Supply Chain Management Review

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A company should conduct a thorough, in-depth review or audit of its supply chain strategy on an annual basis. The supply chain controls the purchase of the company’s raw materials or purchased product. The department oversees up to 100% of an organization’s material purchases. The supply chain function has a large impact on a company’s effective and profitable operation. The supply chain management review needs to encompass functional and operational areas of the supply chain.

The functional audit includes a review of personnel, systems, internal and external relationships, in addition to change. Management needs to verify that they have the right personnel in place to execute the supply chain strategy. Key employees have to be as driven and focused after being in the job one year as they were in the first year.
A company’s computer infrastructure is audited to assure that the technology in place can maintain pace with any innovations introduced in the industry. Employees’ computer usage should be scrutinized to ascertain whether or not the systems are being utilized correctly.
Internal relationships are measured to develop an understanding of how employees work together toward a common goal. For a company to maximize a supply chain strategy, employees must work well together. External relationships need to be sound for the supply chain team to receive useful supplier or transport input.

A company’s supply chain is an evolving operating methodology. As best practices are identified and acceptable suggestions are received, the processes of the supply chain need to be modified. Any change should be identifiable with supporting documents to reflect the improvements. The audit verifies that changes are being implemented. Ongoing change, albeit minor, is part of the supply chain strategy for without change the program becomes routine and stagnates.
The operational review looks at location, operations, paper flow and performance evaluations. Each of these segments should tell management a story about the company’s performance. The effect each category has on an organization’s ability to operate and the costs associated with each area need to be viewed with a critical eye.

The company’s location(s) should be studied to assure that the company is in an advantageous location. Are support services readily available? The audit team should look raw materials, finished products, carriers, availability of labor and governmental jurisdictions.

Operations are studied to observe the flow of product from ordering of materials and supplies through their internal use and/or distribution to customers. Is inventory optimized? Are personnel being utilized properly? Are there processes the company should automate?

The late Peter Drucker, business guru and college professor, wrote that a company travels on paper. The company’s flow of information and paper are reviewed to determine that there is an orderly progression throughout the organization. Managers depend on information and might request reports to provide the needed information. The supply chain management review looks at all reports to eliminate unneeded reports or redundant work.

The ability of the company to accomplish their overall job function is reviewed. The accuracy of order placement, receipt, and shipments are analyzed. Inventory turns, warehouse usage, and employee turnover are investigated. Length of time to load and offload trucks is studied.

The annual supply chain management review has to be all-inclusive and absolute. A supply chain strategy requires conscientious audits with the intent being to strengthen every conceivable area of the business.