What is Logistic Audit?

What is Logistic Audit?

A Logistic Audit is a systematic review and evaluation of a company’s logistics operations to assess their efficiency, accuracy, compliance, and cost-effectiveness. It involves analyzing all aspects of the logistics function, including transportation, warehousing, inventory management, order processing, packaging, and supply chain performance.

Objectives of Logistic Audit

The objectives of a logistic audit are:

• To point out the weaknesses of the logistic system and/or its subsystems.
  
  
• To estimate the impact and potential for performance improvements.
  
  
• To identify and demarcate the largest potential areas for improvement.

Importance of Logistic Audit

The purpose of logistic audit is implementation a comprehensive diagnosis of logistics processes and corporate functions and subsequent determination the program of changes in individual steps. Main goal of logistic audit is description of current state of corporate logistic and determination the specific activities to change and improvement of logistic processes.

The result of logistic audit is:

• Description current state of system,
  
  
• Identification so-called “constraints or bottleneck” of the system,
  
  
• Proposal of measures for elimination of deficiencies,
  
  
• Setting of priorities to attain desired state.

The audit provides a basis for the efficient and effective project progression as all processes from goods receipt to goods out are examined. The suggested course of action for the project identifies the key processes with the highest potential for improvement. But the structure within the organization will also be specified and developed.

Improvement measures are checked for maximum profitability and the best solution concepts are integrated into an implementation plan. From our own project experience, we know that the costs for a logistics audit will, in general, pay for itself within 3-4 months.

A logistics audit removes process bottlenecks by means of restructurings. Service levels and the quality of logistics will be increased, and logistics areas can be used optimally. A logistics audit is, therefore, the first step to sustainably improve the location.

Basic Principles of Logistic Audit

The basic principles of logistics audit in any company are:

• Objectivity of processing logistics audit – objectivity reflects objectively facts which are actual in the time of implementation audit,
  
  
• Confidentiality of commercial information,
  
  
• Commercial independence of the auditor – auditor isn´t bound by a third person who may have the benefit of any audit results,
  
  
• Professional independence of the auditor – auditor can´t be an employee of the evaluated company,
  
  
• Repeatability – when the audit is repeated the comparability of results must be secured,
  
  
• Control of results – final report of executed audit must be checked in terms of content and formal side at least with one other external auditor.

Processing of Logistic Audit

There are a many companies which offer an external elaboration of logistic audit in the company. Each company has already its specific approach to implementation the logistic audit. General procedure of implementation logistic audit can be described based on following steps:

Presentation of methodical of logistic audit

Before starting audit, an auditor has to inform the customer by appropriate form with the basic principles and methodology by which the audit will be carried out.

Preparation of logistic audit

In this step, it is necessary that the auditor to becomes familiar with the company, its departments and focusing. The main task of auditor is to define main and support processes in company i.e. to determine which processes contribution to the fulfillment of the mission of company in the greatest extent.

Setting the goals of audit

Before starting the audit is necessary determine the goals which have to be achieved by audit. Based on these goals will be decided what the main goal of audit is. It can be whole logistic chain or its specific part (selected logistic processes).

Audit processing

In this step, is necessary to identify all relevant processes in the company and describe its course or compile a process map. This step consists from two phases. The first phase is analysis of current state of company. Here are collected all relevant information based on selected goals in order to investigate the factors that influence the achievement of the priorities.

The auditor by means of observation, communication with employees and company management creates objective view about material, financial and information flows, its mutual links. The second phase is evaluation of current state. Auditor prepares and evaluates obtained data on the basis of established qualitative and quantitative indicators.

Results evaluation

After determination so-called “constraints or bottleneck”, auditor suggests measures for its removal. He also may order the activities for application in company. These activities will be carried out according to priorities (necessary mid urgent and recommended activities). The role of auditor is not only to perform the above mentioned steps but also to propose a budget and calendar for application of the proposed changes in practice.