The importance of robust supplier relationships cannot be overstated. In an era where supply chains are as complex as they are essential, the art of conducting effective supplier audits has emerged as a cornerstone of successful business management. But what is a supplier audit and how are these conducted?
This comprehensive article is an essential guide to the intricacies of supplier audits, a critical tool for ensuring quality, compliance, and efficiency in your supply chain. From understanding the fundamental nature of different types of supplier audits – including system, process, product, and compliance audits – to navigating their execution through well-defined steps, this guide offers a deep dive into the art and science of supplier evaluation.
What Is a Supplier Audit?
A supplier audit is a process of evaluating and scrutinising a supplier’s capabilities, performance, and compliance with agreed standards and contractual obligations. This systematic examination goes beyond mere assessment, it’s an exploration into how suppliers uphold quality, adhere to regulations, manage risks, and align with the ethical and environmental values of the commissioning company.
The audit begins with a thorough review of the supplier’s procedures, policies, and records. It’s not just about ticking boxes, it involves a deep dive into their operational fabric. Auditors look for evidence of consistency in quality management, efficiency in processes, and adherence to legal and ethical standards. This evaluation is not conducted in isolation but in the context of the supplier’s industry, market position, and the specific demands of the products or services they provide.
What sets a supplier audit apart is its dual focus. While it identifies areas where suppliers fall short, it also highlights opportunities for development and collaboration. This dual approach ensures that the audit is not seen as a punitive measure but as a constructive element in building a stronger, more resilient supply chain.
Types of Supplier Audits
Supplier audits can be categorised into several types, each with its unique focus and methodology. Understanding these variations is vital for businesses to select the right type of audit based on their specific needs and objectives.
System audits
A system audit is an in-depth examination of a supplier’s overall management system, focusing on its organisational structure, procedures, processes, and resources. Typically conducted at the onset of a relationship with a new supplier or as a periodic review for existing ones, this audit aims to ensure that the supplier’s management systems meet the required standards for consistently delivering quality products or services. It involves a thorough assessment of the effectiveness of their quality management system, checking their compliance with industry standards, and evaluating their capacity to fulfil contractual obligations.
Process audits
A process audit zeroes in on a supplier’s specific processes or operations, proving invaluable when concerns arise about certain aspects of these operations or when verifying their efficiency and effectiveness is necessary. Auditors meticulously scrutinise each step of a chosen process, from manufacturing to supply chain logistics, assessing not just efficiency and effectiveness but also compliance with established standards.
Product audits
A product audit is a detailed inspection of the final product or a batch of products supplied – essential when there are quality concerns or when it is necessary to ensure that the products meet specific quality, safety, and regulatory standards. Product audits involve a thorough examination of the finished products to check for defects, non-compliance with specifications, or any other issues that could impact quality and customer satisfaction.
Compliance audits
Compliance audits assess whether the supplier adheres to external laws, regulations, and internal policies and standards. They’re powerful when entering new markets, dealing with products or services in highly regulated sectors, or periodically to ensure ongoing compliance. The audit involves a thorough review of the supplier’s adherence to relevant legal and regulatory requirements, industry standards, and ethical practices.
Audit formats
- Announced supplier audits are scheduled in advance, offering suppliers ample time to prepare necessary documentation and resources, thus facilitating a comprehensive and structured evaluation process.
- Unannounced supplier audits, conducted without prior notice, provide a realistic snapshot of everyday operations. They ensure standard operational procedures are accurately reflected, reducing the likelihood of practices being altered just for the audit, though they can be more challenging due to the lack of preparation time. These are particularly effective for verifying critical compliance areas or addressing specific concerns about a supplier’s practices.
- Desktop supplier audits offer a remote review of a supplier’s processes through documentation. Cost-effective and less time-consuming, these audits involve scrutinising documents, records, and written procedures, but their scope is limited as they lack direct observation of practices.
How To Conduct a Supplier Audit?
Conducting a supplier audit is a structured process that requires careful planning and execution.
Here’s a step-by-step guide on how to effectively carry out a supplier audit:
1. Define the audit objectives
The first step is to clearly define what you aim to achieve with the audit. This could range from assessing compliance with legal standards and evaluating the quality of products or services to understanding the supplier’s operational processes. Clear objectives will guide the entire audit process, ensuring it remains focused and effective.
2. Develop the audit plan
Once the objectives are set, the next step is to develop a detailed audit plan. This plan should outline the scope of the audit, the areas to be examined, the methodology to be used, and the timeline for the audit. It should also identify the team responsible for conducting the audit and any specific tools or techniques they will use.
3. Inform the supplier
Before the audit begins, it’s essential to inform the supplier. This communication should include the purpose of the audit, its scope, and the expected timeline. For announced audits, this step helps in scheduling and preparing the supplier for the process. In the case of unannounced audits, the notification might be minimal or just before the audit commences.
4. Conduct the audit
This is the execution phase where the audit team visits the supplier’s site (or conducts a desktop audit, if applicable) and gathers information. This involves interviewing staff, reviewing documents, inspecting facilities, and observing operational processes. The team collects evidence to evaluate the supplier’s compliance with the audit objectives.
5. Document findings
All findings from the audit should be meticulously documented. This includes noting any non-compliances, areas of concern, as well as positive findings. Accurate documentation is important for the next steps in the audit process.
6. Prepare and present the audit report
The documented findings are then compiled into a comprehensive audit report. This report should be clear, and concise, and include recommendations for improvement, if necessary. The report is then presented to both the supplier and the management team of the auditing company and serves as a formal record of the audit findings.
7. Follow-up
The final step is to follow up with the supplier on the audit report. This involves discussing the findings, agreeing on any corrective actions, and setting deadlines for these actions to be completed. Regular follow-ups may be necessary to ensure that the supplier implements the changes and maintains compliance.
Supplier Audit Checklist
1. General information
- Supplier name and contact details
- Date of audit
- Name of auditor(s)
- Type of audit (system, process, product, compliance)
2. Pre-audit preparation
- Review previous audit reports and outcomes
- Confirm audit objectives and scope
- Develop an audit plan and schedule
- Prepare audit questionnaires and checklists
- Inform the supplier about the audit (if announced)
3. Audit execution
3a. System audit
- Evaluate the supplier’s organisational structure
- Review quality management system documentation
- Assess compliance with ISO 9001 or relevant standards
- Check resource management, including human resources and infrastructure
- Verify process control and operational effectiveness
3b. Process audit
- Inspect specific manufacturing or service delivery processes
- Evaluate process efficiency and effectiveness
- Check for adherence to specified process standards and procedures
- Assess risk management within the process
- Review process documentation and records
3c. Product audit
- Examine the final product or a batch for defects
- Verify compliance with quality specifications and standards
- Check packaging and labelling accuracy
- Assess product handling and storage procedures
3d. Compliance audit
- Review compliance with legal and regulatory requirements
- Assess adherence to ethical standards and corporate policies
- Verify environmental and safety compliance
- Check labour practices and adherence to social responsibility standards
4. Post-audit activities
- Document findings and observations
- Prepare a detailed audit report
- Discuss findings with the supplier
- Agree on corrective actions and timelines
- Plan for follow-up audits if necessary
5. Audit follow-up
- Monitor the implementation of corrective actions
- Review responses and evidence from the supplier
- Conduct follow-up audits if required
- Update supplier performance records
6. Closing
- Finalise and file audit documentation
- Provide feedback to the supplier
- Update internal stakeholders on audit outcomes
- Make recommendations for future audits
Why Is a Supplier Audit Necessary?
Conducting a supplier audit is not just a procedural step; it’s a strategic necessity in today’s complex business environment. Let’s explore the multifaceted benefits it brings to a business.
- Ensuring supplier compliance
- Identifying potential risks
- Improving supplier performance
- Building trust and transparency
- Maintaining quality
- Understanding vulnerabilities
- Boosting visibility and communication with suppliers
The Role of ISO 9001 in Supplier Audits
ISO 9001, a globally recognised standard for quality management systems, plays a pivotal role in shaping the framework and effectiveness of supplier audits. This standard, known for its stringent criteria, focuses on ensuring consistent quality in products and services, which is crucial in the context of supplier audits.
First, ISO 9001 provides a universal language of quality. When suppliers adhere to this standard, it simplifies the audit process as auditors have a clear, internationally recognised benchmark against which to measure the supplier’s quality management practices. This uniformity ensures that the evaluations are both thorough and fair.
Second, ISO 9001’s emphasis on continuous improvement aligns perfectly with the objectives of supplier audits. Audits under the ISO 9001 framework are not just about identifying non-compliance; they are also geared towards recognising areas for improvement and encouraging suppliers to enhance their processes. This approach fosters a proactive culture of quality enhancement, benefiting both suppliers and businesses alike.
And, third, ISO 9001’s requirement for documentation and record-keeping enhances the transparency and traceability in supplier operations. During audits, this allows for a more efficient review process, as auditors can easily access and assess the necessary documents and records.
Setting Objectives for ISO 9001 Supplier Audit
Setting objectives for an ISO 9001 supplier audit requires a strategic approach, ensuring that the audit aligns with both the quality standards of ISO 9001 and the specific needs of your business.
Begin by thoroughly understanding the ISO 9001 requirements, focusing on areas such as quality management principles, customer focus, and the process approach.
Next, tailor these requirements to fit the context of your supplier’s industry and your business relationship. This involves identifying key areas where your supplier’s performance directly impacts your business outcomes, such as product quality, delivery timelines, or compliance with regulatory standards. It’s also important to consider any previous issues or challenges encountered with the supplier, as these can guide you to focus on specific areas needing improvement.
Establish clear, measurable goals for each area of the audit – for instance, ensuring a certain level of product quality or verifying adherence to specific regulatory requirements. These objectives should be SMART: specific, measurable, achievable, relevant, and time-bound.
By setting such targeted objectives, your ISO 9001 supplier audit becomes a focused tool for not only assessing compliance but also driving meaningful improvements in the supplier’s processes and outputs, ultimately enhancing the overall quality of your supply chain.
