Within today’s globalized market, there are many choices as to whom organizations choose to work with – and this is often the case when finding suppliers. But finding the right supplier can be challenging, especially if the actual company is located thousands of miles away from you. Luckily, supplier audits can help businesses overcome these challenges .
What Is a Supplier Audit?
A supplier audit inspects a supplier’s usage of industry regulation practices, including the health and safety and correct manufacturing processes. Generally, auditing a supplier covers a large area with several practices. Therefore they are usually bespoke to the client’s requirements. The supplier auditing process can differ for each industry, from food to electrical goods.
Who Conducts a Supplier Audit?
The supplier audit process is typically initiated by an internal team of the buyer organization led by someone in charge of procurement or quality department as a part of their due diligence review or annual review. The internal team will then determine what information should be collected from suppliers and whether the actual auditing process should be done in-house or externally.
Typically the supplier audits are conducted by a neutral third-party inspection company, and this organization evaluates the supplier’s compliance on behalf of the buyer related to specific quality standards and client’s requirements. The supplier audits should be conducted every two years to ensure the supplier is up to standard.
What Are the 3 Types of Supplier Audits?
Supplier audits can be broken down into three broader categories, namely: announced audits, unannounced audits and desktop audits. We’ve summarized the key points of each three audits below.
Announced supplier audits give the supplier a notice before they are conducted. Both parties agree on this before the inspection, allowing ample preparation time. Although this style is effective, it can somewhat lack transparency as the supplier have an opportunity to review their processes and improve them before they are audited
Unannounced audits are performed on a supplier without IFC discussing the audit with the supplier or giving them prior knowledge of the inspection date. This is a trending inspection method, as it gives the buyer an insight into the daily operations and practices used onsite while ensuring that nothing has been tampered with or prepared beforehand (which can occur under announced visits).
Desktop audits do not require an inspector to visit the supplier’s site in person. Instead, these audits are focused on verifying the supplier’s documentation and certificates are up to date. These can be things like the ISO 9001 certification, which certifies their quality management system to ensure they are up to the required and agreed level set out by the organization collaborating with the supplier and governing bodies that regulate the industry.
How Do You Perform a Supplier Audit?
The procedure of performing a supplier audit typically involves examining the supplier’s business practices, financial history and product quality. But it is always bespoke to the buyers’ needs. Therefore, it can differ between supplier inspections.
It typically starts with pre-audit questionnaires that collect information regarding the supplier and the procedures. Followed by a pre-inspection meeting, where both parties discuss the audit process and agree on any changes to be made, allowing for a clear purpose and list of objectives before the auditing process
From here, a team will be formed to best match the audit type. These staff members are chosen based on their expertise and knowledge of the type of supplier audit.
A notification is given to the supplier in writing (with several months’ notice) to allow them to prepare. Written notifications also contain:
- The purpose of the audit
- The schedule of the inspection
- Names and details of the auditors
This involves a brief introduction to the auditors and finalising any changes to the inspection schedule.
After the meeting is adjourned, the inspection will begin in which the auditors will inspect each aspect of the brief using a supplier auditing checklist based on the original goals and objectives. This checklist comes in the form of an observation sheet (OS) which records the inspector’s findings.
Once the audit is completed, the auditors will compare and discuss the findings. After which, they’ll create a report based on the inspection. This report includes assessing whether the supplier conforms to specific requirements and feedback for improvements.
How to Audit a Supplier by Yourself?
Auditing a supplier alone can be difficult if you don’t have the proper knowledge or experience. But there are certain factors to be aware of which can assist in producing a more robust audit. These things include:
Research Customer Complaints
Analyzing customer complaints can be a great starting point to understanding the key danger points with a particular supplier. When you’re trying to decide if a new supplier or company is right for your business, asking previous customers of the provider or complaints which have been formally submitted can give insight into failures within the service. If there is repetitiveness within these complaints, it can indicate that the product or service is not up to standard.
Check if a Supplier Is Outsourcing
Suppliers can often outsource work to subcontractors to complete orders and provide for clients. Understanding if suppliers partake in this can help clarify their performance and, ultimately, their final product.
It is essential to ask whether or not they do use subcontractors and, if they do, whether there are valid quality agreements that align with your organization’s requirements. As well as this understanding, the relationship between the supplier and its subcontractor can illuminate potential issues if the relationship is poor.
What Are the Benefits of Supplier Audits?
As companies grow the size of their supply chain, selecting the appropriate supplier is essential. A supplier’s reputation and quality will ensure that business runs smoothly and reduce potential issues or risks. Because of this, an audit of suppliers is essential to help in the decision-making process.
Some of the benefits of implementing a supplier audit are
A supplier audit can review all production processes, including shipping, manufacturing, and quality. They may give insight into gaps and check if these will cause any issues with the delivery to a client. Therefore potentially mitigating delays or deformities in the product.
An organization relies on its reputation with customers. This is done through the quality of the products put forth to them. Implementing strong standards and ensuring a supplier follows them allows for customer satisfaction to be upheld. A supplier audit can assist in the quality control processes of a supplier to potentially mitigate any product quality or safety issues. It is also a way for an organization to measure the supplier’s performance
A supplier audit is also a way to improve and maintain strong communication with a supplier. Clear visibility and understanding of suppliers’ activities can assist with improvements and the business relationship. Regularly scheduled audits ensure objectives are met and can be constantly developed depending on the organization’s needs.
What Is a Supplier Audit Report?
When supplier audits are conducted, an organization follows a procedure to consistently measure supplier quality and compliance. This is recorded in a supplier audit report. This report contains all the details of the audit, this includes:
- Details of the factory, including the key team and location.
- A summary of the audit results.
- Key attention points provide more details regarding faults and general comments.
- A list of follow-up suggestions to improve the supplier.
- A full audit list includes general information and all the detailed inspection findings that work on an ABC quality scale.
- Finally, a section for images taken whilst on location provides evidence of any faults.
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5 Steps to a Better Supplier Quality Audit
This is by no means a complete list of all the tactics you can take to improve your supplier quality audit. However, the benefit these in particular are often overlooked during the audit process.
A supplier quality audit presents an opportunity to strengthen the partnership between you and your supplier. Before setting foot on the audit site, review both parties’ expectations and responsibilities as laid out in the quality agreement and prepare a prioritized checklist of items to review based on the material, component, or service supplied.
Additional areas of pre-audit research to consider:
- Past audit reports.
- Company history using the supplier’s product.
- Current product specification.
- Whether the product has ever failed.
- Alternative qualified manufacturers.
- Interviews with in-house personnel about the supplier and product.
Connected quality audit software can make this step easier by enabling you to collaborate with your supplier via the internet to receive, review, and approve pre-audit documentation in one place, regardless of document type. Quality audit software can also provide an internal-facing location for all your approved vendor list (AVL) materials. By maintaining a central hub of vendor information, pre-audit research becomes that much easier next time.
Along with conventional supplier quality audit preparation, check out the supplier’s online presence. Look through the supplier’s own website and social media profiles. Check review sites like Consumer Reports and the Better Business Bureau. What are other customers and users saying about the company and its products? Likewise, search the FDA website for information relevant to the suppliers’ compliance with Current Good Manufacturing Practice (CGMP) regulations, including whether the supplier is the subject of an FDA warning letter, import alert, or recall.
Don’t underestimate customer complaints. Capturing and investigating issues received via this channel is important, as complaints are a crucial source of information about the performance and quality of products under actual usage. Look for potential patterns to determine whether other clients have had similar complaints about the product you currently purchase as well as the supplier’s product line outside your current purchases. Connected quality audit software can help you and your supplier collect and maintain any documentation related to customer complaints in one accessible place.
It’s important to know if your supplier is outsourcing parts of its process and whether it has quality agreements with its own suppliers. If possible, ask to review the supplier’s audit findings of its own suppliers. Or, if the supplier doesn’t allow that, ask to see the supplier’s incoming inspection of subcontracted materials, as well as any other documentation that can prove the supplier is holding its vendors to quality standards and receiving quality items. Clear expectations and the right quality audit software not only helps you conduct your supplier quality audit, but also extend quality standards and expectations across the ecosystem of suppliers.
Stay focused on your objectives. If the supplier is being evasive during an inspection, or isn’t providing certain quality-related documents, it may be a conscious attempt to hide quality issues. Once on-site, if the supplier seems to be steering the supplier quality audit team down certain paths during a tour, it may be to distract from process problems like non-conformances, deviations, or failed lots. It’s important to review processes and documents during an audit. However, it’s equally important to actively listen to the supplier, be aware, and understand your goals, so you can keep things on track.
When done successfully, a supplier quality audit can help you identify, address, and even prevent problems in a supplier’s product quality or processes before the problems spread, ensuring the supplier consistently meets quality expectations. By being prepared with the right tactics and connected quality audit software, you can make the entire experience more productive. It may even feel less like an audit.