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Why Factory Audits Are Important for Importers?

2023-12-20
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Why Factory Audit Is Important for Importers?

Nowadays, most of the importers all over the world are interested to buy from China factories directly as they can offer very competitive prices. However, the quality of Chinese products always remains a question mark.

Before you start to buy bulk products from China, a thorough factory audits are 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 have the quality control procedures, legal compliance, and productivity controls necessary to support the growth of your company.

So, you should be aware of what factory audits are, and why factory audits are important for importers.

What a factory audit is?

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

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.

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 labor and compensation practices.

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

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

2. Manufacturing audit

A manufacturing audit examines whether a factory can develop and deliver a product that meets your company's requirements and manufacturing 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 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 harmonizing the sourcing and distribution policies of your business with those of your suppliers.

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. 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.

5. Security audit

These are the type of audits which focus specifically on security, and they are performed by merchants and brands 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, 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.

Benefits of factory audit for importers

1. Assurance of the existence of factory

Since these days most of the customers are shifting online during order placements, there are many cases of scams noticed on the world of the internet, therefore, a third-party audit report will confirm the existence of a factory.

2. Unbiased feedback

Usually, third-party feedback will be unbiased hence customers can trust those companies easily who have allowed any external audits of their factory. If there are any concerns, the third-party report will highlight and remind for attention of the client.

3. Overview about the factory performance

The factory audit reports will also present the financial figures and facts, like sales per year, manpower resources, and the company’s corporate social responsibility, which makes any customer get a detailed overview about the company performance.

It is always very important to do factory audits 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 to

Issues may arise for factory audit

In most cases, while importing any industrial products, a factory audit in China is essential. However, in all cases, it may not be as smooth as you expect. The following are a few issues that can arise.

1. Can someone really visit the factory?

During the last few 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.

2. 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.

3. 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 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.

4. 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 program is to encourage a manufacturer to enhance processes and systems through what is known as layered process audit.

Traveling to China is more difficult now than it was in the past. You can conduct factory audits 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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