Factory Audit | Why is it needed | Criteria and 5 Key Types

What is a factory audit?

If you want to make sure that your suppliers are reliable and competent before integrating them into your supply chain, then factory audits are one of the best ways to get a complete picture of suppliers’ sourcing and operations policies and ensure they are in line with your company’s brand image.

It allows an independent third-party auditor to objectively assess key goals for safety, security, ethical operations, compliance with government regulations, upholding your company’s standards, and avoid costly supply chain disruptions.

Why is it necessary?

Choosing a supplier in China is a difficult task. There are too many suppliers to remotely understand the state of the factory. A quality website or catalog is not a guarantee of a quality plant. We always recommend to do at least a basic check of your supplier with the business license and certificates check available at www.verificasia.com

A physical factory audit allows to:

  1. Identify risks by pointing out gaps that could have a major impact on business performance.
  2. Highlight the most important issues in order to further put pressure on the supplier in order to eliminate the main sources of risk.

What are the criteria for a factory audit?

The general factory audit procedure includes the following parameters:

Types of factory audits

  1. Products audit (also known as inspections)

It is carried out after the completion of production, but before the product are shipped from a factory. If the products do not meet standard requirements or specifications, the inspector points out the findings, indicates the defects and records the nonconformity.

After inspection, it is always possible to negotiate with a supplier about re-working/ exchanging the defective products, ask for a discount or ask the supplier to ship extra quantity (in the determined percentage of the defects) free of charge.

We usually recommend to conduct a re-inspection after the supplier claims the products to be re-worked/ corrected to make sure those unacceptable defects no longer exist in your batch.

The inspections are usually conducted by random sampling according to the AQL system, which can be found as below:

  1. Audit of production and processes

During a factory audit, auditors determine whether a supplier is capable of producing a product that meets your company’s specifications, fixing costly failures, and preventing (further) costly failures once production has started.

Process audits look at the details of the manufacturing process, such as:

  • Manufacturing steps
  • Precautionary measures
  • Temperature settings
  • Pressure readings
  • Sensor calibration

Benefits of a production audit:

  • Checks if your supplier’s production facilities are suitable for the production of your product
  • Ensures that your company’s purchasing policy matches that of your supplier
  • Identifies and reduces potential qualitative, operational and ethical risks
  • Assesses the competence of the plant management
  1. Social compliance audit

Introduced more than two decades ago due to the growing pressure on all companies to be socially responsible – providing a healthy, safe and ethical work environment along with sound work practices and pay. Ensures proper working conditions and has since grown into a global industry dominated by about a dozen multinational corporations competing for audit contracts.

Every year, inspectors from Bureau Veritas, V-Trust, Intertek and TÜV Rheinland inspect thousands of companies in Asia and the subcontinent.

Benefits of social audit:

  • Builds collaborative relationships with suppliers
  • Ensures decent working conditions and respect for human rights in your supply chain
  • Helps determine legal compliance
  • Helps to gain an accurate understanding of ethical compliance
  • Prevents unauthorized subcontracting
  • Improves your company’s image and consumer loyalty
  1. Environmental audit

By monitoring and improving the environmental impact of your supply chain, environmental audits help assess compliance with local environmental laws and regulations.

Benefits of an environmental audit

  • Provides the ability to combine audit results with laboratory testing to get a complete picture of your supplier’s environmental performance.
  • Leads to improved environmental performance
  • Verifies compliance with local and international environmental regulations
  1. Structural safety audit

Structural audits are intended to assess the structural integrity and safety of your suppliers’ buildings and sites. This includes verification of structural integrity, fire safety measures, and other conditions.

Benefits of a structural audit

  • Ensures that the health of employees is not in danger
  • Protects your brand image and reputation
  • Provides a safe working environment that helps prevent minor and catastrophic injuries
  • Helps you get an accurate picture of the security situation in your supply chain
  • Prevents supply chain disruptions
  • Checks compliance with legal requirements

In this way, factory audits help ensure that your supply chain is in line with local and international standards, your company’s standards, and quality assurance system.

Sourcing.eco conducts rigorous quality and sustainability screening of suppliers to help you shortlist and check the most responsible and conscious suppliers to place order with. You can conduct a deeper business background and certificates verification at our partner website www.verificasia.com.