What are Factory Audits and Why are They Important?
You’ve done your due diligence and found a good factory to work with. Congratulations.
On paper, it looks like they’re everything you could look for in a manufacturer. They’re perfect for your product. And it seems like this might just be a match made in heaven.
Time to place an order, right?
Hold it right there, because there’s something else you need to do first. It’s time to verify that this seemingly perfect factory is actually everything they say they are…
It’s time for a factory audit.
What is a Factory Audit?
A factory audit is a snapshot of your factory at a particular moment in time.
An experienced auditor visits with their checklist full of items to verify and check. And they have an important goal… To verify whether everything the company said about themselves is true.
Your supplier could just be trying to win your business. And all those yeses they gave you may not be completely accurate. Or, maybe they don’t know their stuff, and so “yes” is their default answer.
Either way, the audit will help you answer two important questions.
- Do they have the capability to make your product? And,
- Do they have the capacity they’d need to produce it on time?
After this factory audit, you’ll know for sure.
A factory audit also identifies areas for improvement so that you can encourage progress over time (if you do decide to work with them).
There are two main types of audits that will help you make a go/no-go decision on placing that order. They are:
- Capability Audits – To verify the factory has all the equipment and resources they need to produce your products.
- Capacity Audits – To make sure they have sufficient capacity to produce your orders on time.
You definitely need to audit for capability and capacity. But there’s more.
You can go beyond these two areas… and you should!
3 Types of Audits You Shouldn’t Overlook
You want to have a supply chain that you can be proud of (and one that won’t get you into any trouble).
By having a third party company perform one of the following audits, you can make doubly sure that you’re in good shape.
Do you want your products to be made to minimum quality standards?
The auditor will measure the effectiveness of the factory’s Quality Management Systems (QMS).
They’ll evaluate them based on the ISO 9001 standard. And you’ll come out with a much clearer picture of whether or not there are any quality risks to your supply chain.
Is this manufacturer out of compliance with local labor laws? Do they have kids in the factory? Are employees working 12-hour shifts, 7 days a week without adequate breaks?
Performing a social compliance audit based on the SA 8000 system will provide evidence that the factory is not in violation of local labor laws.
Do you want to ensure compliance with C-TPAT?
C-TPAT (Customs-Trade Partnership Against Terrorism) is a US government initiative aimed at improving the security of private companies supply chains with respect to terrorism.
It’s a voluntary program led by U.S. Customs and Border Patrol.
If C-TPAT compliance is a client requirement, then a security audit would be in order. It will tell you for sure whether the factory is meeting program requirements. And you’ll get the details you need to secure your supply chain.
Why do You Need a Factory Audit?
Let’s be real here for a minute… You can’t always trust everything your factory says.
First of all, they could be exaggerating to win your business. Don’t discount the possibility that they might be willing to lie to make a quick buck.
But, even when the people in your factory have good intentions, they will sometimes answer “yes” to your questions when the answer should be “no.” This is common in China and other Asian countries as a way to save face when they don’t know the actual answer or don’t want to disappoint.
Remember that you’re dealing with people who speak English as a second language. So, they may be misunderstanding things and not be digging deeply enough to even realize it.
That’s why you need to be sure you’re on the same page when it comes to standards and definitions.
Conducting an audit removes the likelihood of disappointment over unmet expectations. It makes things crystal clear for everyone.
Should You Just do One Initial Audit or do You Need More?
It’s essential that you perform a factory audit before working with the factory. Once your relationship begins, you should also do occasional follow-up audits to ensure compliance and track improvements.
Regular audits will help you improve efficiency and productivity with your supplier. And they’ll help you minimize risk in your supply chain.
You can also be sure that you’re in compliance with laws and regulations. And you can be more confident in your ability to guarantee quality.
If you want to ensure that you’re choosing the right factory, do an audit. It will give you a valuable snapshot to help you know what’s really going on there.
You’ll know whether the factory has the capability to make your product and the capacity to make it on time. And if you choose to work with them, you’ll have a way to encourage improvements over time.
You can ensure the quality, social compliance and the security of your supply chain. And you can put yourself in a position to be successful with your product.
What are you waiting for?
It’s time to move things forward and schedule your audit! Insight Quality is fully equipped to perform all of the audits mentioned in this article. If you’re interested in an having an audit for your business let’s talk. Schedule a quick initial conversation here.
Recommended Reading - The Sourcing Process: Step by Step
What is product sourcing and what does this process entail?
The entire sourcing process – from sourcing agent to shipping – aims at finding, evaluating, and engaging suppliers of products.
Download this free guide to get a clear picture of sourcing and how all of the pieces fit together to ensure the delivery of quality products to the end user.