For enhancing the performance of the logistics system, it is necessary to take stock of the efficiency and effectiveness status of the various subsystems of the logistical chain. This process is known as logistics audit. The shortfalls, bottlenecks and gaps in the logistical supply chain can be identified with logistical auditing so as to improve the system efficiency and effectiveness.
Logistics audit examines and tests the operations of logistics process in terms of quality, technology, productivity and external factors. The auditing process reveals any weakness in the logistics system of the company. The test results can help in offering proposals to the firm for improving the system efficiency and effectiveness by investment in system, equipment or new technology. A logistics audit measures the capabilities and quality of the logistics and highlights resources for rationalization and cost reduction. The areas of logistics audit are discussed below.
The audit identifies the quality of the logistical service. The errors, constraints and bottlenecks leading up to the present situation are identified. The audit checks the existing standards of stock levels and the delivery performance in terms of speed, reliability and consistency so as to suggest the improvements.
The audit notes the output of the system with respect to the system input. It analyzes the productivity of assets, equipments and the labours employed with respect to time and cost frames. It assesses the throughput capacity of the system in terms of orders fulfilled, material packed, material transported and so on.
3. Packaging System
The audit will indicate the adequacy of the present packaging system in terms of capacity and the technology and cost economy.
In case the present warehouse has reached its threshold limit of throughput with respect to the labour employed and cost incurred, wherein the manual operations are causing reduction in system productivity, the logistical audit will propose warehouse automation.
4. Warehouse Capacity
The audit will spell out whether the warehouse is underutilized for its existing capacity or there is a case for hiring or constructing an additional storage space based on the level of order throughput.
The technology audit may include equipment reliability, speed of information and material flow, warehouse management system (automatic material identification storage, retrieval, picking, sorting, packaging and loading) and transaction system. The audit will compare the critical subsystems with state-of-the-art systems and subsystems.
6. External Factors
The logistical audit will bring out facts on the changes in buyer and supplier relations, transportation conditions, customer-specific services and emerging technologies in logistics at both macro and micro levels and its likely impact on the logistics operation of the firm. This will help in taking appropriate corrective action.
7. Strategic Logistics Planning
Even though the main purpose of a logistics audit is to concentrate on process details, it also draws conclusions and helps in preparing strategic plans to bring greater efficiency and effectiveness to the entire logistical supply chain.
Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.