Factory Audits

Notes on conducting Factory Audit during the supplier identification phase by Mike Bellamy (Operations Director at www.PSSchina.com and CSIC advisory board member)

It is essential to do a factory audit to review the QC system of your top potential suppliers in advance of placing a Purchase Order (PO). Depending on your budget constraints, you may choose to audit all the top candidates or perhaps just one or two. But it is essential to have some kind of on-site audit done. As the costs are generally hundreds of USD per audit when hiring a 3rd party auditor, rather than thousands, I tend to audit the top four or five suppliers to give myself the best odds of finding that perfect match.

To give the reader a feel for what a typical factory audit consists of, I would like to provide two examples.  One is the resulting report of a “simple factory audit” conducted by the professionals at Asia Quality Focus (www.AsiaQualityFocus.com). The second is a template for a “comprehensive audit” used by a US buyer of high-end electronics. It is full of very technical QC concepts and in a bi-lingual. Keep it handy if you find yourself in a factory that doesn’t have polished English skills, you just may be able to use your fingers to point out the key QC terms if you can’t communicate them well in spoken or written English alone.

In advance of reviewing the two documents, understand that the intensity of your audit depends a lot on the industry you are in. For example, electronics, medical and automotive standards are much more rigorous than plastic picture frames. And it wouldn’t be effective to hold a plastic picture frame factory to the electronics sample below.  The simple factory audit will give useful insight into any factory and catch any major red flags, while an industry specific extensive audit would be used to select the best supplier from a group of suppliers that have all passed the simple audit.

Please keep in mind that the templates below are used by engineers, trained in auditing. But it is my hope that simply reading over how the experts do it, readers can pick up some themes that they could apply to their own projects. For reference, know that the going rate at the time of writing for Professional to conduct the simple factory audit below is just 188 euro per man day and the vast majority of audits are conducted in 1 or 2 days, depending on the size of the factory in question. So unless you are familiar with QC standards and how Chinese factories are set up, it is probably best to leave quality systems auditing to the experts. But, if you are on a tight budget and don’t have the funds to hire the experts, here are some tips to keep auditing costs down:

i.              Audit only the top 1 or 2 factories.

ii.              Join the auditor for the initial factory audit, study their methods, learn the template, and do the next factory audit yourself.  I don’t advise this option, but it is an option when on a tight budget. Most auditors will be happy to have you tag along, because if they are professional and do a great job, the buyer will see the clear value and probably opt for the auditors to do the rest of the audits.

iii.              Make your own template based on the samples below and conduct your own audit as a last resort if you are flat broke and can’t hire a professional for a few hundred USD。(I’ve been in sourcing for 10+ years and I still leave this function to the auditing professionals, so don’t feel embarrassed about getting help! It may be turn out to be the best money you spend in China.)

Please click these links to view the Sample Audit (provided by www.AsiaQualityFocus.com) and the Sample Supplier Evaluation Form.

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