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Auditing supply chains – Are there better solutions?

Auditing supply chains – Are there better solutions?

Audits are a central component to nearly all responsible sourcing monitoring programs, but are they as effective as they need to be? This question was posed at a breakout session at KPMG’s and Sedex’s 2017 Responsible Sourcing Conference in Sydney.

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Nathan Robertson-Ball and Tim Stamp from KPMG’s Human Rights and Social Impact team; Rona Starr, Executive Director, APSCA; and Walter Lin, Operations Director China, Sedex, explored the validity of an audit as the best approach to building sustainable supply chains.

Their discussion focused on the purpose and barriers to a good audit, and how to effectively manage the audit outcome. They asked, are there alternative or parallel solutions to affect sustainable change? Here are some key takeaways.

1. Why audit?

A supply chain audit is a measurement tool for compliance, validation and progress. It can indicate to a business the efforts needed to build a more sustainable supply chain. The panel explored the use of audits to help organisations understand their suppliers and how they give visibility and transparency into their practices.

For suppliers, audits keep organisations vigilant, acting as a method for continuous improvement to find non-compliances, and to provide an opportunity to correct them.

2. Successful audits need a quality auditor

The panel discussed that many auditors don’t have the correct range of skills, or enough understanding of the organisation they are auditing. They asked, who is responsible for ensuring quality auditors?

Additionally, audits are heavily dependent on the extent to which the supplier has been engaged in the process. Many suppliers don’t understand the standard that they are being held against, they haven’t been adequately engaged in the responsible sourcing journey, and they ‘don’t know what they don’t know’. Many suppliers are small businesses and do not have adequate resources to meet audit requirements. Therefore, an ongoing issue to explore is, who is responsible for educating suppliers? And who is responsible to build capacity?’

3. Approaching an audit

The panel offered suggestions on how to approach a supply chain audit. These included conducting a risk assessment to determine where to focus effort and resources, who to audit, and which non-conformances to follow up on first. They said to start with focusing on a small group and engaging them thoroughly.

4. Audit follow up

Once the audit is complete, the panel emphasised how important it is to consider how to manage the audit data, which can include managing follow up audits, corrective action plans, and closing off non-compliances.

They recommended using audit data to identify and highlight systemic and ‘one off’ issues; to inform next steps; to engage, improve and learn; to link good practice to good product; and to compare suppliers.

In summary, the panel said managing auditing in a very large supply chain can be daunting and costly. Seeking third-party advice to help navigate the associated complexities is often the best approach.

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