Auditing the Supply Chain

Highlights

The supply chain audit is now a vital business process. Understanding the supply chain helps companies significantly enhance their risk management approach, reduces the risk of disruption and can confer a major competitive advantage.

Competitive advantage is key — the supply chain audit isn't simply a defensive strategy designed to mitigate the chances of external developments impacting the viability of a business or product range; the organisation that has a detailed understanding of the supply chain can then act upon the insights of this understanding, creating a significant opportunity to increase market share and possibly seize new business opportunities. Understanding the supply chain is mission-critical — it is time to understand more.

Changing the Supply Chain

The supply chain is complex: its interweaving parts are many, and it is not always easy to identify all the companies operating in a supply chain — the supplier, to a supplier to a supplier.

The supply chain is analogous to an ecosystem, and it is not always viable to change a significant number of suppliers in a short time frame. Furthermore, when considering the supply chain, competitors can also be partners — creating the concept of coopetition.

For one thing, economies of scale are such that one particular supplier may only be able to continue to operate if it sells its goods and services to multiple vendors. A particular vendor could outcompete other vendors, only to find that its cost of supply increases, while an individual supplier loses out on economies of scale, as the number of its customers decrease.

Whilst creating agility in the supply chain is important; there are limitations to the extent of this agility. This is why a detailed understanding of the supply chain is vital and why it requires a degree of resilience built into it. Resilience in the supply chain means that, as circumstances change, a company's existing supply chain is sufficiently robust to remain operational; and can be tweaked to cope with the change, rather than require a comprehensive overhaul.