The purpose of the contract audit is to identify internal and external risks associated with supplier relationships and to design a programme of actions leading to more profitable business relationships and increasing the company's competitiveness.
How does the contract audit work?
Model
contract audit process consists of several basic stages. The first of these is
defining the scope of the audit. This usually takes place during a series of initial meetings with stakeholders and aims to identify the support required of the purchasing department by the various departments of the company. Defining the scope is the starting point for further audit work.
Offline survey
The second stage of the process is
offline contract survey. During this phase, the auditors:
- analyse the provisions of supplier contracts
- identify the participants in the purchasing process
- identify and describe the processes involved in purchasing
- identify the impact of contractual provisions on the operation of the company.
This stage is intended to prepare the auditors for the next stages, during which work begins on designing corrective actions.
Value stream mapping
The next step is a series of meetings with purchasing staff - buyers and contract managers. These meetings take the form of VSM workshops and are usually divided into three parts:
- a diagnosis of the current state,
- defining a vision of the target state,
- developing a plan to reach the target state.
What is expected
Objectives of the VSM workshop? Most often, they help identify current problems and prepare a short- and long-term action plan to address them. The results of VSM workshops are also used in the preparation of a final report showing the links between supplier management and performance in other areas of the company's operations, as well as suggestions for changes in the purchasing management strategy.
Next stages of the contract audit process We will describe in our next note. And today we invite you to take a look at Eveneum offers.
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