How does Supplier Audit help in Managing Organization Risk?

by Procurement Freelancers Team
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Imagine where your brand reputation would stand if your customers discovered ethical violations at your factory services. They would probably boycott your products and services. This is exactly what happens when your organization does not have a reliable and professional auditor on the ground to carry out a quality audit of the products outsourced to the supplier. A slight negligence in the prior assessment of the supplier capabilities could pose a potential risk to the existence of your company.

As a purchaser, you are likely to be embedded with a great deal of pressure of supplying the best-quality goods where you cannot afford to sacrifice the quality at all. And, the key to source in superior quality products lies in understanding how your suppliers initiate and complete their tasks. The collection of detailed and exact data about the supplier performance and the quality of workmanship they acquire requires the purchasing manager to take an on-site tour of the supplier organization itself. Most of the time, it becomes difficult to evaluate the supplier, specifically when one is located half the world around. Relying on an unfailing and trustworthy third-party quality supplier auditor can perform the auditing task on behalf of a purchasing manager.

If you are still perplexed if you should hire a quality auditor, read through the context and understand how a potentially conducted audit can save the fate of your organization from the supplier risks.

Disorganization caused due to shipment delays

Practically and virtually, all customers are worried about the delivery dates. Even if it is your supplier who initiated the delay in shipping the products, your customers will still, likely blame it all upon you.

Shipment delays can directly impact the reputation of your organization. A slight delay in the delivery of products could cause your business partners to end the relationship with you and look for an alternative and a more trustworthy vendor. The worst that could happen to you is you might not get the full payment for your products as your customers can charge you back for a delay in the delivery time. Therefore, it is better to assess the supplier’s performance before signing the contract with them and ensuring they are as strict with their delivery dates as you are with your word.

This is where a quality supplier auditor comes into play. A professional auditor will conduct a thorough assessment of the supplier’s performance and identify if there is any fault in the factory management procedures at the supplier’s place. He will make sure there are no missing product reports or un-kept production deadlines and vital machinery. He will personally take a walkthrough to check the internal conditions of the factory and other departments to make sure they meet deadlines and save your organization’s reputation.

Read: Major Reasons for Quality Audit Failure

Unverified suppliers could put you at financial risks

Financial and legal issues are likely to go side by side. You never know if your supplier is legally verified just by sitting at your comfort and relying on their overpromised conversations. Working with such illegal organizations can present your company with several legal as well as financial issues, causing you to lose a considerable portion of your bank balance. You can contact a supplier auditor to deal with such issues.

A lot of risks come your way when you deal with overseas production. You could transfer a huge amount to a scammer’s account and later come to know from your supplier that they never received it or you could send the money to an alleged organization that does not have any existence.

When you hire a potential auditor, you can be sure you won’t have to face financial issues. The auditor will conduct thorough reviews on the financial record of the supplier you are working with, ask for their bank details and monitor the current production of the supplier. In this way, you will get an idea of the overall financial health of the supplier organization with the help of a supplier auditor so that you can trust them with your money.

Poor legal position of the vendor’s operation

You never know if your supplier relates to some illegal practices. This can highly be hazardous for your organization. Moreover, illicit practices could pose a risk to the image of your brand. Working on a collaboration with an organization that has overpromised fake things and has illegal connections, can have the following effects on your company:

  • The factory of the vendors could have a sudden shutdown due to legal issues.
  • Customers could boycott your organization as they bought products that are unethically sourced.
  • Government agents could confiscate the goods you bought from illegal suppliers.
  • Your stocks may get refused by the retailers.

Quality auditors can visit the supplier on-site and talk to them personally about their existence in society and ask for legal documentation as well. They can even check the business and legal licenses of the suppliers to make sure they belong to a legally verified agency.

These are the ways supplier auditors can help save your organization’s reputation.

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