When it comes to working with a new supplier in China, it’s important to take the necessary precautions to ensure that your business is making a safe and wise decision. This is where a China factory audit comes into play. In this article, we will explore what a China factory audit is, why it’s important to have one, and what is examined during the process.
Firstly, readers will gain an understanding of what a China factory audit is and why it is crucial to have one before working with a new supplier. Additionally, readers will learn about the different types of operations that may be involved and what to consider before applying for a factory audit. Finally, the article will conclude with an overview of the factory audit process and whether it is a one-time audit or part of a program.
Key Takeaways
- A China factory audit is important to ensure a safe and wise decision when working with a new supplier.
- The audit examines various aspects of the supplier’s operations to ensure compliance and quality.
- It’s crucial to understand the different types of audits and what to consider before applying for one.
What is a China Factory Audit?
A factory audit is an on-site evaluation of a manufacturer’s ability and capacity to produce a specific order of a product. In the case of a China factory audit, the audit checklist is based on the client’s international standards and requirements. The purpose of a factory audit is to verify whether a manufacturer is skilled enough to produce a specific order as per the client’s requirements.
During a factory audit, an auditor (could be the client, a colleague, or a third-party professional auditor) will travel to the factory to collect information about the factory and its work. The auditor will use a checklist of items that the factory should follow to evaluate the manufacturer’s ability and capacity to produce the specific order of the product.
The factory audit usually focuses on one specific product category. For instance, if the client wants to produce e-bikes, the auditor will evaluate the manufacturer’s ability and capacity to produce the client’s particular order of e-bikes.
In the end, all the findings of the factory audit are documented in a report that provides a detailed overview of the manufacturer’s capacity and capabilities. The report helps the client to make an informed decision about whether or not to work with the manufacturer.
Why Do You Need a Factory Audit in China?
1. Test the Seriousness of the Supplier
A factory audit in China is a crucial step in ensuring that the manufacturer you choose is reliable and trustworthy. By conducting an audit, you can test the seriousness of the supplier and gauge their interest in your business. If a supplier is not willing to send an auditor, it may be a red flag indicating that they are not serious about doing business with you.
Moreover, if a supplier is secretive and unwilling to provide transparency in the areas that matter to you, it could be difficult to have control over your supply chain. A factory audit helps you to identify such issues beforehand and avoid potential problems.
In addition, a factory audit can help you analyze any problems that the supplier may have faced in the past. By doing so, you can rely on their engineering capabilities and their ability to prevent such issues from happening again in the future.
Overall, a factory audit is an important step in ensuring that you select the right manufacturer in China and minimize the risks associated with doing business overseas.
2. Know what type of operations are involved
When evaluating a potential supplier, it is crucial to have a clear understanding of the type of operations involved. This includes knowing the key processes and components of the products that the supplier will be manufacturing for you. By identifying the major risks, you can develop a plan to mitigate and control them.
3. Know what processes are done inside the factory
It is important to consider the critical process steps involved in the production of your product. If the supplier only handles final assembly and packaging, you may need to evaluate the suppliers further down the supply chain to identify the critical components and sub-components.
To ensure that the supplier is capable of producing your product to your specifications, you may also want to conduct an evaluation of their processes. This can help identify any potential issues that could impact the quality of the final product.
4. Know if their ISO 9001 certification is genuine
When evaluating a supplier, it is important to determine if their ISO 9001 certification is genuine. While almost any factory in China can obtain ISO 9001 certification, some suppliers may simply allocate a budget for it rather than building a management system that meets the requirements of the standard.
To ensure that the supplier is committed to quality management, you may want to look beyond their ISO 9001 certification and evaluate their overall quality system.
5. Predict if their product meets your quality standards
A low score in a quality system audit is a red flag that the supplier may not be able to produce your product to your quality standards. Working with a supplier that has a history of high scores in factory audits and product inspections can help ensure that your product meets your quality standards.
To predict if a supplier’s product will meet your quality standards, it is important to evaluate their quality system and track record.
6. Know if they maintain process discipline
Maintaining process discipline is critical to ensuring consistent product quality. However, some manufacturers may become complacent when overseas customers are not visiting as frequently as they used to.
To ensure that the supplier is maintaining process discipline, you may want to conduct regular audits of their processes and quality system.
7. Do get to the root of the problem
If you are working with an existing supplier, it is important to monitor their performance over time. This includes identifying any problems that arise and working with the supplier to implement effective countermeasures.
To ensure that the supplier is consistently effective in implementing countermeasures, you may want to conduct regular audits as part of a tiered process audit program.
By knowing what type of operations are involved and evaluating a supplier’s processes, quality system, and performance over time, you can ensure that your product meets your quality standards and is produced in a safe and reliable manner.
Before Applying a China Factory Audit:
First, Access to the Factory
Third-party inspectors are authorized to visit any factory and conduct supplier verification. However, if the factory is inaccessible, auditors can review the factory’s Standard Operating Procedures (SOPs) and key records to confirm the existence of a quality system. In China, auditors can collect additional information from government databases to supplement the audit.
Second, Supplier Acceptance of Factory Audits
Manufacturers may refuse a factory audit for small orders or if their products are in high demand. In such cases, auditors can conduct a “factory visit” instead of a structured audit. This allows auditors to gather evidence and ask questions on-site and provide useful comments to policy-makers.
What is the Cost of a Factory Audit?
The standard cost for an all-inclusive factory audit is between $200-$398 USD/man-day in any major manufacturing clusters in China. However, if the job is simple, a cheaper price of around $150-$180 USD/man-day may be available.
Overall, before applying a China factory audit, it is important to ensure access to the factory, confirm the supplier’s willingness to accept an audit, and consider the cost of the audit. By taking these factors into account, companies can successfully conduct a factory audit in China.
What is Examined During a Factory Audit?
When it comes to factory requirements, different industries have different needs. For instance, clothing brands emphasize ethical working conditions, while manufacturers of medical equipment must adhere to strict rules and regulations. To meet these needs, various types of factory audits exist, each focusing on a specific area. In China, there are three common factory audits, which are:
1. Initial Factory Evaluation
The Initial Factory Evaluation is the most basic audit among the three. It focuses on essential aspects of a manufacturer for the supplier selection process. The audit report typically includes, but is not limited to, the factory profile, staff count, production process, machinery and equipment, quality management, official documents, and facility. The audit report is used to determine if the factory is suitable for relatively small buyers. However, factories that pretend to have a quality management system can be evaluated in more depth. In such cases, a process audit is required to assess the factory’s manufacturing processes and various good practices.
2. Factory Technical Audit
A technical quality audit provides a more detailed evaluation of the factory’s equipment maintenance, management techniques, and quality of the system. The auditor evaluates quality management, supplier selection, internal QC, capacity, use of data, equipment maintenance, and employee training. This audit is used to determine if the manufacturer is ready to accept orders based on their internal production capabilities, supply chain, and validation of new products.
3. Social Compliance Audit
A Social Compliance Audit focuses on a factory’s compliance with social, environmental, and legal standards. This audit is essential for the protection of a brand. The auditor evaluates labor policies, safety policies, environmental policies, health and safety, working hours, and compensation. This audit ensures that the factory adheres to minimum wages, and it reviews payment records. The audit report is used to determine if the factory complies with social, environmental, and legal standards.
In conclusion, factory audits are essential in ensuring that factories comply with specific industry requirements. The three most common types of factory audits in China are the Initial Factory Evaluation, Factory Technical Audit, and Social Compliance Audit. These audits evaluate various aspects of the factory, including quality management, supplier selection, internal QC, equipment maintenance, employee training, labor policies, safety policies, environmental policies, health and safety, working hours, and compensation.
Is it a One-time Factory Audits or Part of a Program?
When assessing a potential supplier’s qualifications, a one-time factory audit is sufficient. However, if a buyer wants to keep a close eye on a manufacturer’s dynamics, it is recommended to have someone check in with major suppliers at least once a year. This ensures that the manufacturer’s systems and practices are maintained and that any changes are noted.
On the other hand, setting up a program of factory audits can drive factories to improve their processes and systems. This is often referred to as a tiered process audit. Quality control can also be considered after a Chinese supplier verification. It is important to note that a program of factory audits is not necessary for every buyer and should be evaluated on a case-by-case basis.
Factory Audit in China Conclusion
Ensuring that goods are of good quality, safe, compliant with associated requirements, and created in ethically and environmentally friendly conditions is crucial for companies running global businesses. China factory audit helps to avoid scams from Chinese suppliers and guarantees that all products are made under ethical and environmentally friendly conditions. To achieve a sustainable strategy throughout factory audit, companies should contact professionals who can help them achieve their goals.