Factory Audit in China: An Introduction
an auditor evaluates the workshop in a factory.

Factory Audit in China: An Introduction

So, you have done due diligence and found a good factory. On paper, the manufacturer seems to be a right fit for your product. Everything seems great. But are you really sure? What proof do you have that the factory is all they say they are?

Probably not that much. And that’s why you should do a factory audit.

What is a factory audit?

A factory audit is an on-site evaluation of a factory. The objective of a factory audit is to verify whether a manufacturer is able to make a specific order as per your requirements.

Therefore, a factory audit usually focusses on one specific product (category). For example, if you want to produce e-bikes, and you found a manufacturer that produces both electric skateboards and electric bikes. Then the auditor will focus on evaluating the manufacturer’s capability and capacity to produce your particular order of e-bikes.

During a factory audit, the auditor (this could be you, a colleague or a third-party professional auditor) will travel to the factory. Upon arrival, the auditor will collect information about the factory and work through a checklist of items that the factory should comply with.

Typically, this checklist is based on international standards and requirements set by you, the client. In the end, all findings of the factory audit are documented in a report to provide a detailed overview of the manufacturers’ capacity and capabilities.

Takeaway

A factory audit is an on-site evaluation of a factory. It provides valuable insight in the ability of a manufacturer to produce your order according to normative requirements. By providing a way to examine a factory’s organization, facility, quality systems and experience, a factory audit allows you to compare different manufacturers and determine the most appropriate one for your project.

What is checked during a factory audit?

Factory requirements may vary across different industries. For example, if you buy medical equipment, you need to make sure your manufacturer complies with strict rules and regulations. For clothing brands, on the other hand, it has become more and more important that the working conditions inside a factory are ethical. To cater to these needs, different types of factory audits exist, all with a specific focus area.

I have listed the three most common factory audits in China below:

  1. Initial Factory Evaluation

The Initial Factory Evaluation is the most basic factory audit of the three. It focusses on general, but vitally important aspects of a manufacturer for the supplier selection process. The audit report typically includes, but is not limited to:

  • Factory profile (i.e. address, main products, main export countries)
  • Staff count (i.e. number of production line workers, engineers, qc personnel)
  • Production process (i.e. description of production steps)
  • Equipment & Machinery (i.e. number, type & condition of machines)
  • Quality Management (i.e. procedures, work-instructions)
  • Official Documents (i.e. business license, export license & certificates)
  • Facility (i.e. photos of the workshop, QC room, warehouse)
  1. Technical Quality Audit

A Technical Quality Audit, or Quality System Audit, provides a more in-depth evaluation of the factory’s quality system, management techniques, equipment maintenance and document control. Based on the specific industry/product, different standards (checklists) may be applied. For example, AS9001 for the aerospace industry or ISO13485 for medical equipment.

By far, the most widely used standard to evaluate a Chinese manufacturer’s Quality Management System is ISO9001. Checking your manufacturer against this standard allows you to determine the strengths/weaknesses of the manufacturer. Above all, it gives you a clear view about the manufacturers’ capability to produce your order in time, on quality and at cost.

A Technical Quality Audit includes the same ‘basic’ information as the Initial Factory Evaluation. In addition, the auditor evaluates the factory’s:

  • Quality Management (i.e. objectives, goals, action plans)
  • Supplier Selection (i.e. what procedures are in place to vet sub-suppliers)
  • Internal QC (i.e. quality procedures, revisions, history of changes)
  • Capacity (i.e. evaluation of a production line making a product similar to yours)
  • Use of Data (i.e. documentation & analysis of inspection yields, defect rates, resource needs, corrective actions)
  • Equipment Maintenance (i.e. calibration records & certification of equipment)
  • Employee training (i.e. training manuals, records, work instructions)
  1. Social Compliance Audit

A Social Compliance Audit (sometimes called Ethical Audit) focusses on a factory’s compliance with social, environmental and legal standards. A widely used standard to audit against is SA8000. Checking a factory against this standard allows you to determine whether the working conditions in that factory are ethical and in compliance with local law. This is imperative to protect your brand’s reputation.

A Social Compliance Audit includes the ‘basic’ information of an Initial Factory Evaluation. In addition, the auditor evaluates a factory’s:

  • Labor Policies (i.e. signs of child labor, forced labor)
  • Safety Policies (i.e. evacuation plan, fire prevention, protective gear)
  • Environmental Policies (i.e. waste disposal, hazardous chemicals, energy use)
  • Health & Safety (i.e. in workshops, building & dormitories)
  • Working hours (i.e. document review & employee interviews)
  • Remuneration (i.e. respect of minimum wages, review of payment records)

Conclusion

 A factory audit is an on-site evaluation of a factory. It allows you to verify whether a manufacturer can produce an order according to your requirements.

In this article, I outlined 3 common audits you can consider before placing an order:

  • Initial Factory Evaluation (to verify general capacity & capabilities)
  • Technical Quality Audit (to verify quality management)
  • Social Compliance Audit (to verify working conditions & labor practices)

An Initial Factory Evaluation might be most appropriate as a pre-audit to compare multiple suppliers on your shortlist. Or when you plan to work with a relatively small factory. However, if your order will be of considerable size, I would always go for a more in-depth evaluation of the factory.

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Written by
Maarten Beekers
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