Looking for the ideal manufacturing partner in China is never easy. In the old days buyers would always visit their suppliers and factories before starting to work with them. With free flowing information, many buyers are over confident and tend to skip steps. Whilst you can skip a factory visit to save time and expenses, ODM suggest that you should at least delegate this job to somebody else to make sure you avoid problems later on.
Maybe your current supplier does not satisfy your needs. Maybe you are looking for a new factory to make an entirely new item for you. In both cases a factory audit should be a mandatory step in order to make an informed decision.
Please find some a few of the necessary steps detailed below so that you (or your agent) can can make this audit as efficient and complete as possible.
Before auditing :
Before auditing a specific partner, you need to choose which factory you will actually be auditing. This is usually done through internet, phone, mail exchange, some sample production and most importantly the capability of the factory to produce the item you are sourcing. Once you target a couple of potential candidates, a good idea is to layout the objectives of the audit for each factory.
What exact characteristics are you looking for? What details will clearly eliminate them? How will I know this is a worthy business partner?
In order to achieve this, the best idea is usually to layout on a piece of paper the various details you would like sorted out per category and fill them in as you audit. Please find below some of the categories you should include:
Auditing, some key features:
At this time you can collect and inspect all certification, papers and other official documents about the quality of the facilities, its production capabilities, organizational policies, etc.
Technical review: We are now entering into most important part of the auditing, the one in which you will be directly in contact with the front line and thus better able to assess the skills and capabilities of the factory.
Be sure to walk around the factory and see how products are assembled. Do the facilities and production tally with what was described in the earlier meeting. Here are some points
ODM would cover:
- Facilities, infrastructure, cleanliness, security: Power capabilities, overall state of the building, its age, security measures (guards,video tapes, etc.), surrounding infrastructure in term of roads, train, plane and finally the overall feel of the place (clean, tidy, messy, etc…)
- Suppliers: Ask the factory how many suppliers do they have, if one dominates the other, how critical are they in providing specific items, their current relationship, etc. (the more diversified and small the suppliers, the better).
- Administration, ownership, structure: Ask about ownership breakdown, manufacturing licenses, export licenses, organizational chart, volume of sales destined to export, whether administrative staff is present 0n the manufacturing premises or if they are at different locations (logistical purposes). You should also request for information about current and previous customers (a factory with nothing to hide will easily provide you this). Another idea is to ask for their usual export destination (to test ability to do business with countries as stringent as yours in term of regulations).
- Manufacturing equipment, capacity: More time needed to be spent here, ask for the details of the machinery, paperwork for it, assess its capacity (compare what they say with what paperwork mentions) and ask for production record. If you require high precision, you should measure capacity and output of each manufacturing step involved in the production process. Insure that you evaluate the proficiency of the factory to manufacture the specific item you want produced.
- Quality Control: Make sure a clear separation exist between QC and production department, check previous QC records, ask for the factory processes for QC (ask for paper version of it, not a good sign if factory can not provide you with any written quality control process). Make sure the factory is knowledgeable about product safety standard in your export market. Evaluate factory’s testing processes more specifically on the item you plan on producing. Might be helpful later to understand when something went wrong.
- Environmental controls: Depending on your demands, either go over it yourself or mandate a 3rd party auditor for more detailed report. This mainly concerns energy efficiency, waste disposal, air pollution, Carbon emissions, etc.
- Any extra questions you may have regarding your project
- Social compliance audit, better kept separate from the manufacturing audit. This is just as important as your manufacturing process. You want the factory to treat their employees respectfully and to comply with local labor laws and practices. Disregarding this key variable might not seem important initially (except for your conscience) but might be the source of discredit, loss of consumers or brand damages at the bottom line.
- Some factories are just really messy – how will this affect the management of your order? The general conditions of samples, warehouses, offices etc… all reflect on the expertise and management style of the factory.
- Provide the factory with your report so they can include their own comments and be allowed to respond to some of the remarks made. They must acknowledge their own findings as well in order for the audit to be representative of all parties involved.
- Pictures: Take plenty of them throughout the visit. Very useful to keep track and illustrate your visit in your final report.
Although long, this article is only a quick resume of the various steps to take while visiting a factory. Each factory audit is different. Remember that your decision for the factory must be balanced between its ability to produce the item to source, its management knowledge, its social compliances practice, etc. Try to get the balance of all these issues right.
An increasing number of production facilities are moving away from the Chinese mainland toward countries offering cheaper labor cost. If you look at our article on Minimum Wages, you can also see the mobility trends in China. This leads many chinese manufacturers to close shop every day.
No article on Factory Audits would be complete without a mention of Outsourcing. It is common for factories to outsource some production of components to other factories. This is normal and required. However, it is important that the factory doing the final assembly, and the management team overseeing the procurement of components and managing the project be the ones you audit. Too often, companies will audit an amazing factory, only for the order to be outsourced to a poor quality one down the street. Regular on site QC services are critical to keep this in check.
Do not hesitate to contact ODM and we will gladly work with you on China Procurement.