Feature Article

Using Lean and CPI Skills to Improve an Audit Program

by John E. Gray

Note: This is the second installment of a series of articles on this topic. The first part appeared in the July issue of The Auditor’s e-newsletter. Click here to view last month's article.

In last month’s article, we reviewed a case study on using lean and continuous improvement methodologies to improve an audit function. Recall that this case study concerns a military organization chartered with assessing supplier conformance to contract requirements in a service industry.

Most of the organization’s auditors are technical specialists trained to become part-time second-party auditors. This organization had struggled with a fundamental problem for some time: No one trusted the audit function to add value. In fact, many customers thought the function created more problems than it was worth. A significant constraint for this organization was the employment of military personnel to perform the majority of the auditing requirements. The military resource imposed a high turnover rate because of deployments and annual re-assignments. The use of brainstorming and cause-and-effect tools pointed toward significant problems in the process of identifying personnel and training them to become auditors. The data set from the first lean session supported this fact. Of 84 part-time auditors:

• Number of auditors trained within the standard: 14
• Number of auditors trained outside the standard: 70
• Average time to train an auditor: 256.64 days
• Best case (total number): 28 days (3)
• Worst case (total number): 620 days (2)

The next step for the improvement team was to find out exactly what in the process of identifying and scheduling auditors for training contributed to the long lead times. Lean principles tell us that the best way to do this is to flowchart or map the current process to determine the flow of information and work.

The team mapped out the current state. The data follow:

Current state process	Average time to complete
1. Functional commanders or directors (FC/FD) identify the best auditor candidates.	51 days (electronic information and routing)
2. FC/FD reviews auditor candidate qualifications based on specific selection criteria.	15 days (electronic information and routing)
3. FC/FD nominates auditor candidates electronically or by hard-copy letter.	0.5 day (electronic information and routing)
4. FC/FD assesses training requirements and informs contracting officer (CO) via nomination package.	0.5 day (electronic information and routing)
5. FC/FD forwards nomination to CO.	0.5 day (electronic information and routing)
6. CO reviews nomination letter against criteria.	3 days (electronic information and routing)
7. CO determines auditor candidate’s training requirements.	1 day
8. CO assigns source to train auditor candidates.	60 days
9. Audit program trainer schedules candidates for second-party auditing.	45 days
10. Audit trainer locates facility to complete candidate training.	21 days
11. Audit program trainer trains candidates in second-party auditing.	7 days
12. Auditor training source updates auditor candidate’s nomination package.	14 days (electronic information and routing)
13. Auditor training source provides training certificates to CO.	15 days
14. Auditor training completion information becomes part of contract file.	1 day
15. CO issues auditor candidate appointment letter (package).	5 days
16. Auditor candidate reviews and signs checklist. (Auditor dos and don’ts)	15 days
17. Auditor candidate forwards appointment letter back to CO.	0.5 day
18. CO reviews appointment letter (package) received from auditor candidate.	0.5 day
19. CO signs official appointment letter.	0.5 day

After much debate, the team completed the current-state mapping. It was the first time it could clearly see what the process entailed. Team members were shocked at the amount of wasted time stemming from information queues, unnecessary reviews, and bottlenecks. Many didn’t know the process and didn’t understand its importance in certifying personnel to perform as second-party auditors. The facilitator used Pareto analysis to help the team see the significant few steps that added most of the wasted lead time. The results of the Pareto analysis tell us the top targets (significant few) were:

Current state process	Average time to complete
1. Functional commanders or directors (FC/FD) identify the best auditor candidates.	51 days (electronic information and routing)
8. CO assigns source to train candidates.	60 days
9. Audit program trainer schedules candidates for second-party auditing.	45 days
10. Audit trainer locates facility to complete candidate training.	21 days
SUMMARY: Four steps causing 177 days of lead time; an average of 256 days

Now that the improvement team could see why it took so long to train auditors, it wanted to see what a perfect process in a perfect world would look like. The facilitator had the team construct an ideal state. The rules for this improvement tool were to remove all constraints. The assumptions were: no lack of resources, plenty of time, and enough money and space to do the job. There were plenty of audit trainers and candidates to train, and the function was considered the most sought-after job in the organization: a true audit Utopia.

This step was more difficult for the team than it anticipated, but the facilitator was ready for this. She knew some team members would have a tough time of letting go of reality, especially if it was painful. However, the team completed the exercise and created the ideal state:

Current state process	Average time to complete
1. Every 90-150 days select the top 10 percent of the organization to become auditors.	1 day
2. Train the top 10 percent in second-party auditing.	10 days (five days from being selected)
3. Auditor candidates perform an audit as an audit team member with a certified lead auditor.	2 days (10-20 days from being selected)
4. Auditor candidates perform a solo audit .	1 day (20-30 days from being selected)
5. Upon completion they are appointed as auditors.	31 days after being selected
Summary improvement from current to ideal state: Nineteen steps reduced to five; days to become certified reduced from 256 to 31

The team was ecstatic about the lean tools it discovered and how they helped it identify and improve such critical processes. The team understood that the ideal state was unrealistic (for now); nevertheless, it was a goal that could be achieved eventually. The team recognized that the organization’s infrastructure (high turnover rates and not enough money, trainers, or space) would make achieving the ideal state difficult. Its next step was to create a future-state map considering the value-added and nonvalue-added steps and their associated constraints.

This will be discussed in the September issue of The Auditor e-newsletter.

About the author

John E. Gray is an organizational strategic planner, audit program manager, certified quality auditor, certified Plexus/coach trainer, and lean facilitator with the U.S. Air Force Acquisition Management & Integration Center. He has more than 15 years’ experience in auditing service suppliers for the Air Combat Command.

Click here to return to the e-Edition contents page.