Procurement like Apple: How to audit suppliers effectively
When it comes to auditing suppliers, Apple has certainly learned its lesson. A few years back, the electronics company made headlines for all the wrong reasons, exposing misconduct at some of its suppliers. Since then, Apple has stepped up its auditing efforts and publishes annual Supplier Responsibility reports.
According to its latest report, out of the 633 supplier audits carried out in 2014, 40 were unannounced on-site inspections.
While many procurement professionals can only dream of the resources Apple spends on auditing its suppliers each year, there are still a few important lessons that can be drawn from its approach that can help you audit suppliers more efficiently. Here are some key tips:
1. Make your standards clear
Apple does this by requiring all suppliers to agree to their Supplier Code of Conduct and Supplier Responsibility Standards. It contains rules labour and human rights, health and safety, environment, management systems and ethics.
Communicating clear guidelines in advance of your audit ensures a smooth auditing process and fair treatment of all suppliers, which will help develop sustainable supplier relationships.
2. Determine risk and devise contingency plans
Of course, Apple makes sure that any supplier taken on is being risk-assessed. But during an audit, businesses should also aim to identify the level of risk involved and work out potential solutions to particular stumbling blocks.
In case one of your suppliers cannot provide their service by the agreed date, you need to have contingency plans in place to quickly address these kinds of issues.
3. Follow it up
All good suppliers should adhere to regulations regardless, but it is important that companies check that it is the case and that any non-compliant areas are addressed.
Often, audits are a waste of your company’s and the suppliers time and resources simply because recommendations made after an audit are not being followed up and reinforced consequently enough.
If Apple finds any violations during an audit such as under age workers being used, document falsification, intimidation of or retaliation against workers participating in audits and significant environmental concerns, the supplier is placed on probation until they successfully pass another audit. The probation means close monitoring - if the supplier shows no commitment to implement the necessary changes, the relationship is ended.
If suppliers are breaking law with their practices, project managers should be made aware of this immediately, or the company could face not just reputational damage, but also legal action. As part of your background checks on suppliers, you should make an effort to ensure they are accredited by any bodies in their specific field.
4. Consider using an audit management system
For companies based across a number of different locations such as Apple, an automated audit management system may be particularly helpful. It can help to support organisation structures by introducing multiple product lines, locations and departments. All of this data can then be linked to the supplier in order to boost efficiency and increase the chances of deadlines being hit first time around.
The end result: Better performance!
By following these tips and best practice examples from Apple, procurement managers who are concerned over their procurement planning can begin to relax, safe in the knowledge that they are collecting their necessary materials in the most time-efficient and cost-effective ways possible.
At a time when many businesses are still struggling with their finances, procurement efficiency is even more important and thorough auditing processes can pave the way for future growth and higher profits.