How an audit of the logistics enterprise is carried out, its peculiarities

Аудит логистический

The field of logistics is constantly changing, adapting to objective realities. Accordingly, the peculiarities of the audit of the logistics enterprise change, so that the results were as reliable as possible, and the strategy and tactics developed are effective. The realities are such that many companies have to review their activities, optimize costs and use reserves. This, of course, also affects the logistics field.

 

Features of the audit of the logistics enterprise

 

It is carried out to provide answers to key questions for the client. In this sense, the peculiarities of the audit of the logistics enterprise are as follows:

 

  • It is necessary to find out what is the optimal number of storage, distribution centers and how to choose their best geolocation
  • Whether distribution centers should be equipped with modern technology, whether it is economically justified, what technologies should be implemented to speed up cargo handling
  • What should be the level of service, what services should be offered to customers?
  • What kind of vehicles must be included in the fleet?
  • What principles should be used for selection of route chains, etc.

 

As we can see the peculiarities of the audit of logistic enterprise allow substantiating the necessary strategy, giving answers to the fundamental questions. If everything is done correctly, it will accelerate the business. Often after such events companies reach a qualitatively different level, for example, passing from the category of regional to international.

 

Also among the features of the audit of logistics enterprises is worth noting that the audit itself is divided into types, depending on the specifics of the company. Yes, there are general algorithms of work, stages, sub-steps, standards for the provision of final accounts. But there will also be differences in the activities, taking into account the specifics of each individual business, its financial capabilities, goals and objectives.

 

What is an audit in logistics

 

It is important to take a closer look at its types. Answering the question of what is an audit in the logistics, it is worth to allocate the following types:

 

  • General. It is carried out with a certain periodicity, not too often, for example, once every 1-2 years. It performs a controlling function, to make sure that the adopted tactics of development. In addition, it will make sure that employees correctly perform their job duties in accordance with the instructions
  • Special audit. As a rule, external consultants are invited to evaluate the level of service and quality. That is, the assessment is carried out from the perspective of the potential buyer. And it is the view from outside to form an objective picture.
  • Special audit of stocks. As the name suggests, the emphasis is placed on checking the level of stocks, tracking their movement, processing data on the return of low-quality goods to the manufacturer, as well as obsolete, unclaimed. It is often combined with the process of inventories, which is quite logical
  • Financial. Financials, financial indicators are analyzed
  • Cargo and shipping documentation. Documents concerning unloading/loading, forwarding, transportation are analyzed. Private just in the process of revealing some errors in the design of documentation, including accounting documents

 

When considering an audit in logistics, the client decides on the advisability of a particular type. Sometimes customers know exactly what they want to check, what information to receive, what errors to identify, but this is not always the case. A classic situation can be called when an increase in unreasonable costs is documented, but it is not possible to identify their source.

 

It is often thanks to an audit in logistics that clients receive appropriate recommendations at the end of all inspections. They see the reports as well. The reports are expressed in the form of diagrams, charts, graphs, and visual statistics. Often the reports are accompanied by photo and video information. As you can see, such cooperation with professionals will be very productive.

 

How transport logistics audit is carried out

 

There are clearly regulated stages. An audit of transport logistics can be characterized in the form of the following table:

 

From the general to the particularAnalyzes the global objectives, activity reporting, identifying the causes of inefficiency, and then there is a detailed study of the various segments in the work of the company
The formation of a team is obligatoryIt includes specialists in logistics, controlling, accounting, finance, marketing, information technology, purchasing and production

Audit of transport logistics – it is usually a teamwork of specialists in different highly specialized areas. The first stage is the study of general information, for example, the sphere of warehousing, sales, production. We study the cooperation with wholesale and retail customers, warehouses of raw materials and finished products, the nuances of production.

 

At this stage in the audit of transport logistics, documentary sources of information are also examined. If such activities were carried out in the past, the reports of specialists who acted earlier are subject to study in the first place. But the preliminary stage is very important, because it allows the formation of the question. Subsequently, these questions will become the basis for the creation of a variety of questionnaires, interviews, as such an audit involves working directly with the employees of the company.

 

Competent audit of the logistics enterprise

 

Conventionally, this procedure can be divided into internal and external. Audit of the logistics enterprise, which refers to the internal format, means the following:

 

  • Analysis of contracts, reports of structural units
  • Analysis of primary documentation, waybills
  • Analysis of the company’s past activities: the history of orders, customer interaction, statistical indicators

 

These are just general milestones. Audit of the logistics enterprise will reveal different indicators, such as the speed of processing orders, the efficiency of work, and so on. Each of the above-mentioned stages is divided into sub-stages. After the stages, after analyzing the internal activities of the enterprise, it will be possible to draw certain conclusions.

 

In the process of auditing the logistics company takes into account how much time is spent on average on completion of the order, what are the costs, what is the rate of rejection, and so on. Assesses the professionalism of employees, the compliance of their activities with job descriptions. This is an extremely important point, where every detail counts. With this it is extremely important to treat polite and correct to the staff of the company, so they do not feel they are tested, and work as a team with the specialists.

 

Audit of logistics warehouses

складской аудит

Often the service is ordered if it is necessary to clarify the failure of the warehouse or an independent assessment. Also, an audit of logistics warehouses is needed when recovery from failure is carried out, that is, measures for the so-called “reanimation of business” are carried out. But this is not all. Thus, it is relevant and assessment for the future, in order to understand in what direction to develop.

 

You can characterize the audit of logistics warehouses and with the help of a table. Thus, the following matters:

 

Basic auditIt allows you to assess business processes, identify deviations, make adjustments. It reveals the effectiveness of the return on work per square meter of the warehouse
Logistics audit of the warehouseEach operation, support, personnel competence, all employees are analyzed

 

In the process of auditing the logistics warehouses, too, their own methods are involved. They allow to find out including such nuances as discipline of employees, evaluation of cleanliness and even observance of fire-prevention and sanitary norms. Evaluated the state of technical equipment, efficiency of order processing and, most importantly in recent times, compliance with safety on the part of employees and departments responsible for this area of the enterprise.

 

Who is relevant to logistics consulting

 

The very concept of “consulting” is relatively new, especially for Eastern Europe. In the U.S., Western Europe it has become commonplace, but it also has its benefits. Logistics consulting is developing rapidly, and it is much easier and more productive for domestic experts to adopt a ready foreign experience of European and transoceanic colleagues. Of course, adapting it to the realities of domestic business. This is an area of management consulting that implies the provision of intellectual services. Specialists have to solve rather complicated problems and be able to approach things non-standardly.

 

Logistics consulting is carried out by specialists who have specialized education and experience in this field. As a rule, this is higher education. But in this area we have to improve all our lives, because new technologies, including information technologies, and new methods for assessing a company’s activities are appearing. This is a special management activity, which allows identifying and pinpointing problems, finding the source of increased costs and, most importantly, offering effective ways to eliminate them, based on financial and other capabilities of the company.

 

There are no details in the matter of logistics consulting, because it is these details that make up the big picture. Specialists collect and process a large amount of data, covering qualitative and quantitative characteristics. Obligatorily drafted and reports that must be provided to the client in a clear, understandable form and be reliable. The statistics is analyzed, the temporal indicators, such as the effect of the season, are taken into account. Indicators are compared with data for the same period of previous years. Surveys, questionnaires, interviews with employees are conducted. It is important to assess how satisfied customers are with the end result.

 

What is the usefulness of logistics consulting for business

 

Answering the question of why logistics consulting is useful, it is worth noting that it reveals the causes of not only obvious problems, but also hidden ones. Sometimes on the completion of all activities, consultants identify hidden problems, which were not marked by the customer, but they pull on a certain part of the material resources. Also, the benefits are as follows:

 

  • Sometimes the results of the activities in the report indicates the need to optimize not only the technical capacity, but also the work of staff. In some cases, consultants advise on the reduction of staff or, on the contrary, to increase the staff by attracting highly specialized employees.
  • This will help to avoid problems with regulatory and supervisory authorities, in particular tax authorities, as logistics consulting involves analysis of financial and accounting documents.
  • Recommendations are made concerning development of the company in the short, medium and long term. That is, tasks for the next few months or even years are set.

 

Answering the question of what is useful for logistics consulting, we can not fail to mention the need for technical upgrades. In practice, this means the introduction of new techniques, equipment and software. This will enable faster analysis of databases and make adequate decisions. Yes, such modernization means financial expenses, but it is possible to conduct these activities gradually, i.e. in several stages.

 

Also, the benefit of logistics consulting is that it will attract more customers. Not only material resources are freed up, but also service and customer service are accelerated. This, too, will have a positive effect on the company’s reputation, making it even more attractive in the eyes of potential clients. When all the business-processes are optimized and their work is coordinated (which can be compared with the work of a clockwork mechanism), the return will be great.

 

What is order and inventory management

 

This is another integral part of logistics consulting. It implies the management of orders and inventories to optimize the volume of raw materials, products, goods. Inventory management allows you to optimize consumable type materials, billets, to minimize costs that are spent directly on logistics, storage. It will also help to avoid downtime in the functioning of the company. Practice shows that even the successful activities of the marketing department and established production often cannot compensate for the costs arising from non-optimized balances. Quite often there is a situation where surpluses are piled up in the warehouse, because even with proper storage they are subject to natural wear and tear. They also drag on financial resources, since these facilities also need to be serviced, guarded, and inventoried.

 

Plus, order and inventory management also reveals the opposite extreme, which is insufficient inventory and orders. This, too, is fraught with the inability to respond quickly to customer requests and provide quality and fast service. This leads to downtime, which means once again having to deal with costs that could have been avoided.

 

In the process of managing inventory and orders must be divided into types. Thus, inventories are current commodity, production, seasonal and some others. They are designed to ensure the continuity of the process of functioning, some must be stored for contingencies and so on. Accordingly, each category will mean and method of management, control. It is necessary to be guided by special regulations.

 

Regulations for the management of inventories and orders

 

This is a separate area that is studied by specialists in logistics. It is possible to demonstrate on an example of the following table:

 

Conservative approach in the formation of inventoryLarge inventories are created because it is necessary to minimize the risks of downtime, interruptions. But if the conservative approach increases strongly, there is an increased risk of diminishing returns from the business
Active ApproachThe company refuses to have an abundance of inventory, focusing only on the minimum or not at all implies a surplus. This helps to reduce some costs, but also entails an increased risk of interruptions
Moderate approachThe most frequent problems are analyzed. Goods, products, i.e. stocks, which are most often in high demand and have had disruptions before, are identified. It is this category of inventory that is stored in warehouses in large quantities

 

It cannot be said that any one type, hike is the right one. Rather, in the process of managing orders and inventories, it is advisable to combine several approaches, focusing on the season, i.e. the natural increase in demand, increased activity on the part of customers.

 

Professionals can help you find a balance between these three hikes. This is based not only on the personal experience of professionals. This area is quite well-studied, so there are even special formulas that allow you to derive the optimal volumes. For example, the so-called “Wilson formula” is often used in calculations. It means taking into account the costs per unit of production, economic justification, the company’s need for products, cost and other factors. There are other formulas, no less interesting methods of calculation.

 

How best to control inventory and orders

 

It is advisable to make a schedule, usually containing equal periods of time. According to this schedule, employees check costs, inventories, identify the volume of balances, and send requests for additional volume in advance to avoid downtime. This is not the only option. In some cases, continuous rather than periodic monitoring is recommended. As soon as the volumes fall to the minimum possible, this information automatically goes to the appropriate department in the enterprise, an application for the delivery of additional volume is formed. According to surveys and based on practical realities, it is better to monitor stocks not periodically, but in a real-time system. Many entrepreneurs called it optimal, more convenient. In this case, the risk of interruption due to lack of stock will be minimized.

 

All data is entered into a table. Modern technology makes it possible to make sure that the management of the company is aware of the volume of stocks at any given time. And quite often companies have several structural divisions, which are located in different districts of the city, in different regions, cities, and sometimes even countries. But in a single control center, for example, in the head office, due to implementation of effective technologies it is possible to see the volume of stocks, to obtain statistics on orders, and to consolidate all this data into a single table.

 

How to build relationships with suppliers and customers

 

This is another difficult question. Yes, the relationship with suppliers, customers affect the development of business, its success. This forms positive opinion about the company, i.e. it creates a positive image. Once the building of such a relationship was governed only by general rules like responsive service, competence and other things. But today, these concepts are much broader.

 

So, relationships with suppliers, customers mean the following:

 

  • The ability to deliver in a cost-effective way that will save both customers and the company
  • Compliance with agreements on the timing of the order. If any force majeure circumstances arise, the client is notified immediately. Decision to change, for example, the route, and replacement of vehicles.
  • The company considers ways of granting special terms and conditions of cooperation, offers of privileges to regular customers, which stimulates greater demand and causes maximum credibility of the service
  • Methods of payment, their timeliness are also often the subject of negotiations with suppliers and customers. In some cases it is reasonable to consider the possibility to offer delayed payments. This is common world practice that makes business more mobile and flexible in relation to dynamically changing market conditions

 

In the question of relationships with suppliers and customers there are many other nuances. It is important to correctly reduce costs: material and time costs. It is also important to reduce costs associated with switching from one supplier to another, which is quite common. To reveal an objective picture will also help reporting data. They indicate the number of claims received in terms of completeness, quality over a period of time. The number of long-term, medium-term, short-term cooperation contracts is also analyzed. The volume, duration of the company’s downtime due to the lack of goods is revealed. And also, statistics must necessarily reveal the number of claims that come from the supervisory and controlling authorities. For example, in the tax office there are questions, claims related to unreliability of counterparties. In some cases, there are signs characteristic of fly-by-night companies that are created solely to evade taxes.

 

What does the management of transport and warehouse logistics mean in practice

 

A lot depends on competent management. Thus, the management of transport and warehousing logistics means operating in several directions at once. Specialists are looking for opportunities to optimize the transportation strategy for goods, products and other material objects. They also monitor packaging and determine how it complies with accepted standards. Professionals identify effective ways to quickly resolve operations associated with the transportation of products and more.

 

In addition, transportation and warehousing logistics management provides the opportunity to implement ready-made solutions, based on the activities of other companies. Nothing prevents you from adopting the best foreign experience. There are ready-made solutions that are ideal for companies operating like a store. There are solutions for warehouses, institutions, production halls. Software and technologies are also being developed to monitor the correct application of marking.

 

It should be taken into account that in the process of managing warehouse and transport logistics it is necessary to understand the specifics of a particular transport, warehouse, and storage location. For example, in addition to classic warehouses, there are so-called “transit transport points” designed not for permanent, but for temporary placement of batches of goods. The goods are stored there for some time before being loaded into rail cars and not only. But that’s not all. There are other types of warehouses, which also affect the implementation of control, management:

 

  • There are retail warehouses, which are where the goods that go on sale are stored. Sales are carried out as directly from the retail warehouse, which, however, does not happen often, or at points of sale, which are located in the vicinity of retail and warehouses
  • Customs. As the name suggests, they are intended strictly for placement during customs inspections
  • Wholesale-distributional. They are common, which is especially important for large suppliers that transport consignments of goods to retail chains
  • There are also special warehouses, which are designed exclusively for seasonal placement, storage
  • Almost always, companies have reserve warehouses. They are used when it is impossible to place goods in ordinary warehousing points. Many companies wisely decide to acquire some backup storage facilities to prevent interruptions

 

As you can see, there are many varieties, and therefore the management of transport and storage logistics will differ.

 

What are the prospects for the logistics audit of the enterprise

 

Undoubtedly, the algorithms of cooperation with customers will change, as objective conditions and legislative norms change. There is a tendency for stricter standards, legislative framework. This is observed almost everywhere, especially in Europe. Increasing emphasis is being placed on environmental friendliness of the logistics chain, including the environmental friendliness of warehousing and transportation organization. New software is also being created to cover more information, analyze it and combine it into a single database. Programs of higher educational institutions preparing specialists as logisticians, forwarding agents, auditors, programmers are also changing, their work should meet new social and business standards.

 

Scientific achievements in this sphere are more and more actively used. Even satellites are involved to ensure uninterrupted supply, logistics. Particularly urgent is the supply of ammunition, food, and supplies for the armed forces, for example. All this also covers the sphere of logistics, although there will be nuances. In any case it is necessary to combine the material and information flows, to control every stage, to get timely reports, to build up correct strategies and tactics of short-, medium- and long-term development. The processes of transportation, loading, unloading, and related manipulations are also optimized.

 

The task of transport logistics is to solve the problem of management, control of transport flow on the entire route or in separate sections. According to publicly available data, the cost of transportation, loading and unloading is in some cases up to 50% of the cost of production. In developed countries with a good infrastructure, such figures can be reduced from a very high 50% to 20.

 

How is the quality of logistics services evaluated

 

This is a separate area, which has its own indicators and evaluation parameters. The quality of logistics services has the following parameters:

 

  • Tangibility. As the name suggests, these are physical indicators that can be touched, touched, and evaluated visually. This includes many concepts, including the quality of specific equipment, even the appearance of staff, modern office equipment, features of the warehouse layout, the interior of the office itself and dozens of other physical names. They may have a direct impact on the quality of services or directly affect the company’s image and business reputation.
  • Reliability. This is another important quality parameter, which includes the accuracy of adherence to schedules. For example, the parties of the goods should be distributed to warehouses, warehouses in a strictly defined day. Time is sometimes estimated to the nearest minute. All this means reliability, which is one of quality parameters for logistics services.
  • Safety. For some customers, security – this is fundamental. Evaluated is how the safety of objects no matter what: in transit, in warehouses, at storage locations, when passing through customs control, in the process of loading and unloading works, in the inventory
  • Responsibility. Another very important criterion that shows how seriously the company treats the fulfillment of its obligations, how much reliable information it gives about guarantees, and how well other agreements are respected
  • Politeness, relations with clients, suppliers, customers. Yes, this is an intangible factor, but it is also of great importance. It is worth to refer to the competence, correctness of the personnel, demonstration of sincere interest, efficiency in providing the information requested by the customers, readiness to resolve non-standard situations, to act quickly in force majeure circumstances. It may also include the motivation of employees, their readiness to grow, learn, increase their experience, improve in the legal sphere, to learn something new, which will be useful for the company as a whole

 

Who should order an audit of the logistics enterprise

 

It’s no secret that today we can safely talk not only about the saturation, but the oversaturation of the market of audit services. This situation is typical for almost any country in the world. However, it is impossible to say that all or at least most of the specialists positioning themselves as professionals in the field of auditing of logistic enterprises, are actually such. Many are attracted to this field by the opportunity of good earnings. According to statistics, auditors are among the top 10 highest paid professions. But that’s not just because. They are required to have the knowledge, moreover, rather deep in absolutely different spheres: legislation, including tax legislation, knowledge of technologies, judicial precedents, nuances of foreign economic activity organization, specifics of work of warehouses, points of temporary storage of goods and so on.

 

Individual specialists of the company engaged in auditing of logistic enterprises must work officially, i.e. they must be listed in the register on the basis of licenses and other approvals.

 

In addition, in selecting a performer is still the most effective way to gather information, feedback. Often professionals involved in the audit of logistics companies offer to look at specific customer reviews. It is advisable to analyze this data, but also do not forget to collect reviews on independent sources. These include specialized forums of logisticians, freight forwarders, entrepreneurs, lawyers and so on.

 

It helps to formulate an objective opinion and the availability of publications. Yes, often the audit of the logistics company are really pros who actively share their experiences on professional and other specialized resources. If there are publications, if there are blogs, social networks, where posted not only advertising, but also professional information about the audit, it will be a good sign. This will help to assess the extent to which people are aware of changes in legislation, of judicial practice, precedents.

 

Companies that offer such services are well aware of this. That is why they often offer free online consultations on blogs and social networks. Answers to the most common user questions are posted in the public domain. It helps to create loyalty and increase confidence in the company, and at the same time demonstrates that everyone has special knowledge in this area. Quite often while answering questions about audit or related fields specialists point out concrete norms of legislation or appeal to precedents, established in judicial practice.

 

What else is auditors’ professionalism in logistics and logistics consulting

 

There are other so-called “additional criteria. Companies engaged in logistics consulting and auditing are required to undergo regular checks to confirm the validity of their license. All information about the education of employees, the passage of additional courses, advanced training, the passing of standards, certification of the company itself should be in the public domain. No wonder that, fighting for the attention of customers, companies put not only this information, but also provide screenshots of numerous certificates, licenses and even commendations.

 

The nuances of professional liability insurance should be obligatory stipulated. Yes, the auditing company is not obliged to insure its activities, unlike, for example, the transport company engaged in cargo transportation, but the insurance in this area will tell a lot. Professionals know that it is important to insure liability in case of some disputable moments and, if necessary, to compensate for the losses incurred due to unprofessionalism of a consultant or auditor.

 

Entrepreneurs who are seriously involved in this field, despite the optional nature of insurance, always take care of it well in advance. Do not think that losses in this area are exaggerated. If we talk about transport companies, the existence of losses is more justified. So it seems to many from the outside. However, one cannot rule out cases when due to unreasonable, incorrect conclusions of inspections or because of an improperly constructed development strategy a company has problems with regulatory and supervisory authorities, in particular, with the tax service. As a result, notices come up about the need to pay additional taxes or fines are imposed for non-compliance with the provisions of the law. And if it turns out that the auditor overlooked this opportunity or just did not notice it due to incompetence, it is possible to claim. This is a standard worldwide practice. If we talk about the countries of Western Europe and the United States, insurance is even more widespread there. In fact, any segments and areas of business, entrepreneurial activity are insured.

 

Formation of cost for audit of logistic enterprise

 

The issue of price is in many ways paramount to many customers. In some cases it is reasonable to offer the client a fixed cost, but sometimes it is calculated depending on the specific activities of the business. Sometimes on the sites you can find a handy virtual calculator, where after entering the basic data the system will automatically calculate the approximate cost of services. Subsequently, the cost will be adjusted. But in order to get the price as quickly as possible, you need only to send a request, a commercial proposal, which contains the basic information. There are also other features of the audit of the logistics enterprise:

 

The number of specialists involved is taken into account: general profile, highly specialized profileSpecialists will be needed, in particular, working with an audit of warehouses, analyzing tax, accounting, other financial statements, conducting surveys, interviewing. Technical equipment, availability of modern software is also evaluated
Time is of the essenceSometimes the client is required to conduct an audit of the enterprise urgently, for example, before the audit by the regulatory and supervisory authorities, or before the sale of the business, its reorganization
The solvency of the client is taken into accountOften, to attract attention is provided more loyal conditions of cooperation for representatives of small business

 

But in any case should not be confused with an audit and the usual “consulting product. Unfortunately, such a substitution sometimes occurs. If it is necessary to get an audit report, it is the auditors at the enterprise who are invited. In turn, consultants offering a consulting product analyze financial and economic activities, but it does not imply the issuance of an auditor’s report.

 

The importance of personal contact when choosing auditors for a logistics company

 

As a final touch to be noted and personal contact, acquaintance. At this stage, too, there are mistakes. So, some potential customers are limited to the study of the track record, resume. In addition, unscrupulous performers sometimes slyly, sending not auditors, consultants, but assistants, assistants. And here it is not only about the lower level of competence, but also about the fact, that assistants have no right to issue auditor’s opinion. Perhaps this circumstance may not always be considered critical, but such unreliability is not conducive to building trust.

 

Some potential clients go even further, going beyond studying resumes, reviews, publications, and even personal acquaintance. They conduct interviews with auditors of transport logistics, logistics enterprise, using already existing tried and tested methods. The interview allows to immediately determine the competence, the willingness of the potential performer to provide specific information, to refer to the points of law, to answer the questions clearly, without using generalized terms.

 

Professionals who want to show their interest explore not only a specific narrow area, such as production, storage, accounting, but also related departments. Given the high demands, it is not surprising that the cost of ordering an audit of transport logistics and other types of a priori can not be very cheap. Serious powers and resources are involved, including in terms of time. The audit does not go just a few hours, and it can not be completed in one shift. In most cases, it takes more than one day to complete. All of this is reflected in the contract. The signing of the contract will be the final chord. It specifies all the essential conditions: the full name of the organization, the actual and legal address, details, other contact information, the cost of services, duration, stages, guarantees, insurance, liability for nonperformance or improper performance of obligations. Besides, it is obligatory to specify in a separate paragraph the auditors’ obligations to keep commercial secrets, not to disclose personal information of the employees, to ensure safe storage of information.

 

Людмила Логистик УКР

Эксперт в сфере транспорта и логистических процессов НАН Украины. Участница экспертной рады при министерстве транспорта и инфраструктуры