These days, most of the manufacturing companies all over the world are interested to buy from China factories directly as they can offer at very competitive prices. However, the quality of Chinese products always remains a question mark.
Therefore, it is essential to do a factory audit in China by either visiting their factory or through a certain China buying agent whom you trust. This will firstly ensure that the factory does exist, as these days there are many scams found on the internet where several Chinese traders had represented themselves as manufacturers on their website.
Secondly, you will have confidence that the manufacturer will be able to supply you with the necessary product as per your specification and your quality standards.
What a factory audit is?
When we talk about a factory audit then we mean it as an on-site evaluation done at the factory premises by the customer before doing any business. The basic objective of performing such a factory audit generally is to ensure that the manufacturer will be able to produce the item as per your quality requirements and to reach a manufacturing agreement finally.
Therefore, mostly a factory audit is going to focus on a certain specific product. As an example, suppose you are interested to produce an item like outdoor products, and then you found a certain China OEM manufacturer, who is producing outdoor products and other similar products. Then the auditor is going to focus on evaluating the capacity and capability of the manufacturer to produce only a particular product e.g., outdoor products.
While conducting such a factory audit, your auditor is chosen by you who could be any of your company’s technical person or a 3rd-party professional hired by you whom you trust.
The auditor will personally visit the factory and perform the audit. After visiting the factory, the auditor will try to collect as much information as possible about the factory’s working system through a certain checklist of items prepared by the auditor and the factory must comply with that.
Typically, the checklist prepared by the auditor will be based on special requirements and international standards set by you. Finally, all the findings of such factory audits will be documented in the form of a report so that it can be reviewed by your company management and make a judgment about the capabilities and capacity of the manufacturer.
Such factory audit will not only benefit suppliers in China but also the other stakeholder too. Generally, suppliers never feel it very comfortable to allow any third-party to do such audit on their production floor rather they believe that their own QA (Quality Assurance) department, however, an external/third-party audit will basically help to achieve the following goals for all stakeholders.
FOR SUPPLIERS
Quality improvement
An external agency audits their production unit and checks the system used before, after, and also during production, then it will basically ensure that many minor/major and certain critical defects will be removed from their product.
Then the supplier will try to avoid those defects in future and also that will help the customers to receive quality supply and there will be less rejection in their final products.
Customer trust
If an external agency approves that this supplier will be able to produce and can meet all the quality standards then the customer will automatically be comfortable buying from the supplier rather than any other suppliers who only believe their own internal audit teams.
The third-party inspector can get better feedback from their customers only after visiting their company physically and can generate realistic, unbiased, and valid reports, which will finally help the manufacturer to improve and also win customers’ trust.
Reliable inspection
Most of the internal audit team generally take many things totally for granted but any outsider will never try to overlook any details. Rather they will try to fix if any possible error is found so that it can make the company 100% reliable.
Therefore, if the external audit will be done with full detail, then it will offer much reliable information to the supplier.
FOR BUYERS
Assurance of the existence of factory
Since these days most of the customers are shifting online during order placements and as mentioned before, there are many cases of scams noticed on the world of the internet, therefore, any third-party audit reports will confirm the existence of a factory.
Unbiased feedbacks
Usually, third-party feedback will be unbiased hence customers can trust those companies easily who have allowed any external audits of their factory.
Current overview about the factory performance
This audit report will also present the financial figures and facts, like sales per year, manpower resources available, and also the company’s corporate social responsibility, which makes any customer get a detailed overview about the company performance.
Such audits can help buyers to make their decisions quickly.
FOR VENDORS
Product Information
Any vendor can take benefit of audit reports and consider the production line of the company suitable and can put their bids directly to that company that has more products what they needed and this will save both their time and money while placing order.
Product handling knowledge
This audit report will also mention the full details of transportation, warehouses, product handling, storage, packing, and checking info so the vendor will know when and how he can dispatch the products.
Production capacity information
When the vendor will know about the production capacity of the company then it will help the vendor to guess how much order the manufacturer can provide as per its resource and capacity.
There can be different factory audits. The following are the list of a few of the works that are included during the factory audit in China:
1. A factory review about the operational structure, various systems in place, different machine types, the process followed, and quality system.
2. A factory production line report on the various machinery, tools, storing facilities, packaging rooms, and also about stores.
3. What is the organizational flow chart of the factory and also the production workflow chart?
4. How do they check their daily output, information on different sensitive points, conditions of machines, power supply condition, and also the status of transportation?
5. All details about supply and sub-supply.
6. Note on their sampling system and also the capacity.
It is always very important to do a factory audit in China particularly if you have noticed their current supply has many quality issues. As a matter of fact, such an audit must be done before selecting the product of any Chinese manufacturer. It can always save you from any potential disaster, loss of your money, and business failure too.
If your own products are getting a poor review on the market then it is high time that now you must identify whether Chinese supply is responsible for that or not.
FACTORY AUDIT IN CHINA
The pre-audit
You must go through your supplier identification process in China before going for a factory audit. You need to contact the factory management by phone/e-mail and try to review any samples that are manufactured by that factory in China.
Audit objectives
Before you select any of your Chinese suppliers, you must set your objectives first what will you like to audit in that factory. There is plenty of mega-size and quite professional factories available in China.
You must also plan to meet the Chinese company’s representatives and fix a meeting with the management of factory and tell them exactly what you intend to audit. The management must be agreeable to allow such an audit.
The technical review
The technical review about the factory will be the core of your audit, where your auditor will collect most of the data of the factory. You must have a very well-organized format for reporting so that your data will remain organized and presentable to their management.
DIFFERENT FACTORY AUDIT TYPES
Social compliance audit
This kind of audit is also called an ethical audit. In general, a factory audit of this type refers to the retailer's supply chain being monitored to ensure that the standards for various working conditions are met.
Quality system audit
This audit is also commonly done during the factory audit where the quality system adopted by the factory during the production is checked to understand whether the various checks done during the production will be adequate to meet the quality requirement as needed for the product in question.
Security audit
These are the type of audits, and they are performed by merchants and brands in order to stay in compliance with the Customs-Trade Partnership.
Nowadays, many audit companies are available in China that will carry out a very efficient factory audit that you have to evaluate the product quality of any Chinese manufacturer. You need to contact the specialist who performs the audit for you and discuss all the norms.
Before you select any third-party audit company in China, you must get enough feedback about the authenticity of their report. You must have confidence in their report and this will save your cost of visiting China.
FEW ISSUES MAY ARISE FOR FACTORY AUDIT
In most cases, while importing any industrial products, a factory audit in China is very essential. However, in all cases, it may not be as smooth as you expect. The following are a few issues that can always arise.
Can someone really visit the factory?
During the last 2 years, the whole world was going through a pandemic situation due to which it had become almost impossible to make a factory visit. In case, the factory remains in operation, but nobody can visit there, then it will be very difficult to evaluate the condition of the production process.
In China, a little information can be obtained in the database of the government that can complement any audit.
Will the supplier accept your audit?
If your order value is quite low then the manufacturer is likely to decline. Also, if their product happens to be in great demand then the supplier will not like any auditor to visit their line as they will be under production pressure.
In such a condition you need to find a middle path. You may not be able to personally visit the company as you thought, but you can send a few lists of questions in a structured manner for them to answer.
What exactly do you like to check?
Mostly your focus will be on their quality system, but let us see 3 different cases:
a. If any small factories have no systems of their own then their evaluation cannot be done by following all the criteria. For a small buyer, this can be the option.
b. Those factories who claim to follow a certain quality management system must be assessed in much more depth. It is very important to know during the process audit, whether they are aware of what are they doing and also why they are doing a certain process.
c. If you also need evidence about the supplier’s social compliance e.g., no child labour, no forced labour, minimum wage norms, etc. Then try to know from your own retailers whether they have any such program. The standards that are followed by your retailer will become the basis for your audit checklist.
Often the key concern remains whether the manufacturer is interested to accept your order depending upon their existing production capacity, supply chain, and their capability to manufacture a certain new product.
There can also be many different types of audits e.g.
· Environmental impact
· Building structural strength
· Supply chain security
Whether it is just a single audit or may happen again
A single assessment is sufficient if all you like to do is qualify as a possible supplier. You should, however, keep an eye on what is happening to the maker.
Perhaps their most important consumer will abandon them. Perhaps the contrary is true, and they are rapidly expanding. What are the results of their systems practices? At least one time in a year, have someone check on the important suppliers.
Another motivation for establishing a programme is to encourage a manufacturer to enhance processes and systems through what is known as layered process audit.