Everything You Need to Know About Factory Audits

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Everything You Need to Know About Factory Audits

We have talked a lot about manufacturing. For example, things you should know before manufacturing in China (or anywhere else in the world), how to prevent manufacturers from avoiding working with you, and a thorough comparison of manufacturing between in China and Vietnam. One of the most important points we are trying to make is that you should take your time to know your manufacturing partners before doing business with them. However, easier said than done, and how do you get to know them? One of the things you can do is to conduct a factory audit.  

What is a factory audit?

A factory audit is an inspective activity you (or someone you hired) conduct on the prospective manufacturing partners. The purpose is to evaluate the capabilities, capacity and other aspects (usually based on what you need from them for your project) of the factories.

The results of the audit will serve as a vital indicator for you to decide if you would like to work with the factories. Sounds easy, right? But the real struggle is how you do it?

How to do a factory audit?

Usually, there are three approaches – use an inspection service provider such as SGS, find a middle company that has their supply chain management team, or do it yourself.  Let’s take a look at them one by one.

Hire an Inspection Services Provider

Money probably can’t buy happiness, but it sure can buy convenience. Hiring a professional third-party inspection service provider can help save your time and energy. You can count on them to perform a rigorous inspection of the factory and get back to you with a comprehensive report of high quality.

However, there are downsides to working with such companies. First, one’s speciality can be a limitation. They might lack the understanding of your business and needs and fail to interpret the data in the right context. Also, services like this can be costly. A lot of big companies choose to work with inspective service providers to ensure the factories comply with international standards in different industries. It can cost approximately 200 USD per person-hour. For startups, you need to decide wisely if you want to be a big spender on this one.

Work with a Middle Company

Find a trusted and professional partner in your destination. This type of companies is usually equipped with a very strong SCM (Supply Chain Management) team to manage your project, no matter it is a mass production run or prototyping production run. More importantly, the team conducts regular factory audits to make sure the suppliers are qualified. Therefore, you don’t have to place factory audits on your plate and worry about the qualifications of the suppliers and factories. When sourcing for your project, a middle company can cater to your need and find not the biggest but the best supplier for you.

Do It Yourself

Some companies prefer conducting factory audits by themselves. They usually have an in-house SQE (Supplier Quality Engineering) team. The team often consists of members with different backgrounds such as engineering, SCM and quality control etc. They will represent the company and perform audits on the factories/suppliers. On the one hand, having your own team conduct factory audits lets you take control of the process and make sure the company is evaluated according to your own needs. However, on the other hand, what you have to understand is that by doing it yourself, you are also taking the risk on yourself.

However, no matter how you plan to do it, below are a few things you should keep in mind,

Do not skip factory audits!

Let’s face the fact for a minute here. You will not trust everything the factories or suppliers tell you. They maybe tell you they work with Apple and Samsung and build good relationships with them, but that doesn’t mean anything. Trust the results of your factory audits.

Are they real factories/suppliers or agents?!

Supposed that you found a supplier on Alibaba and everything has been moving forward smoothly, at least via email or phone calls. Let me stop you right before you are about to sign on the contract. Are you sure you have been talking to a real supplier the whole time?

Things like this happened to one of our clients before. They were in contact with a supplier before coming to us and signed the contract after a couple of weeks without conducting a factory audit with them. Just a few days later, the supplier called and told them they were not able to finish the project and would like to cancel the contract. The client found us, and our bilingual specialist called the “supplier”, and they confessed that they were just an agent, not a factory. Our client’s project was way beyond their capabilities, and they didn’t even realize in the first place.

Therefore, make sure to let them know that you would like to do a factory audit and more importantly you need to be there to see and talk to them.

Conduct the factory audits regularly

If you rely on yourself to find suppliers and want to save yourself some time and money in the long run, try to conduct factory audits regularly. Let’s say, if you have worked with five factories and did factory audits with them every six months, you will have a record of their performance and the quality of the products for each of them at the end of the second audit. Rank them based on the record and choose the highest ranking one to work with first, maybe even without auditing them.

Have you conducted a factory audit? What approach did you take? Let us know your experience in the comment section below. If you have any questions about factory audits, contact us today and talk to our experts!