An internal audit of the supply chain examines the processes, strategies, and functionality at every step in order to isolate problems and maximize opportunities. Improving the internal supply chain causes a positive ripple effect throughout the external supply chain as well, creating stronger and more efficient operations overall.
Supply Chain Success Factors
No matter how long or short a company’s internal supply chain, an effective audit investigates five key success factors: strategy, structure, people, processes, and technology. These five pieces provide the framework for every step of the supply chain, as well as an efficient supply chain over-all.
Supply Chain Audit Checklist
The supply chain auditor should use a checklist to make sure each success factor is properly attended to. The order in which the checklist is completed is deliberate, with each step flowing from the next.
For a supply chain to be solid, it must be built on an equally solid foundation. The foundation of a successful supply chain is in the company’s vision statement.
An internal supply chain audit should start by making sure the vision statement:
- Details how the company will fulfill its mission.
- Describes the factors that make the company different from the competition.
- Is documented consistently throughout the organization.
The vision statement should be clear, using measurable business goals to accurately describe each of its elements.
Measurable goals, like dollar amounts and percentages, leave little room for misinterpretation, clearly stating the company’s expectations, and creating markers with which to gauge improvement.
Structure refers to the breakdown of each department and each role within the company.
This internal audit places special focus on the departments and roles dealing directly with the supply chain. Such roles include those that receive and process orders, manage inventory, ship, provide customer support, and process returns and exchanges.
When examining structure, the auditor should verify that each department knows exactly how they fit into the company’s mission by making sure:
- The structure of each department is documented, and roles both mirror and represent the company’s goals and vision statement.
- There are sufficient accountability standards built into every level of the supply chain. For example, employees at each level are responsible for individually reporting on progress.
- All departments have access to the proper tools and resources to be successful in reaching goals.
A supply chain is only as strong as its links, which are the people running it. Each department must have the right people in place to successfully fulfill the company’s vision statement.
The auditor should look for:
- Experts at every level of the supply chain.
- Continuous training available at every level to ensure the sharpness and growth of each employee.
- Accountability at every level. Holding each person accountable for their work maximizes productivity and their opportunities for success within the company.
- A company culture that promotes excellence by recognizing employees for their accomplishments and celebrating star employees that lead by example.
The auditor should then check to see that each step of the internal supply chain has an official process by which roles are performed. Each of these processes should be documented, clear, practical, and efficient.
Clear processes must be present at every stage of the strategy:
- Data management and refinery
- Monitoring of progress, growth, and potential fraud/risk
In order for a company to remain competitive and flexible for growth, sufficient technology must be in place.
The auditor should make sure the technology can perform the following tasks:
- Managing demand
- Managing inventory
- Managing vendors
- Training and support is available
The right technology should make the supply chain more efficient while eliminating errors often caused by cumbersome paper trails and human error.
Begin Your Internal Supply Chain Audit
Any internal supply chain audit needs to cover all five areas to provide a full picture of the health of a company’s logistics processes. Opportunities (and threats) exist from strategy to technology, and leaving out any stage of the supply chain weakens the entire operation.
When you’re ready to get started, download our infographic: The Essential Supply Chain Audit Checklist: Internal Audits. The graphic translates every essential item into a simple checklist, so you – or your auditor – don’t miss anything.