A factory audit is an on-site investigation of a supplier’s factory to assess the supplier’s production capacity, product quality, management compliance, etc. It enables you to gain a clearer understanding of your Chinese supplier’s business and policies, and provides information for adjusting strategies and corrective actions when necessary.
Factory audits can more clearly reflect the production and operational capabilities of potential suppliers than traditional background checks, and more effectively expose suppliers for business risks such as deception and misinformation, reduction of poor quality products, delivery delays, and supply disruptions, etc., so as to recognize falsehoods, refute fallacies and take corrective actions in a timely manner.
Verify suppliers and assess qualifications to determine whether to work with them;
Audit suppliers to understand the production process to ensure the safety of the business;
Monitor suppliers to check for business anomalies to identify potential risks.
When purchasing from Chinese factories or importing products from China, visiting Chinese factories from overseas can be a challenge. China factory audit service can help you to reduce procurement risk and improve negotiation support by allowing you to obtain the real environment and operation status of Chinese factories and Chinese suppliers as if you were on-site without leaving your office.
China factory audits of Chinese suppliers can be used not only to qualify potential suppliers and ensure supplier compliance, but also to manage existing supplier relationships.
China factory audits are thorough and effective, second only to your in-person factory and shop floor visits.
A factory audit is an inspection of factory facilities, workplaces and other conditions, which allows for a more comprehensive understanding and assessment of whether the Chinese supplier is ensuring compliance with the buyer’s requirements. By truly documenting and checking the true condition of the Chinese supplier, first-hand information is obtained from the factory site, including verification of the company’s true address, the factory’s on-site environment, the office operations, the scale of the production business, verification of the supplier’s company documents, product licenses, production capacity, product quality and other factors, and to examine factory production, capacity and operations to minimize costly mistakes that may occur in trade cooperation.
A factory audit is usually the final step in qualifying a potential supplier or managing the business in an ongoing supplier relationship. Typically conducted after the “company validation” process has been completed, it is an on-site form of due diligence, especially for new suppliers.
Types of factory audits are usually environmental audits, social audits, internal audits, quality audits, and ethics audits. Factory audit services are generally available in the form of initial audits, periodic audits, follow-up audits and other services.
When you are considering a new Chinese supplier, it is critical that you vet them as thoroughly as possible. The supplier may appear to be able to meet your production, quality and delivery requirements on company documents and product descriptions, and may be able to offer reasonable prices and produce good quality samples, but conducting a factory audit to check and verify all aspects of the environmental facilities, office operations, and staffing of the production site and operating location before you sign a contract and make payment will ensure that they do not mislead you.
New supplier audits typically check in the following areas:
■ Identifying suppliers:
You will find out who your suppliers really are, are they trading companies or manufacturers? Sourcing directly from the manufacturer cuts out the middleman and reduces sourcing costs and business risk.
■ Background information verification:
Check the relevant qualifications and documents to find out details about the supplier’s production capacity, factory equipment, business processes, financial sales, product quality, production safety and factory owners.
■ Production Quality Assessment:
Understand the supplier’s raw material sourcing, product production and operation policies, and assess whether the supplier has sufficient capacity to meet your needs and can ensure timely and stable delivery of qualified products.
■ Sourcing Agent Support:
Visit your China factory or office and interview the supplier’s management team to understand the real situation of the factory and products, prevent fraud and misleading, and help make informed business decisions.
Regular or occasional re-audits of suppliers can ensure that ongoing suppliers have the capacity to meet your business growth, help build long-term stable relationships and enable continuous improvement. If there are already signs of delivery delays, supply disruptions, etc., proactive supplier audits can identify problems in a timely manner, and you will have the opportunity to quickly build in mitigating measures to resolve them before they become a problem for your business.
Ongoing supplier audits typically check in the following areas:
■ Business follow-up:
Supervise suppliers to deliver products on time, ensure product quality and logistics for smooth business completion.
■ Negotiation Support:
Assist in handling your sourcing strategy, business disputes, and transaction fraud with China suppliers and China factories.
1. Assessment areas:
The audit team usually conducts a preliminary review and assessment of the factory’s business license, registration documents, corporate background, legal disputes and other documents. Based on the preliminary audit results of the supplier assessment, the audit team determines the detailed key areas and the subsequent factory audit checklist, and develops a specific supplier on-site audit program.
2. On-site inspection:
During an on-site inspection, the audit team usually starts with a site visit to the factory, reviewing relevant factory documents, checking production equipment, manufacturing processes and quality standards, and looking for any potential safety and quality issues.
3. Inspection Report:
Upon completion of the factory site inspection, the audit team will prepare a factory site review report outlining their findings. The site review report will assess the potential impact on business safety of any non-compliance issues found.
4. Factory Improvement:
The factory will be given the opportunity to address any issues from the on-site inspection and make any necessary improvements.
The follow-up of the on-site inspection is intended to ensure that the plant has implemented improvements to the corrective actions proposed and that any non-compliance issues identified during the initial on-site audit have been effectively addressed.
■ Information collection:
Includes publicly available data from official government agencies, Internet search engines, and a wide range of other sources of information;
■ Information review:
Accessing and reviewing suppliers’ production licenses, product quality test reports, financial status, and other relevant information.
■ Observation and recording:
Visit factory production sites, inspect production equipment and facilities, and observe the production environment, employee conditions, and product quality.
■ Interviews with factory employees:
Conduct interviews with the supplier’s management, production staff, accessory population, etc. to learn more about the relevant situation.
■ Seller verification :
A factory audit confirms who is selling and exporting your products to you, a middleman would greatly increase the risk to your business!
■ Cost Reduction :
Unscrupulous suppliers and sellers will waste your money and time, factory audit will enable you to verify and select the most suitable suppliers, from avoiding fraud and reducing product cost.
■ Save money and time：
Checking Chinese factories, you no longer have to spend thousands of dollars on flights and several days of your time.
■ Seeing is Believing：
We help you substantiate the various claims made by suppliers as well as analyze the capabilities of potential suppliers.
■ Increase business safety：
Minimize the risks of fraud, low-quality products, delivery delays, supply interruptions, transaction security, and product quality in collaborations.