Why Internal Audit of Logistic Area is Necessary? In Modern World, The Logistics area serves as the backbone of the companies and has a significant impact on the company’s business strategy which directly affects its operation and operational costs. Additionally, the performance of the Logistic area has a direct impact on a company’s ability to provide services to their customers and create additional value via Faster services offered or simply through reliability. An internal logistic audit is one among the most powerful methods of analysing and possibly exceeding your supply chain, decrease operations costs, and expand competitive advantages. The purpose of the internal audit is to assist you with find fragility or weaknesses inside your supply chain and correct pain points, bottlenecks to enhance supply chain agility, flexibility, and overall proficiency.
The following points are the dark area which can be helpful in improving the supply chain process in the company: –
Duplication of Freight Bill: – It is the most important aspect for transport audit. Sometimes the transporter charges freight for the same sale invoice multiple times in different billing Majorly happens where billing is done monthly. The Company should ensure whether they are having control over the same as it may have a huge financial impact. Turn Around Time [TAT] – TAT can be defined as the total time taken by the transporter for delivery of the product. In today’s modern world Faster delivery is very important. E-commerce companies like Amazon, Flipkart majorly Focuses on faster deliveries. Therefore, Company should check that whether their logistic partners are fulfilling the same or not. Non-Fulfilment of the same would ultimately result in loss of prospective customers and proper penalty should be imposed in a case where transporter lacks to deliver the same in time.
Hike in prices: – Usually, the transport companies increase their rates when the diesel rate increases, or government imposes any kind of charges. The company should check that in a case where the diesel rates are declining whether the logistic vendors are passing the benefit to the companies.
Capacity utilization: – In a normal scenario, transporters charges for the full truckload. The company should verify the utilization of vehicles used for the transport of material. To identify the capacity utilization company can verify the weight of material with weight charged by the transporter in its bill.
Rate check: – The Company should check that the rate is as per agreement and proper quotation has been taken before finalization of the agreement. Also, the quotation should be taken regularly.
Charging of penalties: – The company should check whether a penalty clause is being imposed on the transporter in case of non-fulfilment of agreed terms and conditions.
Detention charges: – Company should check that detention charges are as per the agreement as the same has being recovered in case of delay from the customer end.
Transit Loss: – Company should prepare a detailed report of transit loss and how the loss will be recovered from the transporter or insurance company and ensure its correctness.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by: CA Aman Aggarwal
AKGVG & Associates