Why You Need To Audit Your Manufacturing Contracts Every Quarter
Reporting & Insight
An internal or external party may conduct an audit of a company's documentation or procedures at some point in its existence, the purpose of which will vary. In some sectors such audits will be routine and in others only intermittent, or perhaps even non-existent. Regardless of whether or how often a company will be subjected to an external review, it is important for various team members to engage in periodic internal audits, or reviews, of their processes and systems. For companies engaged in manufacturing, this should occur on a quarterly basis, at a minimum, and is necessary for the following reasons:
In general, manufacturing involves a lot of companies, people, parts, and equipment. In some cases, the pieces of the puzzle are scattered across the globe, so an error or delay in one location can have a ripple effect across the entire operation. As a result, the whole manufacturing process and every single contract needed to sustain it must be followed diligently and punctually. The only way to ensure that this is occurring in a satisfactory manner is by regularly monitoring performance and progress and communicating with the appropriate personnel. And, one of the simplest ways to ensure that this occurs is via a periodic review, with a quarterly schedule making it easier to track and report.
In addition to taking a look at the manufacturing operations, companies will need to ensure that the products churned out consistently meet the requisite specifications. Over time, it is easy for things to begin to fall by the wayside, with quality sometimes taking a gradual plunge. Of course, this will really only occur and perhaps reach a point of costly rectification if no one bothers to pay attention and demand change as soon as the issue is identified. Consequently, engaging in quarterly reviews will provide the team with an opportunity to analyze the quality of the manufactured items and quickly address any potential deficiencies that are found.
Of course, a huge facet of manufacturing is the relationships that exist among the parties who are pertinent to the overall process. Even if deliveries are arriving on time and the product is consistently meeting the outlined requirements, there may be other issues among the professionals that are hindering the process. For example, communication issues, or rather a lack thereof or outright miscommunication, are often the reason that business relationships break down and eventually cease. Therefore, auditing contracts must include an assessment of the relationships, such as whether they are cordial, cooperative, and mutually beneficial. Depending on the length of a contract, the review period may offer the team time to figure out how to fix things going forward or perhaps cut their losses at that point, if feasible.
All of the foregoing aspects that can be examined during the review process ultimately boil down to evaluating operational efficiency and cost effectiveness. Although the goal of an external audit may relate more to compliance and performance, an internal audit is a great opportunity to analyze systems and processes that can be streamlined and sharpened to bolster output. In the end, any issues identified and adjustments made will improve the bottom line.
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