Customized Audits – Solution for your supply chain conformity assessment needs.

Customized Audits – Solution for your supply chain conformity assessment needs.:

Each of us have heard the term “Audit” and faced one or many as a student or as a professional. The word audit is derived from a Latin word "audire" which means "to hear". During the medieval times when manual book-keeping was prevalent, auditors in Britain used to hear the accounts read out for them and checked that the organisation's personnel were not negligent or fraudulent. Moyer identified that the most important duty of the auditor was to detect fraud.

Any subject matter may be audited. Auditing is a safeguard measure since ancient times (Loeb & Shamoo, 1989). Audits provide third party assurance to various stakeholders about the subject matter which is free from material misstatement. The term is most frequently applied to audits of financial information relating to a legal person. Other areas which are commonly audited include: secretarial & compliance audits, internal controls, quality management, project management, water management, and energy conservation.

As a result of an audit, stakeholders may effectively evaluate and improve the effectiveness of risk management, control, and the governance process over the subject matter.

Since last two decades, there has been a considerable growth in the industries across the globe. With this rapid progression, the competition in the market is also increasing. To meet the increased customer demands, many organisations expanded their business (even across the globe in some cases) and also developed network of partial manufacturers, raw material / component manufacturer suppliers in order to keep the manufacturing costs in check so as to ensure profit margins.

The high quality of vendors' products is a vital factor to the success of the company's quality control function. Therefore, the quality commitment of vendors is indispensable. To attain the company's goals through the quality assurance/quality control function, it is important to issue instructions and procedures for the evaluation, approval and auditing of incoming-material from suppliers or manufacturers. It is well realized that Supplier Evaluation and audits can be considered as an integral part of assessment in any type of industry or organization. As the entire industry routine depends on the type of materials supplied for the production, these raw materials will only shape up into the actual end product or the final product. So, it becomes necessary to guarantee that the person who supplies the raw material in an industry is of good quality and standard and the materials they supply comply with all the industry set standards and policies. Good quality products become standard and reliable end products that can satisfy customers.

These large organisations from various business sectors with an ambition to maintain their reputation and competitive edge via continual improvement, need to manage risks related to quality, environment, health, safety, food safety and hygiene. This applies both to the organisation itself and to agent, supplier or contractor performance; they must ensure demonstration of corporate social responsibility and compliance with the relevant law. For this, Organisations appoint Certification bodies for Assessment and certification of their processes to ensure Quality, Environment, Health and Safety and Sector Specific requirements have been met with. They have their internal vendor assessment team for vendor/supplier evaluation. One of the criterias for vendor selection is to have the “ISO CERTIFICATE” for various Management System Certification Standards. With the existing large vendor base and long list of probable suppliers to be inducted, it is important that these vendors are assessed on various parameters of Quality, Environment, Health and Safety, Business Ethics, Social compliance etc.

Many of the supplier organisations being small in nature (manpower as well as finance), sometimes find it difficult to obtain and sustain Certifications for various Management System Certification Standards. Also, the Large Organisations may have specific requirements to be verified pertaining to business. Ex. Verification of certain processes such as Welding / Soldering, or Traceability of Raw Materials such as Diamonds, Precious Metals (blood diamonds and conflict minerals) etc. The existing internal auditor work force may be insufficient to cover the aspects.

The Second Party Audits or Customized audits are important in such scenarios. A second-party audit is an external audit performed on a supplier by a customer or by a contracted organization (certification Body) on behalf of a customer. A contract is in place, and the goods or services are being, or will be, delivered. Second-party audits are subject to the rules of contract law, as they are providing contractual direction from the customer to the supplier. Second-party audits tend to be more formal than first-party audits because audit results could influence the customer’s purchasing decisions.

Benefits of second party audits

• Cost reductions and improved margins

• Performance bench marking

• Brand protection and enhancement

• Improved quality within your own organisation

• Enhanced performance and value from agents, contractors and suppliers

• Improved image and client confidence

Second party audits also referred as Customized audits and can be adopted by any organisation in any type of business sector viz; Hospitality, Retail, Healthcare, Education, Food and Beverages etc. The entire Supply chain can be evaluated using second party audit scheme which can be customized based on the type of supplier / distributor or Network of Sales Locations.

Some of the examples for Second Party Themes are as follows:

• Responsible Sourcing

o Responsible Recruitment

o Responsible Procurement

o Chain of Custody

o Business Ethics

• Safety Assessment

o Job Safety Assessment

o Workplace Safety

o School Safety – Safe School Programme

o Hospital Assessments – Patient Safety, OHS at Hospitals

• Food Safety and Hygiene Audits

o Restaurant Audits

o Food supplier Audits

• Supply and Distribution Audits

o Transportation

o Distribution

o Warehousing

There is no shortage of action that companies can take in order to address the risk pertaining to quality, environment, health and safety, social compliance etc. in their supply chains. With a focus on the QHSE-SA parameters, this engagement can touch on the company policy, human resource practices, management systems, and stakeholder engagement and partnerships.

It is necessary for the Second party Audit programme to go beyond the traditional checklist-based approaches to social compliance to embrace a more comprehensive plan of action. The program should leave no stone unturned to ensure that your supply chain meets the requirements of product quality as well as other specifics as mandated by the master client.