Factory Audit in China - Why It Is Important for Importers

2022-12-06

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According to UN figures, China accounts for a stunning 28.7% of the world's manufacturing output. Despite efforts in recent years to diversify sourcing destinations, the nation's supremacy in manufacturing encourages a great number of businesses to benefit from its established factories and vast transportation network.

Conducting a factory audit in China is something you should think about if you want to manufacture products in China.

They are now even more crucial because Covid-related problems have caused considerable setbacks in the country's manufacturing industry.

Before you start to buy bulk products from China, a thorough factory audit in China is essential to ensuring that your supply chain is legal, effective, and able to provide your customers with a high-quality product. By doing this, you can make sure that your suppliers and vendors have the quality-control procedures, legal compliance, and productivity controls necessary to support the growth of your company.

You should be aware of what a factory audit is, and in this post, we will highlight a few key points you need to be aware of about China factory audits. You will have a better understanding about what is essential to buy from Chinese factories.

What a factory audit is?

A factory audit is a systematic procedure to determine whether a supplier or vendor complies with legal requirements or essential corporate standards. The goal is to guarantee that the supplier provides high-quality services and goods.

Factory audits are typically conducted by quality managers, who assess the supplier's organisational structure, system for managing quality, and production methods.

What are you interested to check?

In most cases, the focus remains on the quality system. However, we would like to distinguish between 3 cases:

  1. Modest factories that have not put their own systems in place don't need to be judged according to all the conventional standards and they will be made to look awful, but they might work well for relatively small customers.

  2. Factories that claim to have a quality management system, by holding an ISO 9001 certification can be evaluated in greater detail.

  3. A process audit is necessary when the buyer requests an analysis of the factory's manufacturing procedures and numerous best practises. The question is if they are competent.

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A few companies need evidence that all their suppliers are socially compliant:

1. At times, social conformance is the only thing that matters where you must ensure:

  • No child labour

  • No forced labour

  • Above minimum wage

The audit checklist is typically based on the retailer's standard if you sell your products to a store that has its own programme.

2.  On occasion, the client requests a review of the quality system. A "mixed audit" is an option.

3.  On occasion, the manufacturer's readiness to accept a certain order based on their following which is the primary concern:

  • Internal production capacity

  • Supply chain

  • Validation of a new product.

Other audit kinds include those that look at the influence on the environment, the security of the supply chain, the structural integrity of buildings, and many more.

Three critical assessment areas for factory audit in China

Factory inspections guarantee that you choose the best supplier possible for your requirements. Investigating these three crucial aspects will help you evaluate the source:

1. Quality control in China

The vendor's QMS (Quality Management System) provides assurance that the work's quality complies with legal requirements.

A top-notch QMS has reliable monitoring practises in place to guarantee ongoing process improvement. Data management, quality manual and analysis, rules and procedures, and customer satisfaction are some of the other basic elements of a QMS.

2. Regulatory compliance

Both you and your potential suppliers must comply with certifications and corporate regulations. The vendor's lack of compliance could result in the closure of the business and jeopardise the certification. Numerous certifications indicate a healthy business.

This proof demonstrates that your supplier not only complies with legal requirements, but also effectively employs processes to deliver your goods.

3. Productivity

You need a supplier who delivers on their promises if you want your company to run smoothly. A manufacturing audit analyses and the supplier's whole production cycle can help you determine whether the provider can meet your order numbers on schedule.

The effectiveness of the production machinery and equipment is also evaluated during factory audits.

Types of factory audits

You must be aware of these five different forms of factory audits if you want to make sure your suppliers are trustworthy and compliant for the distribution channel of your company. The most important factory audit types and their advantages are listed below.

1. Ethical audit

Ethical audits are important since they validate the analysis and assessment of the vendor's social responsibility. Companies now are held to a higher standard for delivering a safe, healthy, and ethical workplace, including good labour and compensation practises.

A thorough ethical audit determines whether the right working conditions are present across the entire organisation.

The advantages of ethical audits for your company are numerous. It verifies adherence to legal standards and gives you assurance that your supply chain adheres to ethical human rights principles and maintains safe working conditions.

Ethical audits will improve your company's brand reputation and assist you in comprehending what appropriate compliance looks like.

2. Manufacturing audit

A manufacturing audit examines whether a vendor is able to develop and deliver a product that meets your company's requirements and manufacturing audit parameters.

Additionally, it averts potentially damaging production problems or expensive disruptions that could harm your company. Manufacturing audits are helpful in reducing the risks associated with operations, ethics, and quality.

Other benefits of manufacturing audits might speed up and improve the efficiency of the product delivery process for your company. It aids in harmonising the sourcing and distribution policies of your business with those of your vendors.

Additionally, you get a precise picture of the factory's proficiency and total capacity to create a trustworthy product.

3. Environmental audit

Environmental audits assess adherence to local rules and regulations to ensure the best possible environmental protection. It guarantees that your vendor complies with all laws and regulations governing the world and your company. Additionally, these audits support ongoing environmental performance improvement.

4. Structural audit

For a factory audit, your vendor's facilities and structures should demonstrate that it has robust safety and compliance measures. Structural audits guarantee structural integrity, adherence to rules and regulations, and compliance with fire safety measures.

These audits give you a clear picture of the supply chain's level of safety.

By keeping an eye on safe working conditions, structural audits are crucial in preventing major and minor injuries.

Structural audits also ensure that staff health is not jeopardised while lowering the likelihood of future supply-chain issues.

5. C-TPAT audit

C-TPAT (Custom-trade partnership against terrorism) audit will attest that private businesses in your supply chain support a terrorism-free workplace.

This programme, which is overseen by U.S. Customs and Border Protection, assesses security precautions both physically and virtually.

A C-TPAT audit not only improves the security of your supply chain, but it also guarantees the morality and legal compliance of your business partners. Additionally, C-TPAT is essential for enhancing border security in the United States.

Here, we go over five essential details about China factory audits that you should be aware of. You'll be in a better position to create and maintain effective supplier relationships if you understand them.

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1. Since Covid, audits are a necessity in China

For the great majority of consumer goods, China is the most developed manufacturing nation in the world. However, the epidemic has significantly impacted its manufacturing businesses.

Audits of China suppliers are therefore more essential than ever for businesses who want to efficiently manage their supplier relationships.

2. Audits and inspections are 2 different things

In a production quality inspection, following things are checked:

  • Packaging and labelling

  • Visual inspection

  • Functional tests

  • Other physical requirements

However, in a factory audit, an auditor might assess the following:

  • Factory’s layout and cleanliness

  • Quality control system

  • Procedures for handling incoming materials

  • Various other systems and processes

  • Employee working conditions

  • Adherence to environmental standards.

3. Some suppliers may often express hesitancy to get audited

Sometimes suppliers show reluctance to participate in audits out of concern that they will face criticism for any shortcomings or issues that are found. It's important to keep in mind that audits are advantageous to both sides.

Audits give the supplier the chance to grow and improve so they can better serve all of their clients. Additionally, the sooner a problem is identified, the quicker you can work to find a solution.

4. You must find the proper focus for your factory audit in China

A factory audit in China is often a check to see if the producer satisfies the needs and expectations of the customer.

Supplier audits, on the other hand, need attention to detail.

  • What is your greatest worry?

  • What proof do you need that this facility complies with your standards?

5. You cannot audit processes into a factory

A factory's efficient procedures cannot be audited, just as quality cannot be checked into a product. An audit is merely a snapshot of the facility as it actually operates, but that snapshot provides you with a place to start as you collaborate with the provider to make improvements.

Traveling to China is more difficult now than it was in the past. You can conduct factory audit in China to evaluate your suppliers and strengthen your supply chain by enlisting the aid of an excellent third-party auditor.

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