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Ensuring Quality and Compliance with Factory Audit in China

2024-03-07
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When you are teaming up with a new supplier or business partner, it is important to check how well their factory inspects and checks the products to make sure it is of good quality.

This is called a factory audit. The way a company checks quality is quite important because it helps reduce problems and decides how well they work along with their partners and perform in the business.

A popular business strategy these days is buying products from China because the Chinese factories can make lots of things at cheaper price. However, it is very important for businesses to focus on getting good quality and make sure everything follows the specifications when they are direct sourcing from China.

So, if you own a business, you need to ensure the Chinese supplier you are working with is trustworthy and meets all your quality and specifications as desired by your needs. If not, you could end up in big trouble.

The good news is that there is a reliable method available to handle this factory audit. A factory audit in China is like a detailed check-up of a manufacturing place. It helps to verify the factory you are working with meets all the quality rules and follows local laws.

The best part is that you don't even have to travel to China to do it. There are plenty of trustworthy companies available in China that can help you set up and do the factory audit easily. In this blog post, we will explain why factory audits matter, how to organize one, and certain important things you need to look for during the audit.

What is a factory audit?

A factory audit is about experts visit a factory to check it out in person. The goal is to see if the manufacturer can handle making the exact product that you want them to make for you. That is why a factory audit usually focuses on just one type of product.

So, let us say you are planning to make e-bikes, and you found a manufacturer that makes both e-bikes and electric skateboards.

During the audit, the auditor will mainly look at whether the manufacturer can handle making the e-bikes you want. They will check if the factory has the skills and resources to produce your specific order of e-bikes.

When it is time for a factory audit, the person doing the audit (it could either be you or someone from your team or a professional auditor) will go to the factory. Once there, he will gather information about the factory and its operations. he will use a checklist of things the factory should be doing correctly while they work.

Typically, the checklist for factory audit in China is tailored to match the client's international standards and needs, which could be your standards.

After the audit, all the observations and findings are put together in a report. This report gives a thorough view of the factory's abilities and strengths.

What are the reasons for conducting a factory audit?

A factory audit in China helps you compare various manufacturers and pick the right one based on their facilities, quality, and experience.

1.Check the supplier’s sincerity

If a manufacturer is not interested in your business, they might refuse to allow an auditor visiting their factory. Knowing this beforehand is helpful.

Similarly, if they are secretive, they may resist. If your supplier is secretive, you won't have transparency in important areas, making it difficult to control your supply chain.

Moreover, if there are issues and you are unable to send someone to figure out the causes, you will have to depend on their engineering skills and their capability to prevent similar problems in the future.

2. Understand what kinds of operations that are involved

You need to get the right answers to the following two important questions.

- Are the systems they are following well-checked and mature enough?

- Are they well-structured and can be safely used?

If you simply rely on a company's website, PDF manuals, or Alibaba profile, then it may not give you the full picture. There is a significant gap between a well-managed factory and a poorly managed one, and this difference becomes evident in the scores provided in the audit report.

Let us try to explain it with the help of a live example. We have plotted a curve by taking the average scores from audits conducted in different Chinese cities, and the contrast between the best and worst cities is quite striking.

3. Know what kind of processes are done within the factory

When considering the products, you want your suppliers to make, focus on the important parts and critical steps in the process. The basic aim is to pinpoint the main risks and then come up with a plan to manage or reduce them.

If your suppliers only handle packing or final assembly plus packing, the main risks might lie deeper in the supply chain. It is essential to know where the crucial components or parts come from. You may also need to assess these suppliers to ensure they meet your standards.

4. Know whether the supplier’s ISO 9001 certification is genuine

In reality, nearly any factory in China can acquire ISO 9001 certification by simply setting aside a budget for it, rather than actually developing a management system that aligns with the standard's requirements.

It is not out of place to mention that while conducting factory audit in China, it was observed by many auditors that companies in China used the sign of ISO 9001, but no system was found in the company.

Also, quite a few factories are doing pretty well without wasting their time doing the paperwork needed for ISO 9001. In reality, many suppliers without any ISO certification are delivering good quality products.

5. Predict whether their product quality meets your standards

A low score in a quality system audit is not a positive indicator. This is not our personal opinion. A lot of research has been done by a team of factory auditor by looking at the past data of a certain company.

It has been observed that those companies who got a better score during the factory audit also found to be producing better quality of products, which was confirmed after doing a thorough quality inspection.

6. Know whether they observe process discipline

Process discipline is another important factor that can influence the quality of products. What is a normal trend is that overseas customers are not visiting as frequently as before, leading many manufacturers to become more complacent.

Consequently, their performance is declining, and they are making more mistakes. Unless someone raises concerns and prompts management to address this, the situation could persist for a considerable period.

7. Whether the supplier goes to the root of the issue

To some degree, everything discussed above also applies to existing suppliers. Their organization can change over time, they may gain or lose business, key personnel might leave, and it is important to consistently monitor their performance.

This aspect specifically pertains to existing suppliers. Chances are, you have faced some issues and requested them to analyse the problems and implement changes to prevent a recurrence.

However, it is challenging to ensure that the countermeasures they are implementing are consistently effective without being physically present. This is where an auditor can play a valuable role.

Some companies conduct such audits regularly, like every two months, as part of their process audit program. If you purchase a large volume of products from a single supplier and aim to foster continuous improvement there, this approach could be suitable for you.

How can you organise factory audits in China?

To organize arrange a factory audit in China, it is necessary to follow the following step-by-step instructions:

1. Identify your potential suppliers

It is necessary to do thorough research and create a proper list of potential suppliers who appear to meet your requirements. Before doing that, you must also prepare a sheet with detailed technical specifications and other requirements of your product so that you can start an initial discussion with the potential supplier.

These days, you can dig out many online platforms that can offer you information about any prospective suppliers of your product; in addition to that, you may plan to visit any international trade fair that is held in different parts of the world.

You can also discuss with your own professional networks, who may also supply you a few company names based on their past experience.

2. Shortlist the suppliers

Now is the time to properly conductChina supplier evaluation that you have obtained after the step above and categorise them based on the following factors such as:

- Product quality

- Price

- Lead times

- Location

- Communication

- Experience.

After doing this, you can shortlist a few potential suppliers with whom you may be ready to work and start auditing those suppliers.

3. Decide the scope of the audit

The scope and objectives of the audit will decide the direction of the factory inspection process. Identify which areas need thorough examination, such as:

- Quality control systems

- Equipment

- Production capabilities

- Ethical practices.

4. Work with an experienced and professional expert in sourcing

Conducting a thorough factory audit in China may not be an easy task. There are plenty of problems, particularly cultural and language barriers, that exist between Chinese ways of conducting business with the rest of the world.

That is why it is beneficial to collaborate with a sourcing expert based in China who is proficient in this field and can communicate fluently in both English and Mandarin.

This enhances the audit's effectiveness, provides valuable local insights, and offers expert guidance throughout the process. These professionals are familiar with the local business environment, cultural subtleties, and language challenges, ensuring a smoother experience.

5. Monitor factory performance

Monitor your selected supplier's performance to ensure they uphold consistent standards throughout your business relationship. Keep an eye on key performance indicators such as product quality, timely delivery, communication effectiveness, and compliance with regulations to ensure everything remains on course.

How to select the right expert to do the factory audit?

Selecting the appropriate sourcing expert is vital for the success of your factory audit. When assessing potential partners, consider the following factors:

‍1. Local presence and experience

It is crucial for the sourcing expert to have a strong local presence in China and significant experience in conducting factory audits. Their deep understanding of Chinese culture, language, and business practices is essential to ensure the audit is thorough and the findings are accurate.

This local expertise enables effective communication with suppliers, thorough examination of factory operations, and insightful analysis of the audit results.

2. Industry-specific knowledge

Indeed, it is critical for the sourcing expert to understand your industry and evaluate factories according to specific product requirements and standards.

A specialist with relevant industry knowledge can more effectively pinpoint potential risks and quality issues, ensuring that the audit addresses your unique needs and concerns.

3. Proven track record

When seeking a sourcing expert, prioritize those with a demonstrated track record of successfully supporting businesses with their China factory audits.

Verify their credibility by reviewing customer testimonials and case studies or requesting references from past clients. Partnering with a reputable and reliable expert enhances the likelihood of a successful audit experience.

4. Customised solutions

Select a sourcing expert who provides customized solutions tailored to your unique needs, requirements, and budget. These tailored solutions optimize the factory audit process, ensuring that your specific needs are addressed effectively.

By partnering with a sourcing expert who understands your individual circumstances, you can maximize the effectiveness and value of the audit.

Conclusion

Global product sourcing has become integral to international business success. For companies operating on a global scale, ensuring purchased goods are of high quality, safe, compliant with regulations, and ethically produced is very important.

This is where conducting a China factory audit becomes crucial in preventing potential scams from Chinese suppliers. It is essential to engage a sourcing expert in China to explore how their services can support your sustainable strategy throughout the factory audit process.

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