Charging the Customer for a Supplier Audit?

W

WisdomseekerSC

#1
I have just returned from the MDM-West in Anaheim, CA and during one of the conference sessions the topic of customer audits of suppliers was discussed. As one of these suppliers to the medical device industry, we are experiencing more and more of these customer audits. As a result, our people spend a great deal of time with these auditors and it is becoming disruptive to our business. When I brought up this concern, it was suggested that we start charging the customer for auditing us.

Is there any precedence regarding this type action?
 
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D

DrM2u

#3
Well, I am not aware of any precedence for charging the customer for the audits. However there is nothing that says it cannot be done either. Just a few hundred years ago the earth was flat, right?!? I just wander what would be a good rate to charge the customers ... Based on audit hours or days?!?

By the same token, there is no prescribed number of personnel to be allocated to the audit either. One thing I would suggest is allocating less resources to the audit. Usually quick opening and closing meetings with the management team will do, the rest of the time should be just one guide for every auditor. This will probably be least disruptive to the organization and alow the customer to achieve their mission.
 

hogheavenfarm

Quite Involved in Discussions
#4
We do alot of these, and I agree they can be disruptive. However, in the technical specifications in the quoting process, these inspections are usually detailed in advance, so yes, you can charge for them, UP FRONT. The problem I have seen develops alomng two lines:
1 - the people involved are not usually informed that these inspections must take place (until they are due), and
2 - In the past, sometimes these inspections were not done (to expedite orders), so they aren't quoted for - then when the customer wants them performed, no money was quoted to pay for them.
I make it a habit to read all the documentation referenced with the RFQ's, and frequently have to point out to top management that certain audits, preshipment inspections, process audits and FAI's are involved.
 
S

silentrunning

#5
One thing I have noticed is that the number of people who want to audit us is directly proportional to the weather up north. If it's cold and snowy - lots of audits. During the hot summer months - almost no audits. Isn't that odd? :notme:

Oh yes, we are about a mile from the Gulf of Mexico by the way.

Doug
 
D

DrM2u

#6
One thing I have noticed is that the number of people who want to audit us is directly proportional to the weather up north. If it's cold and snowy - lots of audits. During the hot summer months - almost no audits. Isn't that odd? :notme:

Oh yes, we are about a mile from the Gulf of Mexico by the way.

Doug
I think that some auditors migrate South with the weather. Snowbirds ... go figure!
 
W

WisdomseekerSC

#7
So, the advice is to setup operations in a less desirable location to reduce customer audits..............:notme:

There may be a tax break in there somewhere too.
 

Chris Ford

Quite Involved in Discussions
#8
I have just returned from the MDM-West in Anaheim, CA and during one of the conference sessions the topic of customer audits of suppliers was discussed. As one of these suppliers to the medical device industry, we are experiencing more and more of these customer audits. As a result, our people spend a great deal of time with these auditors and it is becoming disruptive to our business. When I brought up this concern, it was suggested that we start charging the customer for auditing us.

Is there any precedence regarding this type action?
Regardless of fees, customer audits will always disrupt business, and they can quickly consume your resources. I've conducted more audits than I can count, and I typically hear the same feedback. Suppliers are often frustrated, but accommodating. The primary gripe I hear most is, "the audit was a waste of time... it's inaccurate... we don't agree on the nonconformities..." and the list goes on. In many cases, these audit reports remain open indefinitely because the supplier couldn't implement corrective action the way that the customer specified.

At any rate, charging a fee to customers for audit time won't prevent these audits from taking all of your time and resources. And I doubt that many customers will be willing to pay a fee for this.
 

Wes Bucey

Quite Involved in Discussions
#9
FWIW:
I agree all future Contract Review should provide compensation for time taken up in customer audits, either as a separate fee or built in to the price charged for product or service.

That said, every customer audit does not need to be the rigorous audit of all processes similarly to a third party registration audit. Frequently, customers are primarily interested in seeing processes which will affect them. All these details need to be worked out as part of contract review.

As an aside, some company auditors are more interested in protecting their own jobs, rather than the company interest, and so make a much bigger deal out of a supplier audit than necessary for the product or service under consideration. If this appears to be the situation in your particular case, it probably needs to be raised at much higher pay grade than yours at both supplier and customer management levels.
 
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