The Importance of Supply Chain Technical Audits and How to Make Them Count

March 5, 2021

In today’s global supply chain, risk assessment is among the most critical survival skills brands and retailers can possess. For companies with production facilities in faraway places, technical audits are an important tool to evaluate if vendors and factories have the appropriate internal manufacturing processes and quality control systems to deliver high-quality products and maintain responsible production practices.

“Manufacturers’ supply chains are highly complex and continuously exposed to a variety of risks, emanating from within and outside of their value chains. […] There are also extended value chain risks related to third-party service providers, and operational risks related to development planning, sourcing, production, and distribution.”

– Deloitte

Given this reality, conducting frequent technical audits in remote manufacturing operations can help identify and mitigate risk early on, ultimately improving the performance of your supply chain.

The importance of technical audits

Technical audits are an important part of an organization’s broader compliance strategy. When implemented correctly, they provide valuable data to stakeholders about how well their processes run, as well as the ability to:

  • Provide reliable data about internal systems and processes
  • Analyze how resources are being used
  • Indicate whether performance goals are being met
  • Improve systems and processes to mitigate risk
  • Assess the reliability of machinery
  • Preemptively improve quality
  • Improve the performance of manufacturing facilities

When talking about technical audits, the accurate and complete reporting of results must be of the highest priority. Through the evaluation of reports, the relevant stakeholders can obtain visibility over their global operations, gain valuable insights about the state of the facilities they work with (or plan to work with), and implement corrective action plans.

A technical audit can be executed at any stage of production to evaluate efficiency in manufacturing and in technical processes. Examples include:

  • Readiness:

    Is the vendor or factory facility prepared for production and able to meet your standards and production needs?

  • During Production:

    Are the facility’s technical operations being implemented correctly?

  • Surveillance:

    After you’ve worked with a vendor or factory for some time, are they sustaining their technical capabilities to continue doing business with you?

In meeting these capabilities, technical audits deliver immense benefits to brands and retailers. In addition to “identifying potential problems early in the course of a project,” as noted by the EPA, they also allow brands to improve their quality of service, assure future revenue, and ensure production is both transparent and cost-effective. This allows production timelines and budgets to be met while optimizing the overall performance of partner facilities.

All of this contributes to brand reputation, which a comprehensive study by Deloitte found to be the most important quality for future competitiveness.

The stages and challenges of technical audits

Despite being a key ingredient to successful risk mitigation, several challenges plague the technical audit process — particularly when done by conventional means and at a global scale. These challenges are associated with the different stages of audits:

1. Planning

In this initial stage, you make the decision to conduct an audit and establish which facilities and processes will be targeted. It is essential to establish clear objectives of what must be accomplished at the end of the audit (For example, obtaining a certification, improving current systems or evaluating the correct implementation of standard operating procedures).

Challenges at the planning stage:
Mapping large numbers of audits: When you have thousands of audits across your entire supply chain, mapping them can be an overwhelming chore if you’re reliant on manual processes.

Typically, this stage includes pre-audit meetings in which you align on goals and review previous factory audit reports. At this stage you must also make sure the audit team is aware and prepared to conduct the audit successfully (whether the audit will be conducted by your internal team or a third-party agency).

Challenges at the execution stage:
Monitoring the integrity of an audit: Particularly for large enterprises, it can be extremely difficult to have visibility over what is happening in an audit at a remote facility. When manual processes are involved, it becomes nearly impossible.

2.    Execution

This is the stage in which auditors go into the field and conduct the audits. This can take several days to several weeks, depending on scale. The most important goal is to collect meaningful data that will allow the auditor to assess the state of the facility and report back.

3.    Results

The auditor compiles the results of the audit and communicates findings with the relevant stakeholders. Efficiently communicating the results of an audit makes it easier to analyze information and ultimately accomplish the goal of the audit.

Challenges at the results stage:

  • Decentralized reporting: When reporting isn’t centralized or standardized, it makes it difficult to identify risk and trends, and implement corrective and preventive actions (CAPAs) where they are most needed. As a large enterprise, imagine receiving thousands of reports in different formats and with different metrics — you will need to spend tremendous resources to distill the reports down to actionable information.
  • High inertia: With time delays due to travel, manual reporting, and friction in the data analytics process, it will be difficult to take actions and close CAPAs efficiently.

4.    Follow-up

The follow-up phase includes future monitoring and analytics to ensure CAPAs are implemented effectively before closing them out.

Challenges at the follow-up stage:

  • Low visibility: As a global enterprise using conventional audit reporting, ensuring CAPA points are being addressed in different facilities can be both expensive and ineffective. Reporting may not provide sufficient information to determine the root causes of problems, which can lead to chronic problems and high remediation costs.

How digitization can address these challenges

The multitude of challenges with conducting technical audits at a global scale have made them ripe for digital transformation — and indeed, digital audits have proven to be the way forward.

As MIT Sloan writes, the new era of digital audit systems “automates the factory inspection process while tailoring it to specific inputs,” delivering “analytical capabilities that are beyond the classic audit model.” Digital factory audits offer far superior risk management, allowing organizations to analyze the manufacturing operations of remote partners with novel clarity. Naturally, it follows that these audits “also can deliver cost savings and process improvements.”

Here is how a digital solution addresses the aforementioned challenges at different stages of technical audits:

1. Planning

To fix the problems of audit/supply chain mapping, digitization enables you to:

  • Instantly access up-to-date information about all the facilities you work with in the digital platform.
  • Map out vendor or factory facilities based on data attributes (for example, map them out by country, product category, size, etc.).
  • Easily map out different facilities around the globe by the type of audit you are conducting.

2. Execution

To address the problems of monitoring and ensuring audit integrity, digital solutions give you the capability to:

  • View the status of every audit in real-time.
  • Keep track of who the responsible stakeholders are — for example, which facility is being audited and who the auditor is.
  • Monitor all facilities, including the state of one or more audits at each facility, on an intuitive dashboard.

3. Results

Digital platforms address the challenges of decentralized reporting and lack of actionable insights by giving you:

  • Automatic reports, in real-time, as soon as the audit is completed.
  • Automatic CAPA reports outlining all the areas of non-conformance. Digital CAPAs are dynamic and interactive, with clear documentation and real-time communication to facilitate the resolution of issues. These CAPA reports give you the opportunity to provide the root cause of the non-conformance, the resolution, the responsible party, and the deadline for completion, all on a digital platform.
  • Automatic notifications when a facility doesn’t meet your custom-set scores and thresholds.
  • The ability to compare the results from different facilities and identify top performers.
  • Powerful data analysis to zero in on the information that matters.

4. Follow-up

To address the lack of visibility on whether CAPAs are being implemented, digitization enables you to:

  • Collaborate with your stakeholders in real-time through dynamic CAPAs, allowing you to understand how actions are being implemented.
  • Map out future audits by specifying an “expiration” date for the current audit. This gives you the power to be proactive about preventing risk by understanding the state of your facilities.

Overhaul your technical audits with Inspectorio Rise

Inspectorio Rise helps you to maximize the impact of your technical audits while reducing the resources required to perform them. As explained by MIT Sloan, digitizing the audit process provides “new insights into the efficiency of remote manufacturing operations.”

Inspectorio Rise helps you digitize, standardize, and centralize the audit process so you can transform the way in which you manage technical audits.

With real-time data collection and reporting, data analytics, and collaborative features, Rise connects your supply chain on one platform and creates new levels of traceability and visibility.

Contact us to learn more about how Inspectorio can help your organization.

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