Essay on "Duration Supply Chain Audit Methodology"

Essay 11 pages (3106 words) Sources: 1+ Style: APA

[EXCERPT] . . . .

Duration Supply Chain Audit Methodology

Even though every supply chain is unique, it is also relatively straightforward in concept; however, in most cases, supply chains are complex in their real-world settings and such complexity can easily result in inefficiencies and duplicative practices that represent diminished profitability for the organizations involved. Therefore, auditing the supply chain from time to time represents a potentially valuable enterprise because substantive improvements in supply chain management can provide substantial reductions in total supply chain costs as well as inventory levels and resulting warehousing costs. In addition, auditing the supply chain can identify opportunities to improve the accuracy of forecasts and the organization's order fulfillment cycle time can be significantly improved (Auditing the supply chain, 2009). To this end, a short-duration supply chain audit methodology would seek to model a given company's supply chain in sufficiently detailed terms to allow the consultant to identify potential areas for improvement and areas where more thorough auditing might be needed. In this regard, Boyson, Harrington and Corsi (2004) advise, "Models can help companies structure and simplify the complex, dynamic nature of their supply chain. These capabilities help structure, transform, and condense information so that managers can quickly grasp a situation and act upon the presented information" (p. 99). The audit model will be developing used a questionnaire and procedures as described further below.

Generally speaking, one of the advantages of using an outside consultant for supply chain auditing purposes is that an experienced auditor can analyze a company's supply chain in an efficient fashion and provide valuable recommendations concerning how to improve the organization's supply chain management function. In most cases, the audit of an organization's supply chain is a straightforward, commonsense analysis; however, it must be emphasized at the outset that there are a number of situations where the complicated nature of the product and the components involved may indicate that additional investigation and follow-up auditing services are necessary. As one industry analyst emphasizes, "Every product is unique just as all audit situations are unique" (Auditing the procurement and supply chain processes, 2009, p. 2). Therefore, the short-duration supply chain audit model described herein should be viewed as a starting point to identify opportunities for improvement which may require subsequent and more thorough analyses.

Properly conducted and interpreted, though, even a short-duration supply chain audit can provide a number of useful outcomes, including the following:

1. Identify the strengths and weaknesses of supply chain strategies and operations;

2. Provide a sound basis for benchmarking supply chain management best practices; and,

3. Act as a powerful framework for planning performance improvement programs (Lascelles, 2008).

The manufacturing company targeted by the supply chain audit would seek to determine, at least in a general fashion, the extent to which the following exist:

1. Does the company have a clear strategy in place for the entire supply chain that is linked to market opportunities and focused on customer service needs?

2. Does the company have an integrated organization structure in place that allows the supply chain to operate as a single synchronized entity?

3. Does the company continuously seek to implement improved supply chain management processes?

4. Does the company have access to and use reliable information and integrated technology to support effective supply chain planning, execution and decision-making?

5. Does the company enjoy effective performance management of all of its supply chain operations to achieve top-line revenue growth, optimum asset utilization and bottom-line profitability? (Lascelles, 2008).

Beyond the foregoing, serendipitous findings concerning opportunities for improvement may emerge from the short-duration supply chain audit process. The extent to which the targeted manufacturing company satisfies the above-listed general questions can be expressed in various graphic formats or as a continuum along a Likert-scaled range (such as "not at all," "most of the time," and "all of the time"). These five dimensions of supply chain operation and excellence should be directly tied to the questions contained in the checklist so that an informed analysis can be provided the client with corresponding areas where process improvement initiatives could benefit the supply chain and where additional auditing may be needed.

For the purposes of this analysis, it is assumed that the "typical" supply chain that will be investigated using this short-duration supply chain audit methodology is that of a vertically integrated company which owns multiple manufacturing sites, some of which feed others with components, and which also owns a distribution system prior to retail. As noted above, though, because all organizations -- and their supply chains -- are unique, a short-duration supply chain audit methodology would typically consist of gathering the same type of basic relevant information concerning the company and the industry in which it competes. By any measure, the specific manufacturing industry involved will have important implications for what specific elements should be considered during the brief time allotted for the supply chain audit. The audit can be accomplished using a paper-and-pencil questionnaire (clipboard recommended for on-sight administration) or an online version that can be completed from the client's offices or using the consultant's laptop for fieldwork and completing the audit on the spot (recommended over clipboard/paper-and-pencil approach).

The short-duration supply chain audit should proceed in three basic steps as follows to collect (a) general information concerning the company and its business units and subsidiaries as well as the industry in which it competes; (b) identification of suppliers and buyers with a specific emphasis on determining the relative importance of each and highlighting those that are most important to the company's success; and (c) supply chain issues that are related to the five general dimensions under consideration by the short-duration supply chain audit.

1.

General information concerning company and industry in which it competes.

Which industry group best describes your company?

"https://www.surveymonkey.com/img/t.gif" Which industry group best describes your company? Automotive (OEM or aftermarket parts & supplies)

"https://www.surveymonkey.com/img/t.gif" Consumer Products (durable goods)

"https://www.surveymonkey.com/img/t.gif" Field Service Provider (installations, repairs, maintenance)

"https://www.surveymonkey.com/img/t.gif" Food & Beverage

"https://www.surveymonkey.com/img/t.gif" High-Tech (electronics, computers, peripherals)

"https://www.surveymonkey.com/img/t.gif" Industrial Products

"https://www.surveymonkey.com/img/t.gif" Life Sciences (pharmaceutical, medical devices and related)

"https://www.surveymonkey.com/img/t.gif" Pulp & Paper

"https://www.surveymonkey.com/img/t.gif" Retail Trade

"https://www.surveymonkey.com/img/t.gif" Other (please specify)

How many:

Manufacturing-related employees?

Line supervisors?

Executives?

Support staff?

Other questions would be added as the need for additional information emerged based on the client's responses.

2.

The identification of supplier and buyers. This second step of the short-duration supply chain audit should identify those suppliers and buyers that are most important to the company; a number of variables will reflect their relative importance. According to Elliott, Swartz and Herbane (2002), "For buyers, this includes what is bought from the organization, the value of output sold to the buyer and the proportion of output sold to the buyer. In addition, any collaboration with buyers in terms of distribution, retail and marketing should be considered. Furthermore, through the purchasing department, it should be known whether there are alternative buyers that could be used in the event of a lengthy (or permanent) interruption, in the case of a retailer going bankrupt, etc." (p. 50). The foregoing factors should, of course, be taken into account by the consultant from their perspective as being the suppliers used by the organization (Elliott et al., 2002).

In many cases, audits of the evaluation and selection of suppliers simply consists of a review of the organization's approved supplier list and whether this list has been reviewed at regular intervals. In many cases this may not be sufficient to ensure that the organization has effective control of all of those suppliers within its supply chain. Some of the salient general issues to be considered during the short-duration supply chain audit process include the following:

1. With how many suppliers does the company cooperate per year?

2. What kind of suppliers are they?

3. Under what criteria are the suppliers chosen?

4. What are the major reasons why the company changes the suppliers it cooperates with?

5. Do the suppliers work exclusively with the manufacturing company? If not, how many other companies do the suppliers work with? (extracted in part from questionnaire on supply chain management and occupational safety and health, 2009).

6. Are suppliers of critical component products selected based only on their ability to supply at an economical price or is their ability to supply consistently to specifications also taken into consideration?

7. Are suppliers included in approved lists solely on their continued registration against a recognized quality standard or is the scope of this registration reviewed? (Note: In some cases, it may be advantageous for the consultant to audit the intended supplier to establish clear lines of communication, product specifications, delivery parameters, etc.)

8. How frequently are credit notes raised by the organization for product rejected but subsequently accepted by the organization?

9. How many concessions have been raised allowing the organization to accept previously rejected products? (Auditing the procurement and supply chain processes, 2009).

Some specific areas that should be targeted during the short-duration supply chain audit include those areas that are described further in Table 1 below,… READ MORE

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