Are supplier audits back in fashion?

18 April 2013
Supplier failures have a habit of catching their customers unprepared and making the wrong type of headlines. When I wrote in January that sustainability would be a theme for procurement in 2013, little did I imagine it would be the European meat trade that would be providing the headlines. The disturbing news stories of contaminated meat being found in products across Europe underlines the importance of a robust supplier quality programme that goes beyond your first tier suppliers.  Starting my career in the aerospace sector meant supplier audits were an early part of my procurement education, and testing and certifying raw materials both on dispatch and receipt was standard practice. More recently in the cosmetics industry, I saw a trend away from in-house testing by the quality department to “certificates of analysis” provided by suppliers in line with EU standards. So are we returning to a world where companies have to rely less on industry standards and carry out their own audit programmes? Apple would suggest that this is the case. Their 2013 Supplier Responsibility Report published in January showed the considerable progress they have made through their approach of auditing suppliers in tandem with an outside watchdog organisation. This is backed up by their decision to join the Fair Labor Association. Apple conducted 72 per cent more audits in 2012 than it did in 2011, totalling 393 audits across facilities employing 1.5 million workers. These audits also resulted in more severe punitive action than usual. One particular supplier fell foul of Apple’s measure to protect against underage labour, with the company terminating the relationship with the offending party, proving there are real consequences for non-compliance. How should the procurement leader of 2013 approach this challenging topic? Any approach should be based upon a solid risk model to ensure resources are targeted in the most appropriate way. A robust supplier audit process can then be established, made up of both planned and “surprise” visits to ensure suppliers are reviewed in line with their risk profile. It may also be appropriate to work with some sort of industry-wide accreditation system allowing everyone to share the cost and benefits of such an approach. For those areas that are really too crucial to get wrong, it is worth considering more fundamental changes to the relationship from a true partnership to vertical integration. ☛ Tom Woodham is director of Crimson & Co
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