These days, most businesses that produce or facilitate the production of physical products heavily rely on a supply chain to remain efficient and profitable. And as we've all experienced, the supply chain can be volatile, unpredictable, complicated, and challenging.
Sometimes, this is just the cost of doing business. No supply chain is perfect, and even the best supply chains sometimes run into unforeseeable wrinkles and complications. But sometimes, supply chain issues are indicative of deeper, more permanent problems. In these scenarios, a supply chain audit can help you reveal potential issues so that you can resolve them and move forward with a better, stronger supply chain.
Supply chain audits are time consuming and sometimes expensive, so it's not like you can conduct them every day.
With that in mind, when is a supply chain audit appropriate?
What Is a Supply Chain Audit?
A supply chain audit is a course of action designed to comprehensively evaluate all your internal supply chain operations. This includes a close examination of all your supply chain operations, systems, and processes, with the goal of identifying problems, weaknesses, and the impact of those problems and weaknesses.
Sometimes, supply chain audits can identify potential compliance issues and violations of internal company policies.
By the end of the supply chain audit, you should have a list of issues, as well as their general impact to the company. From there, you can make plans to resolve or improve these issues.
Reasons to Consider a Supply Chain Audit
These are some of the top reasons why businesses consider a supply chain audit:
Operational efficiency and delivery speed. Performing a supply chain audit and taking action on the findings of that audit can greatly improve operational efficiency and delivery speed. You can maintain much better vendor relationships, accelerate the delivery and transportation of various products, and ultimately achieve your business goals faster. This can save a lot of time and prevent unnecessary headaches.
Specific issue resolution. If you have specific issues with your supply chain, such as regulatory complications or bottlenecks, a supply chain audit could be the right strategy to identify the root causes of those issues and eventually resolve them. If you know you have problems in the supply chain, an audit might be the only way to get the knowledge you need to address them.
Lower costs. There's no getting around it; supply chain management is expensive. Chances are, there are a number of changes and optimizations you can make to reduce the costs of managing your supply chain. However, you may not know where to begin. A supply chain audit can help you identify opportunities for lowering costs so that you can operate more cost efficiently.
Risk mitigation. Some businesses pursue supply chain audits because they want to mitigate or analyze risk. They want to preserve regulatory compliance while simultaneously minimizing the risks of various disruptive issues.
Superior vendor relationships. In the course of a supply chain audit, you can also analyze and improve your vendor relationships. If there are any vendors who are underperforming or failing to serve you, you can work those issues out or replace them.
The Costs of a Supply Chain Audit
Of course, supply chain audits aren't free. If you work with a third party, you'll need to pay for the audit. If you do the work internally, you'll need to spend a lot of hours making this comprehensive report. Accordingly, it doesn't make sense to perform a supply chain audit on a daily, or even weekly basis.
So when should you move forward with a supply chain audit?
When to Trigger an Audit
These are some of the biggest reasons why you should launch a supply chain audit:
Recognition of a bottleneck or critical issue. If you know there's a bottleneck in your supply chain, or you recognize another critical issue, a supply chain audit can help you better understand it.
Operational slowdown or inefficiency. Overall slowdown or inefficiencies in your operation could also be tied to your supply chain. An audit could be exactly what you need to track and eliminate the main issue.
Prevalence of supplier issues. If you have issues with suppliers and vendors, you may also want to conduct a thorough supply chain audit.
A push for profitability. If you find yourself pushing for greater profitability (as opposed to some other directive, like growth), and you haven't found the results you want pursuing other strategies, a supply chain audit could be the right move.
Supply chain audits are expensive and they aren't always straightforward, but they can be a valuable investment for businesses who need them. By following these best practices, you can implement supply chain audits when you need them without getting bogged down by costs and unnecessary complications.