Post audit: The auditing evaluation (monitoring and improvement) (9/9)

After completion of the audit, evaluations are essential to detect potential for improvements. In addition to the auditing evaluation, in which the auditing program is checked for its effectiveness, a performance evaluation of individual auditors and the auditing team should be carried out in order to identify potential areas of optimization in the auditing process.

As such, the requisite questions post completion of the SCRM audit are:

Monitoring and Controls:

Documentation Have all documents required by the auditor been prepared or made available?
  Are the audited documents/evidence available in sufficient quantity?
  Has a comprehensive SCRM audit report, including improvement recommendations as well as a description of the current state, been prepared?

Filing

Were all important results of the SCRM audit secured in writing?
  Were all important results of the SCRM audit secured electronically?
Evaluation of the SCRM audit program
Was the number of sites to be audited appropriate?
  Was the selection of staff for the face-to-face interviews appropriate?
  Was the number of interviews conducted adequate?
  Were the appropriate SCRM auditing methods selected?
  Were the performances of the auditor and SCRM audit teams evaluated?

Improvements:

Improvement Measures Does the final audit report contain a satisfactory number of quality suggestions for SCRM improvements?
  Have milestones for concrete SCRM improvement measures been set?
  Have the key implementation responsibilities of these concrete improvement measures been defined and assigned?
  Have the key responsibilities for the monitoring and maintenance of these implemented improvements been defined?

Extract from Schröder, M. (2019): Structured improvement of supply chain risk management. In: Supply Chain Management – Contributions to Procurement and Logistics, Series-Editor: Essig, M.; Stölzle, W., Kersten, W., Springer Gabler: Wiesbaden

How to audit SCRM? The preparation phase (4/9): Defining the auditing policy — configuration and reporting

The auditing policy must further specify whether audits are regulated using a longer-term auditing program or whether they are carried out only when required. The latter are referred to as “ad hoc audits”. Closely related to the auditing policies are the design variables of the auditing configuration, which are concerned with regularity/frequency, scope, and focus.

Reporting designs should be agreed in advance. In this regard, a suitable information and communication system should be established for all phases of auditing. The system should primarily enable general communication between the auditor or auditing team and the key person(s) responsible. To ensure unrestricted and confidential communication both within the auditing team and within the organization, appropriate information and communication tools must be available to all parties involved. In addition, an appropriate information and communication system can promote the efficient delivery of results and enable the application of the auditing methods described below.

The requisite questions for the beginning of the SCRM audit are therefore:

Scope and process of the SCRM auditing program
Have the subjects of the SCRM audit (e.g. sales or production departments) been selected?
Have the specific business aspects to be audited (e.g. logistics, supply chain management, etc.) been selected?
Have appropriate auditing techniques been defined (e.g. site visits, employee interviews, job observations, work-environment inspections, etc.)?
Is there a schedule for the SCRM audit process with the sequence, times, and duration of each individual department’s necessary approvals and access procedures?
What is the date of the SCRM audit kick-off meeting?
What is the date of the SCRM audit wrap-up meeting?
Has comparative criteria for the SCRM audit process been developed, which can be used to conclusively evaluate the audit findings?

Communication
Have all involved employees been informed of the SCRM audit schedule?
Have the physical workstations and corporate departments which will be audited been informed of the dates for the SCRM audit?
Are the communication channels for the SCRM audit defined?
Which employees will receive the final SCRM audit report?

Documentation
Is access to all the would be audited documents and details ensured?
Does the auditor have all necessary documents for the SCRM audit?
Does the auditor have any and all supplementary documents for the SCRM audit?
Have possible overlaps in content with other auditing systems been considered in order to avoid duplication of work?
Has a checklist for implementation of SCRM measures been prepared for the auditor?
Are the results of previous SCRM audits available? Where?

Extract from Schröder, M. (2019): Structured improvement of supply chain risk management. In: Supply Chain Management – Contributions to Procurement and Logistics, Series-Editor: Essig, M.; Stölzle, W., Kersten, W., Springer Gabler: Wiesbaden

How to audit the SCRM? Preparation of an SCRM Audit (Part 1/9)

Long-term efficiency of the SCRM process can only be achieved if comprehensive monitoring of the SCRM implementation process is performed in all phases. To this end, SCRM-related auditing is a suitable method.

In risk management literature, the additional process monitoring for the risk management process is being actively discussed but has not yet been applied to SCRM. Since there has been no attempt to date to develop SCRM auditing, either within the scientific literature or in practice, this topic has been addressed as part of our research.

Extract from Schröder, M. (2019): Structured improvement of supply chain risk management. In: Supply Chain Management – Contributions to Procurement and Logistics, Series-Editors: Essig, M.; Stölzle, W., Kersten, W., Springer Gabler: Wiesbaden

How can supply chain risk management be implemented?

When introducing SCRM, organizational, technological, and personnel aspects should be taken into account. At the same time, structural aspects should be aligned with the individual phases of the SCRM process—risk identification, analysis, management, and control (process). Method catalogs were created as a further component

Relevant Aspects  
Personal
  • Awareness of SCRM should be raised among employees
  • Heterogeneous team composition is advantageous (i.e. representatives from purchasing, supply chain management, IT, quality management, etc.)
  • Team members must have sufficient capacity (available working hours)
Organization
  • Integration of SCRM into existing units (e.g., Purchasing, Global Distribution Fulfillment)
  • Support of the project by management
  • Appointment of a project manager who coordinates the SCRM process, collects necessary data/documents, and consolidates the results
  • Regular supplier evaluation—especially for critical suppliers. Clustering according to cash turnover is recommended
  • Complete documentation (e.g. defective rate, special releases, delays, etc.)
  • Regular exchange of information with suppliers such as forecasts, ERP system information, etc.
IT
  • SCRM process support from an IT system
  • Integration into existing IT systems (e.g. ERP) and access to the same data sources (e.g. sales and purchasing) can be advantageous
  • Conducting audits to identify supplier weaknesses

For the SCRM implementation process, the first step is to raise awareness among employees. Internal company events and attendance at specialist conferences or external training events on this topic are, for example, suitable for this purpose.

In addition, a heterogeneous team composition is ideal. If, for example, employees from purchasing, supply chain management, IT, and quality management work together on the SCRM team, a cross-departmental exchange of information is ensured. Additionally, the hierarchical and functional composition of the SCRM team must be considered.

In general, it must be ensured for the implementation process that the team members are motivated and have available capacity (working hours) so that the employees involved do not see the implementation of an SCRM system as an additional workload.

Furthermore, an SCRM team leader should be appointed to coordinate the SCRM process, collect the necessary data or documents, and consolidate the results so that continuous processing of the SCRM is ensured. The associated shift of decision-making authority to the SCRM team is also critical to performance success. Management support for the SCRM is particularly critical here.

From an organizational perspective, a decision must be made at the start of implementation as to whether the SCRM should be integrated into the existing organization or whether a restructuring should be sought. It should be noted here that, particularly in the case of SMEs , integration into an existing department is seen as advantageous. In addition to an increase in the acceptance of SCRM-related measures by other employees, a better exchange of information from this step can be guaranteed.

Furthermore, regular supplier evaluations, especially for critical suppliers, (e.g. clustering by sales) should be integrated into the implementation process, accompanied by complete documentation on aspects such as error rates, special approvals, delays, etc. A continuous exchange of information with suppliers (e.g., via forecasts or ERP system) helps to identify possible failure risks at an early stage.

In terms of technological implementation, the SCRM process should be supported by an easy-to-use IT system; however, isolated solutions should be avoided here. Access to the same data sources by different departments, such as sales and purchasing, also promotes an exchange of information. Associated reporting is also critical for SCRM success. The frequency of reporting, the volume of reports, and the specified group can promote or hinder the SCRM process.

Excerpt from Kersten, W.; Feser, M.; Schröder, M. (2013): Situationsadäquate Implementierung eines Supply Chain Risk Managements, Bundesvereinigung Logistik e.V. (BVL) – Schlussbericht des geförderten Vorhabens 17234N.

MBP 16/16 Measures and Best Practices on “Risk Reporting and Reporting”

“This reporting is a single component of the existing quarterly reports.” (Interview – Corporate Risk Manager, pharmaceutical industry)

Documentation is another success factor for SCRM. As such, risk reports and reporting have a significant importance.

In the numerous expert interviews and focus groups with company representatives and scientists for the development of the maturation model, the following measures were identified:

  • Ensure reporting at regular intervals.
  • Define the future recipients as well as the scope of the reporting. In addition to mid-level management, the risk report should also be sent to all relevant department heads who are involved in SCRM.
  •  
  • Define a process for distributing interim reports: for example, which SCRM measures should be taken for unforeseen supply chain risks that are characterized by a high degree of potential damage.
  • To a large extent try to automate data aggregation for reporting.
  • If possible, integrate reporting into the existing reporting system (e.g., quarterly reports).
  • The report should include illustrations, brief explanations, and recommendations for action.
  • In addition to the development of the key risk figures, include recommendations for action together with a trend analysis in the report.

Extract from Schröder, M. (2019): Structured improvement of supply chain risk management. In: Supply Chain Management – Contributions to Procurement and Logistics, Series-Editors: Essig, M.; Stölzle, W., Kersten, W., Springer Gabler: Wiesbaden

MBP 14/16 Measures and best practices on “Documentation of Supply Chain Risks and the Measures Taken”

“Getting documentation signed creates a bond.” (Interview – Head of Risk Management, Wind Energy Industry)

Documentation is another success factor for SCRM. This involves documenting the supply chain risks (for example, using key figures) associated with these SCRM measures which have been taken.

In the numerous expert interviews and focus groups with company representatives and scientists for the development of the maturation model, the following measures were identified:

  • In the event of a supply chain interruption, keep a detailed report of what happens and analyze it to find the sources of the interruption–possibly with the aide of an FMEA (Failure Mode and Effects Analysis)
  • Ensure a cohesive/consistent story for relevant control data.
  • The documentation of supply chain risks and the SCRM measures taken should be well-structured (definition of content, data origin, frequency, responsibilities, and so on).
  • Ensure that the documentation of the SCRM measures is audit-compliant (i.e., permission to document rights are established, changes are traceable, etc.).
  • The documentation should be created using a special software solution that is linked to all relevant systems in the company (information systems for supply chain risk management, ERP, etc.).

Extract from Schröder, M. (2019): Structured improvement of supply chain risk management. In: Supply Chain Management – Contributions to Procurement and Logistics, Series-Editor: Essig, M.; Stölzle, W., Kersten, W., Springer Gabler: Wiesbaden

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