In this article, we will take a look at what a management audit of logistics operations should involve. We will point out what needs to be covered and what the auditors should be looking for. A management audit should look at the logistics operations in an objective way to identify issues to be remedied but also positives to be adopted further.
Whenever a logistics audit takes place it should be undertaken by a group that can perform a constructive critique and therefore promotes a logistics audit in a positive light aimed at making improvements to the running of the business. An audit should not be a focus on any one individual nor should it be used as a tool to seek out scapegoats or pass blame.
A logistics audit is an analysis of some or all parts of an organisation from within. This could be its operations, finances or a smaller element or process that's conducted as part of its activities. An audit should always be carried out by someone outside of a particular department who can take an objective view without being directly affected by its findings.
In order for a logistics audit to be successful, reports and data must be made available by the department and passed to the auditors for close scrutiny. Auditors should also speak to any person involved in the activities to discuss methods, safety measures or issues that they can identify.
An auditor must be mindful of the possibility that there may be instances or findings which are outside of the immediate audit priority checklist. This may occur during the observation of any ongoing processors. When this is the case it should only be fed back to management and not pointed out during the audit to the individuals involved in the process.
An audit team can include any personnel from the organisation and the members should be selected from different areas of the business. This might include factory employees, accounts, or salespeople but all staff can be considered and it is more effective to include people with different skill sets and areas of expertise.
How is an audit conducted?
When performing the logistics audit certain standards should be met with regards to the approach is taken and the level of detail required. All findings of the logistics audit should be identified and recorded in an audit report. By doing this not only can audits be referred back to in the future but it also serves to simplify and communicate the findings without risk of omission.
Any department to be audited should prepare all the relevant reports or paperwork to be inspected. These might include areas such as schedules, procedures, performance, or equipment maintenance reports. Auditors would start their analysis by establishing an understanding of the department's activities and consider outside factors impacting how the department operates. This could relate to its connection to other departments but also any economical restrictions which may manifest themselves in the work carried out.
Each audit team is issued with a form that identifies all the specific areas to be checked. The auditors then identify and assess any risks which could have a significant impact on either safety or financial areas which could need updating in the future. As well as checking these specific items the audit should also cover any internal controls that the organisation has put in place to mitigate those risks. These measures which have been outlined are based on previous audits and the feedback discussed at the monthly audit meetings.
Any organisation could have dozens of audits being conducted on a regular basis with a view that no single one should happen less than on at least an annual basis. The audit team could also take their place for the period of at least one year at which point they can be reviewed and if appropriate new audit members can be assigned. Once auditors have completed their work, they will write the audit report explaining what they have done and giving an opinion drawn from their work. Generally, an audit should be performed at least every year and reference should be made to prior audits to ascertain whether previous measures have been implemented.
Designing an effective management audit of logistics operations.
When we talk about conducting an audit of our logistics operations, what goals do we have in mind and what are we trying to achieve? Logistics is no longer a small part player in the overall business strategy of most organisations. It has become a central pillar in the success of many manufacturing and retail enterprises. Logistics can mean the difference between either having an advantage or trailing behind when assessing your competitor's operational performance. Logistics in the 21st century must be part of a business's overall strategy and be subject to a program of continual assessment and renewal.
In order to leverage the most out of a business's logistics operations, management must be committed to possible future system redesigns and the maintenance of successful procedures. One incredibly important task is the formulation of a logistics audit to ensure continual focus is placed on the logistics functions importance in the context of the business strategy. In formulating the management audit of our logistics operations we must ask ourselves some important questions relating to our competitors, our customer service, the sales channels we access, and very importantly our costs.
An important aspect to establish in formulating your logistics strategy audit is establishing where you are in your logistics development. Your logistics networks may be complicated and extremely well developed but that won’t have been the case when you first set out. A well-developed logistics network may include a large number of sales channels-oriented distribution centers. This helps to reduce costs for smaller deliveries when compared to situations where orders are shipped directly from a single location. These location factors are just one of many elements to be scrutinised during a management audit of your logistics operations.
How do these distribution networks impact customer service and the related costs and how do they compare to your competitors? In a previous article, we discussed the concept of differentiation where different product lines utilise different logistics strategies. Are your current logistics networks working efficiently for all your SKUs or are there opportunities available when shipping higher-priced items?
Gaining advantage through management audit observations
With the huge growth of e-commerce and the massive increase in individual orders, it may be that reverting back to shipping directly from a local production plant could now offer benefits that didn’t exist before. Maybe to make this possible smaller vehicles or van loads are a larger part of an organisations distribution strategy. One key point of interest in the management audit of logistics operations is the location of the manufacturing plants or production facilities. If these locations only serve to hamper the logistics operations and the audit can show evidence of this then consideration must be given to relocation.
The relocation of a facility is never at the top of anyone's list in terms of system modifications. If however it can be shown that the disruption and expense can be easily compensated for from economic savings then it should be considered a viable priority. A detailed analysis of the benefits of a focused logistics audit will require the examination of costs that extend throughout the whole operation. Each stage of the logistics process may require different policies with regards to manufacturing, distribution or transportation. If the management audit of the logistics operations can identify where changes are required then any organisation can expect a more profitable outcome.
