Supplier Audits Research Articles

A data-driven decision support system for sustainable supplier evaluation in the Industry 5.0 era: A case study for medical equipment manufacturing

Effective supplier management is critical for an enterprise’s success, as supplier procurement accounts for up to approximately 70% to 80% of total manufacturing costs. Correct supplier selection can ensure the competitiveness of the enterprise and contribute to supply chain integration and innovation. In recent years, supplier evaluation frameworks based on Industry 4.0 concepts have contributed to the development of the industry. However, the novel concepts of Industry 5.0 require examination from a people-oriented and sustainable perspective. Unfortunately, at the present time, supplier evaluation frameworks based on Industry 5.0 are lacking. Therefore, the primary task of this study is to develop a novel and comprehensive supplier evaluation framework for the Industry 5.0 era. This study proposes a data-driven decision support system to execute the supplier evaluation process. First, variable precision- dominance-based rough set approach (VC-DRSA) is applied to extract the core criteria, to remove the noise factors and to generate decision rules for the decision-makers’ reference. Second, the criterion importance through intercriteria correlation (CRITIC) approach is adopted to obtain the dependency weights of the core criteria and their ranking. Finally, a modified classifiable technique for order preference by similarity to ideal solution (CTOPSIS) is used to integrate the final performance values of suppliers when new alternative suppliers are added. The research concept is in line with the conception of data-driven decision support in business intelligence and does not rely on the subjective judgments and opinions of experts. Data provided by a multinational medical equipment manufacturer are used as an example to demonstrate the proposed model. VC-DRSA retains nine core criteria from the original twenty criteria, which greatly reduces the labor and cost of supplier audits. In addition, the CRITIC results show that digital transformation, real-time information sharing, and organizational culture transformation are the three main factors affecting the development of enterprises towards Industry 5.0. The results show that CTOPSIS can be used to quickly assess the ratings of new alternative suppliers are listed.

ПРАКТИКА УСПЕШНОГО ПРОВЕДЕНИЯ АУДИТА ПОСТАВЩИКОВ С УЧЕТОМ РИСК-ОРИЕНТИРОВАННОГО ПОДХОДА

Building long-term relations with the supplier is one of the key elements in ensuring the high quality of products and the key to the further success of the enterprise. The time of manufacture and the quality of products depend on the work of suppliers. GOST R ISO 9001 - 2015 in No. 8.4 «Management of externally supplied processes, products and services» indicates that any organization regardless of the type of activity or size should define and apply criteria for evaluating, selecting, monitoring and reassessing external suppliers based on their ability to perform processes or deliver products and services as required» [1]. In order to comply fully with paragraph 8.4, the heads of organizations need to pay considerable attention to:  development and implementation of a documented vendor evaluation procedure;  developing, implementing and conducting ongoing supplier audits;  optimization of the time and material input control procedure. These activities allow:  to ensure stability of supply of raw materials, materials and components;  ensure the quality of the products purchased;  optimize input control (by improving the quality of delivered products by the supplier, increasing trust, transparency and openness in working with the supplier, ensuring timely delivery) and, as a consequence, minimize costs at this stage of the process;  to organize a system of traceability of products, raw materials and materials supplied by the supplier;  exchange information and work experience to develop new design solutions;  identify and minimize potentially hazardous risks by working together to address them;  maintain up-to-date information on the supplier, its business activities, management for management decision-making. In this study data obtained during the in-person audits from suppliers of raw materials and components for the enterprise - manufacturer of control and measuring devices and automatics CJSC «Electronic and mechanical measuring systems» were used. (Chelyabinsk Region). The study achieved the following objectives:  assessment of the established external environment as extremely complex and unfavourable from the point of view of geopolitical and economic factors, characterized by multiple increase of various risks (technical, production, financial, innovative, etc.);  the advantages and disadvantages of the remote audit of the supplier have been identified;  the necessity of conducting a full-time audit of suppliers in modern conditions has been substantiated;  the use of the Deming-Shuhart cycle has been proposed, taking into account the risk-oriented approach when planning the audit of suppliers. The key result of the work is the developed author’s method of conducting in-person audits of suppliers in complex conditions of polycrisis, which has proven its effectiveness for three years.

Examining the Impact of Leniency Bias on Supplier Audits

Examining the Impact of Leniency Bias on Supplier Audits

EVALUATION, MONITORING AND AUDITING OF SUPPLIERS IN SUPPLY CHAIN MANAGEMENT

In the global market, the supply chain performances have a significant impact on the company’s business strategy. The quality requirements that must be followed by suppliers require permanent monitoring of processes of design, development, production, installation and service of products through audits qualified based on supply chain management. This paper presents an analysis of the supplier qualification process including the main phases as follows: evaluation, monitoring and auditing of suppliers in supply chain management. Internal quality audits and/or suppliers are one of the key instruments for ensuring sustainability and performance in supply chain management. Auditing of suppliers is a core component of the modern management of suppliers, with the help of which the customer can analyze precisely relevant processes to existing or potential suppliers. Supplier audits help both commercial partners to increase the transparency of the supply chain and also simplify supplier selection, evaluation, monitoring and development. The suppliers must meet the highest quality standards for products and processes. The main purpose of this paper is to give a general view of the supplier qualification process which involves the steps from initial identification until the inclusion of the supplier in the Approved Supplier List (LST). This list should be managed in such way that a complete traceability is assured. Following the proposed qualification diagram the customer can obtain an image about the status of one supplier, can also identify the weak points considering the evaluation, monitoring and audit class.

Exploring the role of industry 4.0 in enhancing supplier audit authenticity, efficacy, and cost effectiveness

Supplier audits are frequently criticized for lacking authenticity and objectivity. Technology-enhanced audits (TEA) offer a potential solution to supplier audit problems by enabling enhanced analytical, visualization, modeling, and predictive capabilities. This paper explores the potential of Industry 4.0 practices in enhancing supplier audit authenticity and efficacy, as well as reducing supplier monitoring costs. The application of Industry 4.0 in supplier auditing is still in its infancy. Therefore, this paper adopts an exploratory approach building on an extensive review of the literature. The paper builds upon an inductive-deductive approach to explore how the individual technologies underlying Industry 4.0 can be leveraged to enhance supplier audits. Based on insights from the literature, the paper develops propositions outlining the role of Industry 4.0 in supplier audit authenticity, efficacy, and cost-effectiveness. The paper builds arguments against the backdrop of traditional audits' limitations and illustrates how TEA can overcome many of these limitations. TEA can enhance the authenticity and efficacy of supplier audits, while also reducing supplier monitoring costs. TEA are most effective in an Industry 4.0 environment where the use of technologies is supported with governance structures. The application of Industry 4.0 can make supplier audits more transparent and value-adding, benefiting both the buyer and supplier. The theoretical and practical implications of the findings are explored. Suppliers can leverage TEA to create opportunities for strategic differentiation, enhance transparency and trust, and stand out from those who view audits solely as a cost. Buyers can use TEA to enhance audit efficacy, enhance insights into supplier operations, cut monitoring costs, and improve their competitiveness. TEA is a new generation of supplier auditing that has the potential to bring fundamental changes to current auditing models and make audits genuine, authentic, prospective, and insightful while building on Industry 4.0 principles.

Supplier audits during COVID-19: a process perspective on their transformation and implications for the future

PurposeAudits are an essential part of supply chain management, whether they be of a single supplier's facilities or the whole supply chain. Before the COVID-19 pandemic, auditors mainly conducted supplier audits in-person and on-site. Subsequent travel restrictions have meant that auditors have had to perform these audits remotely. The purpose of this paper is to conceptually describe the emerging phenomenon of remote audits and explore the implications of this change for the future.Design/methodology/approachThis exploratory research used qualitative interviews with key stakeholders (firms, auditors and regulators) to provide an empirical basis for the study. A total of 60 interviews were conducted in two rounds with 40 respondents from 26 organizations. A process perspective lens was used to explore the fundamental changes in supplier audits.FindingsThe study provides an interpretative conceptual framework of remote supplier audits grounded in key factors (audit process, use of technologies, document and record sharing) and identifies a set of contingency factors (technological sophistication, reputation for integrity, maturity of internal audit processes, and level of complexities and risk involved) that affect the effectiveness of remote audits.Originality/valueRemote supplier audits have radically changed how supply chains operate. This paper presents the first empirically-grounded study on remote auditing. It provides a springboard for future research in this domain and practical implications for managers to assist them with the development of remote auditing in their firms and supply chains.

Additive manufacturing supplier risk mitigation

The NASA Jet Propulsion Laboratory (JPL) has established a quality assurance framework to mitigate additive manufacturing (AM) supplier risk. AM has expanded applications in almost every industry by offering a reduction in weight, lead time and likely cost; however, due to the rapid expansion of the AM industry, standards, requirements and procedures are not yet sufficient. This leads to a lack of consistent part qualification and variability in the supplier qualification process. To mitigate this, a cross-disciplined group authored a supplier quality requirements document for performing supplier audits and approvals. This requirements document has been a foundation for defining a quality framework, containing additional requirements and policies, to build AM parts for flight. This paper further explains JPL’s tactics and methodology in establishing that quality framework and requirements document.

Assurance of quality, safety and efficacy of vaccines through compliance of quality management processes

Vaccines develop the immune response against disease and are the intricate biological entities containing one or more than one antigen beside an adjuvant. In order to ensure that manufactured vaccines are safe, potent, and of consistent quality, four primary controls of bio safety namely: PPE; facility design; SOPs and leadership are required at every step of manufacture and quality control testing until the administration of vaccine to the target population. The safety and efficacy of testing methods are based upon the data validation of several years. With time the advancements in vaccine production techniques has brought about advancements in testing techniques as well. These improvements have enabled scientists to detect highly sensitive potential hazards which were a dream few years back. An increasing assemblage of physico-chemical methods permits much better characterization of the product. In addition to advance tests vaccine regulations necessitate quite a few numbers of strategies to ensure the safety and potency of the vaccine/serum. These measures include cell banking, seed lot system, supplier audits, master seed, compliance with good manufacturing practices, independent lot release from National Regulatory Authority and increased (pre and post) marketing surveillance to look for possible adverse effects following immunization (AEFI). Together all these methods ensure the quality of vaccine for the purpose it is manufactured against.

Behind the runway: Extending sustainability in luxury fashion supply chains

From a resource-based view, this paper investigates sustainability integration across multiple tiers in two Italian luxury supply chains producing fashion and leather footwear, a complex and fragmented industry sector that is highly dependent upon raw materials and a human skills base. Qualitative in-depth interview data were collected from senior industry informants within 10 businesses, spanning multiple supply chain tiers. Industry practices are systematically decomposed into product, process and supply chain levels to analyse supply chain sustainability. Findings reveal that product-level practices focused on raw materials more than design initiatives, with operational benefits of cost reduction and market benefits of consumer value-add. Process-level practices in water and energy reduction were motivated by cost reduction benefits more than environmental concerns. At supply chain level, traceability projects and supplier audits were limited by a lack of end-to-end supply chain visibility, despite the criticality of raw materials and evidence of close and long-term trading relationships. Supply chain transparency and supplier engagement are critical areas for development. Both technical and relational resources must be developed across supply networks. Current practices are geared towards reducing negative impacts associated with current operations, falling short of the radical strategies needed to address root causes and embrace sustainability at large.

Horizontal collaboration in response to modern slavery legislation

PurposeThe purpose of this paper is to investigate how horizontal collaboration aids organisations in responding to modern slavery legislation and in gaining a socially sustainable competitive advantage.Design/methodology/approachAction research has been conducted in the textiles and fashion industry and a relational perspective adopted to interpret five collaborative initiatives taken to tackle modern slavery (e.g. joint training and supplier audits). The primary engagement has been with a multi-billion pound turnover company and its collaborations with 35 brands/retailers. A non-government organisation and a trade body have also participated.FindingsSuccessful horizontal collaboration is dependent on both relational capital and effective (formal and informal) governance mechanisms. In collaborating, firms have generated relational rents and reduced costs creating a socially sustainable competitive advantage, as suggested by the relational perspective. Yet, limits to horizontal collaboration also exist.Research limitations/implicationsThe focus is on one industry only, hence there is scope to extend the study to other industries or forms of collaboration taking place across industries.Practical implicationsSuccessful horizontal collaborative relationships rely on actors having a similar mindset and being able to decouple the commercial and sustainability agendas, especially when direct competitors are involved. Further, working with non-business actors can facilitate collaboration and provide knowledge and resources important for overcoming the uncertainty that is manifest when responding to new legislation.Social implicationsSocial sustainability improvements aim to enhance ethical trade and benefit vulnerable workers.Originality/valuePrior literature has focussed on vertical collaboration with few prior studies of horizontal collaboration, particularly in a socially sustainable supply chain context. Moreover, there has been limited research into modern slavery from a supply chain perspective. Both successful and unsuccessful initiatives are studied, providing insights into (in)effective collaboration.

Ethics in the Supply Chain: Follow-Up Processes to Audit Results

Ethics and sustainability audits are a common practice to evaluate the social and environmental performance of vendors, but firms struggle with proper follow-up to the auditing results. In a supply chain workshop, business participants identified four challenges that relate to communication and collaboration among the actors of a supplier audit. The first challenge is managing information from the supply chain, the second is motivating suppliers to pay for audits and complete questionnaires, the third is responding to audit results uncovering ethical violations in the supply chain, and the fourth is increasing awareness for a responsible supply chain among buyers. Considering the marketing, supply chain, and ethics literature, this article explores the ethical issues of a supply chain that drive supplier audits and defines the actors of a supplier audit. Core marketing theories on interorganizational relationships guide a research agenda for responding to challenges in effective follow-up to supplier audits.

Monitoring global supply chains

Research summary: Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers' conduct. But little is known about what influences auditors' ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains. Managerial summary: Firms reliant on supply chains to manufacture their goods risk reputational harm if the working conditions in those factories are revealed to be dangerous, illegal, or otherwise problematic. While firms are increasingly relying on private-sector “social auditors” to assess factory conditions, little has been known about the accuracy of those assessments. We analyzed nearly 17,000 code-of-conduct audits conducted at nearly 6,000 suppliers around the world. We found that audits yield fewer violations when the audit team has been at that particular supplier before, when audit teams are less experienced or less trained, when audit teams are all male, and when the audits were paid for by the supplier instead of by the buyer. We describe implications for firms relying on social auditors and for auditing firms. Copyright © 2015 John Wiley & Sons, Ltd.

The Micro-level Foundations and Dynamics of Political Corporate Social Responsibility: Hegemony and Passive Revolution through Civil Society

Exploration of the political roles firms play in society is a flourishing stream within corporate social responsibility (CSR) research. However, few empirical studies have examined multiple levels of political CSR at the same time from a critical perspective. We explore both how the motivations of managers and internal organizational practices affect a company’s choice between competing CSR approaches, and how the different CSR programs of corporate and civil society actors compete with each other. We present a qualitative interpretative case study of how a French children’s clothing retailer develops CSR practices in response to accusations of poor working conditions and child labor in its supply chain. The company’s CSR approach consists of superficial practices, such as supplier audits by a cooperative business-organized nongovernmental organization (NGO) and philanthropic activities, which enable managers to silence more radical alternative models defended by other NGOs, activists, and trade unions. By this approach, the core business model based on exploitative low-cost country sourcing remains intact through self-regulated CSR. Through the case study, we develop a framework of dynamism in competing CSR programs. We discuss the implications of our study for CSR researchers, company managers, and policy makers.

Optimisation of process audit plan for minimising vehicle launch risk using MILP

Suppliers play a critical role in the success of any organisation. A complex product such as an automobile often involves a large number of suppliers. The need for high supplier quality especially gets highlighted at the time when automobile manufacturers launch new vehicles. A new vehicle launch involves enormous coordination efforts among the original equipment manufacturer (OEM) and suppliers distributed across the globe. In such situations, supplier audits are used for minimising associated launch risk. However, allocating limited qualified engineers to supplier plants for an audit becomes a challenging task. This research proposes a mixed integer linear programming (MILP) model to allocate engineers to supplier plant locations and create an optimal audit schedule by incorporating the level of risk involved.

Complements or Substitutes? Private Codes, State Regulation and the Enforcement of Labour Standards in Global Supply Chains

AbstractRecent research on regulation and governance suggests that a mixture of public and private interventions is necessary to improve working conditions and environmental standards within global supply chains. Yet less attention has been directed to how these different forms of regulation interact in practice. The form of these interactions is investigated through a contextualized comparison of suppliers producing for Hewlett‐Packard, one of the world's leading global electronics firms. Using a unique dataset describing Hewlett‐Packard's supplier audits over time, coupled with qualitative fieldwork at a matched pair of suppliers in Mexico and the Czech Republic, this study shows how private and public regulation can interact in different ways — sometimes as complements; other times as substitutes — depending upon both the national contexts and the specific issues being addressed. Results from our analysis show that private interventions do not exist within a vacuum, but rather these efforts to enforce labour and environmental standards are affected by state and non‐governmental actors.

Critical factors for an effective business value chain

PurposeThe purpose of this paper is to identify critical factors for effective business value chains in the electrical and electronic industries. This knowledge can benefit private firms as well as their supplier management and customer fulfillment, and public agencies for relevant policy initiatives.Design/methodology/approachThe research methodology includes the survey development and the statistical analyses, especially the use of the Pearson correlation. Altogether, a total of 129 firms participated in this study, 97 companies from Hong Kong and 32 firms from Thailand. Included in this methodology are a pre‐test of a survey and follow‐up discussions with participating executives.FindingsAn effective business value chain essentially depends on good operational systems and management, and information and communication technology (ICT) linkages with both suppliers and customers. There are a total of five critical factors for effective business value chains. For example, an effective business value chain is influenced by how well production and delivery systems are managed. In addition, how well a manufacturer can manage its operation is influenced by customers with effective information and communication infrastructures.Practical implicationsThe five identified factors can be used as a checklist for planning and/or monitoring the effectiveness of a business value chain. The findings also helps develop a new initiative to be undertaken by Thailand's Department of Industrial Work when attempting to strengthen business value chains within various industrial clusters.Originality/valueThe findings underline the need to focus on data harmonization and to adapt ICT standards, such as Control Objectives for Information and related Technology COBIT and Projects in Controlled Environments PRINCE for data sharing and software development, to promote supplier audits when sustaining a business value chain.

ISO 14001 in environmental supply chain practices

This paper focuses on the role of ISO 14001 in environmental supply management practices in Swedish companies. It discusses the existing and potential role of ISO 14001 for three key operational tasks of environmental supply chain management: to communicate the requirements to the supplier, to motivate and enable the supplier, and to verify that the supplier follows the requirements. The study used three different research methods: interviews with environmental managers, focus group discussions and a survey of two multinational companies and their operating units in several countries. It concludes that cooperation between the purchasing and environmental functions within a company is frequently not sufficiently achieved in implementation of ISO 14001; this makes the communication of customer requirements to suppliers less efficient. Building close relationships with suppliers is important to overcome initial difficulties, but this often conflicts with having a large supplier base. For the supplier to have an ISO 14001 certificate is seldom an absolute requirement, however, preference is often given to such suppliers. The value of the ISO 14001 certificate, as a proof of environmental performance, is a combination of the supplier's environmental ambitions, the advancement of supply chain practices of the customer and the ambitions of the certification bodies. Supplier audits are not commonly used as they are resource-consuming. Monitoring and verification approaches need further development.

The Role of Auditing in Buyer-Supplier Relations

Supply chain management has emerged as one of the more important topics in managerial accounting. The importance of information exchange between parties involved in supply chains has also been well documented. By addressing the value of audits in this setting, this theoretical paper serves to link two strains of accounting research: the managerial topic of supply chain effectiveness and the value of the audit function, in particular audits of the suppliers conducted by the buyers. We analyze the role of supplier audits with long-term, profit sharing contracts between the buyers and suppliers. Through a stylized model, we demonstrate that when random supplier audits are conducted, the buyer can effectively leave zero informational rents to the supplier, regardless of the supplier's cost type.

Accounting, purchasing and supply chain management

PurposeTo not only help with price quality and reliability and speed of delivery but also to enhance value analysis, make‐or‐buy analysis and supplier audits and certification. Planning may also be enhanced and assistance may be derived in maintaining ethical standards.Design/methodology/approachAn integration of the managerial accounting and purchasing functions is discussed and illustrated. It is hypothesized that synergy can be gained by the organization and related stakeholders.FindingsThe purchasing function in business organizations is becoming increasingly important, and synergies can be gain by integrating the purchasing and managerial accounting functions.Originality/valueBy integrating the purchasing and managerial accounting functions, costs can be reduced and quality can be increased.

Chondroitin Product Selection for the Glucosamine/Chondroitin Arthritis Intervention Trial

To select a high-quality chondroitin dosage form and/or an appropriate source of sodium chondroitin for the National Institutes of Health's Glucosamine/Chondroitin Arthritis Intervention Trial (GAIT). Controlled experimental trials. Laboratory. Not applicable. Commercially available chondroitin products were reviewed, and purified sodium chondroitin from two suppliers was evaluated through tests (infrared and near-infrared identification, moisture content, pH, optical rotation, color and clarity of aqueous solutions prepared from the powders, protein contamination, total residue following ignition and nitrogen content, determination of sodium chondroitin molecular weight, disaccharide analysis, and measurement of chondroitin, sodium, and total glycosaminoglycan content) and an onsite supplier audit. Purity, potency, and quality of sodium chondroitin powders. No commercially available chondroitin product was deemed appropriate for use in GAIT. Samples of sodium chondroitin powder from two suppliers exhibited similar disaccharide and glycosaminoglycan content. Each contained approximately 2% hyaluronic acid and 8%-9% unsulfated disaccharide. Potency was inconsistent across groups, which might have resulted from different analytical methods and choice of reference standard. Mean potency obtained by five separate methods ranged from 82.2% to 95.5% for one supplier, 92.5% to 110.1% for another, and 95.1% to 112.5% for a commercially obtained reference standard. Critical issues raised by the results include choice of reference standard, selection of assay method, and the consistent appearance of an unidentifiable contaminant present in all three lots from one supplier. This blinded study determined methods to identify acceptable agents and provided results, which, in addition to regulatory compliance supplier audits, formed the basis for chondroitin product selection in GAIT.