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An essential step early in the internal audit cycle is gaining familiarity with the process that will be reviewed. Two challenges faced with virtually every audit are the limited knowledge of the stakeholders involved and inadequate understanding of the process itself. Drawing flowcharts with swimming lanes often help ameliorate these issues because these diagrams show the activities performed and the identities of those performing the activities. However, even flowcharts often fail to incorporate other critical components, such as the essential contributors to the process and key supplies for effective product and service delivery.
As internal auditors apply risk-based auditing techniques to their reviews and increase their focus on the needs of customers to achieve organizational aims, it is essential to gain a panoramic understanding of the process. This must be done effectively during the Planning Phase, or the entire review could result in poor outcomes. A SIPOC Diagram can be very helpful in that regard because it identifies the participants, summarizes the process, and lists the inputs and outputs produced. A SIPOC diagram is a tool every internal audit team should consider using to identify the relevant elements of a process before fieldwork begins.
SIPOC is an acronym that stands for suppliers, inputs, process, outputs, and customers. These items form the columns of the matrix and preparing the diagram is very easy. It can be done using flipchart paper, standard notepad paper, directly on a computer using word processing or presentation software, or Post-it notes.
• Suppliers: List the organizations, departments or individuals that provide the inputs required by the process.
• Inputs: List the objects, materials or data that enter the process
• Process: Draw a high-level, four to nine-step, map of the process
• Outputs: List the outputs the process produces
• Customers: Identify the customers that will receive the process outputs
• Inputs: List the objects, materials or data that enter the process
• Process: Draw a high-level, four to nine-step, map of the process
• Outputs: List the outputs the process produces
• Customers: Identify the customers that will receive the process outputs
The SIPOC Diagram is particularly useful when defining the scope of the review because it can give internal auditors a high-level overview of the process. All of the elements captured in the SIPOC Diagram are important to understand what the internal auditors are going to review fully. Failing to do so can result in a poorly-defined scope during planning, or limit the team’s ability to understand the process during fieldwork effectively.
SIPOC Diagrams can also help perform a stakeholder analysis, so the key participants in the process are identified. It will help avoid the exasperating situation encountered when deep into the audit cycle someone asks: “Did you talk to so-and-so about this?” Or “Did you know that if X is unavailable, Y performs that task?”. The interactions among the stakeholders involved can help define risk exposures, the size of the operation and related audit coverage needed, and customer requirements. Some stakeholders share in the benefits a company creates, while others bear the risks that are generated as a result of the organization’s activities. Internal auditors should be aware of both.
SIPOC Diagrams can also help perform a stakeholder analysis, so the key participants in the process are identified. It will help avoid the exasperating situation encountered when deep into the audit cycle someone asks: “Did you talk to so-and-so about this?” Or “Did you know that if X is unavailable, Y performs that task?”. The interactions among the stakeholders involved can help define risk exposures, the size of the operation and related audit coverage needed, and customer requirements. Some stakeholders share in the benefits a company creates, while others bear the risks that are generated as a result of the organization’s activities. Internal auditors should be aware of both.
What others are saying Completion of a SIPOC diagram is critical for the Six Sigma DMAIC process SIPOC is a high-level overview of the process that depicts how the given process is servicing the customer, which is an essential step in Six Sigma for process analysis. Let us introduce We are a leading software development company specially deals in ERP Software named “SIPOC ERP”.
The following are some key questions internal auditors should ask before every engagement, and the SIPOC Diagram can help answer them:
• Who supplies the inputs the process requires?
• What is supplied and what material or informational inputs enter the process?
• How critical are these inputs to the effective functioning of the program or process?
• What does a high-level breakdown (or flowchart) of the process look like?
• What does the program or process produce?
• Who are the customers of the process?
• What are the requirements of the customers?
• What is supplied and what material or informational inputs enter the process?
• How critical are these inputs to the effective functioning of the program or process?
• What does a high-level breakdown (or flowchart) of the process look like?
• What does the program or process produce?
• Who are the customers of the process?
• What are the requirements of the customers?
In addition to these questions, further analysis of each of the components can provide valuable assessment information too. For example, the location of the suppliers can provide some insights into the length of the supply chain, the risk of foreign currency conversion, and political risk. Suppliers and customers may be internal or external to the organization that performs the process, so all of this is vital information that can inform the auditor about the size, spread, and complexity of the network. Inputs and outputs may be materials, services, data or information, so gaining an understanding about these, can help define the role IT plays during integrated audits.
The SIPOC Diagram is a very simple yet very useful and powerful tool. The time spent preparing it will greatly enhance the value obtained from every internal audit. Good outcomes are the result of effective planning, and SIPOC Diagrams are a great tool to help in that regard.
If you would like to know more about SIPOC Diagrams and other tools and techniques, please join Dr. Murdock when he teaches Lean Six Sigma Skills for Auditors, High-Impact Skills for Developing and Leading Your Audit Team, and Internal Audit School.
A SIPOC (suppliers, inputs, process, outputs, customers) diagram is a visual tool for documenting a business process from beginning to end prior to implementation. SIPOC (pronounced sigh-pock) diagrams are also referred to as high level process maps because they do not contain much detail.
SIPOC diagrams are useful for focusing a discussion, helping team members agree upon a common language and understanding a process for continuous improvement. In Six Sigma, SIPOC is often used during the “define” phase of the DMAIC (define, measure, analyze, improve, control) methodology. Some organizations use SIPOC diagrams in the opposite direction, or COPIS, to map the value of the customer to a business process.
How to create a SIPOC diagram
SIPOC diagrams are tables that document the inputs and outputs of a process. They can be created by following seven steps:
- Choose a process: The first step is to choose a business process that would benefit from charting in a SIPOC diagram. A team can then be assembled around the key players of that process.
- Define the process: The diagram starts with the “P” section, which is usually an overview of the business process in 4-5 high level steps that each consist of an action and a subject. This could include the starting and ending points for the process or a simple flowchart.
- Identify the outputs: This section includes 3-4 outputs with little supporting information, typically neutral in tone and using nouns only. Inputs and outputs can be anything ranging from materials, products, services or information.
- Identify the customers: These are the individuals that will receive the outputs or will benefit from the process. Customers are not always external consumers and could be coworkers, board members or other internal stakeholders.
- Identify the inputs: This section includes the resources that are necessary for the process to function properly. Similar to outputs, only the important, overarching inputs should be listed.
- Identify the suppliers: This section lists the suppliers associated with each of the inputs of the process. A supplier is anyone that has a direct impact on the outputs.
- Share the diagram: Once the diagram is complete, it should be shared with any relevant stakeholders and validated before moving along with the process.
Here is an example of how a continuous improvement team might use a SIPOC diagram for a simple process, such as feeding the family dog. The diagram can be created rather quickly by drawing a chart with five columns. Each column is labeled, from left to right, with the letters SIPOC or the words suppliers, inputs, processes, outputs and customers.
When to use a SIPOC diagram
Creating a SIPOC diagram can be beneficial in a variety of applications, the most popular being for continuous improvement. Since a finished SIPOC diagram provides a high level map of a process, it can be used for identifying problem areas, conducting process analysis and explaining business operations to an audience.
Additionally, a SIPOC diagram can be helpful when parts of a process are unclear. It forces team members to identify and centralize information such as supplier contacts, project specifications and target customers.
Benefits of a SIPOC diagram
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A few benefits of using a SIPOC diagram are:
- Increases transparency across an organization.
- Provides an overview of a project for stakeholders.
- Can be used as a training tool for newer employees.
- Helps with problem-solving initiatives.
- Creates a template that can be reused for various processes and projects.
- Ensures all team members are on the same page.
Systems2win demonstrates how to create a SIPOC chart for a business process.