Managing the Audit of Off Shore Suppliers

Introduction

Quality, cost, and delivery of product in time are the requirements of every organization. It is the quality of the product and service that wins the customer. Large multi-national companies are very particular in maintaining the quality of their product to have high order of customer satisfaction. This way they are able to keep up their brand name and get customer loyalty. Multi-national or global companies have their product market in very vast areas spread over in many countries. Audit is very important to ensure that the customer get what he wants and for what he is paying. These companies do not manufacture everything themselves and depend upon their suppliers spread over all over the world. Developments in the present day supply chain has enabled these firms to get the quality materials and services from any part of the world.

Why audit?

Audit means to check and ensure that the product, process and practices are in accordance to standards, specifications and regulations. Audit plays an important role in ensuring quality products from the offshore suppliers. It helps in ensuring that the suppliers or sub-suppliers of these multi-national companies produce good quality of products to avoid any rejection of the product at destination and its return to the supplier. This would be possible only by making the processes in perfect conditions and ensuring that the suppliers are adhering to the quality standards and statutory standards. Audit at every stage is of importance and therefore all the good suppliers follow stage-inspection as well as final inspection before they deliver their products to their purchasers. The world class companies like General Motors, Apple, Wall Mart, GEC, Google etc.  have realized that audit is essential to maintain their image in the market place. By the word audit they make sure that their suppliers are purchasing materials of the right quality, manufacturing the products using the right processes, have strict quality control systems to ensure that nothing should pass unless all the standards and regulations are complied with.

Problems with the suppliers and sub-suppliers

It is not easy to find if the offshore suppliers are following the standards and regulatory norms. They may be violating the wage norms, employee’s benefits, working hour norms, excessive overtime, and employment of child labor prohibited by law, violating factory laws, safety norms, environmental regulations, weights and measurement regulations. They may also be indulging in many unethical and wrong business practices. For example, petrol pumps may be adding spurious materials altering the quality of the petrol. Food products are often mixed with cheap materials which are very harmful to the health. There are many food poisoning cases when some of the items of food are mixed with spurious materials. Ice cream is often mixed with some other materials to make it tasty and reduce the cost. Some of the suppliers violate the regulations of weights and measurements. Many plants set the weigh bridges and packing machines in such a way that the actual weight of the product packed is less than the weight recorded by the machine. Inspectors have to calibrate such weigh bridges and packing machines to stop such wrong doing. It is a common practice in some of the plants polluting dust to stop the pollution control equipment during night shift to save on power consumption. Some of the polluting plants even stop the production during the visit of the environmental inspectors so that the actual level of pollution is not caught, which would have attracted heavy penalties. Many of the chemical factories are disposing their pollutants in the rivers thus creating health hazards to the population living in the area. It is also observed that when auditors reach to an establishments for auditing they are not allowed to audit the premises or the departments and their time is either wasted in unnecessary discussions, visits by longer routes, diverting them to lunch and tea or taking them to senior officers of the company with a purpose to waste the time and leaving very little time for actual audit.

Types of audit

There can be many types of audits which may include technical audit, safety audit, energy audit, environmental audit, maintenance audit, audit by factory inspector, audit by inspectors of weights and measurements, and food department’s inspectors. All these are essential for maintain the quality, adhering to norms, standards and regulations. The audit is not easy especially in cases of offshore suppliers who are located far off and are spread over a very vast area.

Solution

The problem of audit of offshore suppliers and sub-suppliers can be solved by outsourcing the function to some reliable auditors who are known for their competencies, credibility, honesty and knowledge. The inspector should be able to withstand any pressure and should not be lured by any bribe. There are many reputed auditors like Price Water Cooper (PWC), SGS, Lloyd and many others who can be tapped for collaborative auditing. While selecting an auditor it is essential to ensure that the audit firm have inspectors who know the local language, are experienced and trained properly. The number of inspectors and level of the auditors should be according to the size of the company to be audited.


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