A logistics audit is a tool for the regular and systematic verification of logistics activities in terms of costs. Logistics costs often account for as much as 40 – 60% of the total product manufacturing costs. Correctly defining and then measuring total logistics costs paves the way for practical applications of the efficiency calculation of logistics support systems and the optimization of the trade-off calculation of logistics processes.
The ability to perform this type of economic calculation is the basis for shaping austere behaviors in a highly competitive market. All auditing activities within the scope of logistics cost accounting boil down to verifying the correctness of maintaining such accounts. It seems that the fundamental problem in the area of issues discussed is the problem of identifying logistics costs sensu stricto. The literature on the subject, as well as economic practice, point to very diverse and, unfortunately, not always substantively correct approaches to issues related to logistics cost accounting. The proper functioning of supply chains is a key issue for companies seeking a competitive advantage. Procurement is the area of economic activity that fundamentally affects the efficiency of the entire supply chain. A logistics audit in the area of procurement is therefore an extremely important scope of auditing activities. The process of conducting a logistics audit in the area of procurement involves a multi-stage scope of audit activities. The main areas of procurement auditing include:
– verification of the material requirements planning process
– examination of supplier selection assessment
– assessment and examination of techniques, methods, and tools used in organizing procurement deliveries.
The starting point for auditing activities in the sphere of procurement is the examination (verification) of demand for final products or services revealed on the market, referred to as primary or independent demand. This type of demand forms the basis for determining dependent or secondary demand. The purpose of the audit in this area is to determine the correctness of the methods used to estimate both primary and secondary demand, and to estimate the correctness of the results obtained from the application of appropriate methods. The purpose of a procurement audit in the sphere of material requirements planning is also to examine the efficiency of the entire information system in the sphere of material requirements planning, which includes, among other things, the scope and correctness of information flow between production units, warehouses (finished goods, raw materials), and units involved in material requirements planning. Procurement audit activities in the sphere of supplier selection may include such issues as:
– performing an initial supplier assessment
– constructing the form of the fundamental supplier assessment
– examining any formal elements of the procurement delivery quality assurance system
– determining whether a supplier can be considered qualified.
In many companies, beyond supplier qualification, the goal of their audit is to determine the level of customer service offered at the supplier’s company. In such a case, the supplier’s organizational capacity to carry out deliveries in accordance with the recipient’s quantitative, qualitative, and formal requirements is also taken into account. Significant issues taken into account in such cases are the following:
– how the level of customer service is measured at the supplier’s
– what units of measurement are adopted
– what are the supplier’s customer service standards or goals
– what is the current level of their implementation
– how does actual performance compare to the assumptions adopted by suppliers
– how are these metrics obtained from the company’s information system
– what does the reporting system regarding this type of service look like
– how do individual functional areas of the enterprise (e.g., finance, marketing) perceive such service
– what are the relationships between these areas in terms of communication and control.
Conducting a procurement audit regarding cooperation with suppliers is intended primarily to verify such parameters as:
– determining possible deviations in delivery time
– determination by the supplier’s sales department of the ability to quickly organize emergency deliveries and respond just as quickly to a reported need
– determining the scope and accuracy of information offered at the time of placing an order (estimated delivery date, delivery size, etc.)
– rules for notifying in advance about delays in ordered deliveries (which is particularly important, for example, for wholesale customers served)
– method of reaction and action in case of the need for a complaint
– accuracy and scope of information offered at the time of placing an order
– compliance with internal procurement norms and procedures (ways of responding to customer inquiries, displays, markdowns).
The article comes from the magazine “Logistyka” 6/2007.