Protection standards. We assess your risk and offer ways to safeguard your physical and digital assets.

Supplier Auditing: The Method

A supplier audit is simple, but planning is crucial. At your initial encounter, an experienced third-party auditor will explain the audit, provide context, and share information. Your audit should be contextualised by auditors with local and worldwide knowledge in your industrial site. Choose a reputable third-party auditor.

The Audit

The audit procedure has four steps. Some audits need additional data collection.

The First Meeting

• Discuss audit goals with the customer, auditor(s), and audit programme manager.
• Set explicit audit goals, criteria, and expectations.
• Make sure goals match auditor capability and timeline.
• Whether regulatory audit requirements are necessary

Factory Visit

• Perform audit
  • Site inspection

• Situation of facilities and equipment
• Factory profile creation

• Gathering information
• Detailed product/process descriptions

• Producing capacity
• Workflow and organisation charts
• Testing QA systems

• Healthy and Safe Evaluation (just Social Compliance Audits)
  • Health and safety inspections, PPE accessibility, compliance information posting, etc.

Employee Data Gathering (just Social Compliance Audits)

• Examine employee records
• Interviewing employees

Closing Meeting

• Complete report sent.
  • Overview of goals
  • Findings
  • Feedback and suggestions
  • Corrective plan
  • End audit

Conclusion:

Supply chain quality, compliance, and transparency depend on supplier audits. By knowing audit types and implementing a systematic auditing process, organisations may discover and resolve concerns, ensuring suppliers meet internal and external requirements. Comprehensive supplier audits assist preemptively manage risks and improve supplier communication and collaboration, making the supply chain stronger and more resilient.