Factory Audit Full Analysis

When selecting a new supplier, it is critical to vet them as thoroughly as possible. Imagine placing your first order with a factory that appears to meet all of your criteria, but they deliver months late and the product you end up receiving is well below your quality standards.

Or, you may have worked with a manufacturer for many years and they have a history of great performance. You expect them to continue to provide quality products, but over time, despite their initial success, their quality has gradually declined.

A factory audit is a tool that can help you avoid these problems. It involves visiting a supplier's production site and evaluating whether it can meet your sourcing needs through a number of criteria. This article will explain how a factory audit works, what the different types of assessments involve, what the audit checklist consists of, and more details.

What is a factory audit?

A factory audit (also known as a factory inspection) is a supplier assessment conducted at a manufacturer's production site. The auditor will investigate its existing systems, production capacity, working environment or capabilities to ensure that they meet your requirements as a buyer.

Companies often use factory audits as the final step in screening potential suppliers, but also as a tool for ongoing supplier management.

Importance of Factory Audits

Factory audits allow you to verify that a manufacturer meets your needs before engaging with them, and help you understand if their capabilities remain stable over time.

You may have specific requirements for quality management, social responsibility, environmental responsibility or production capacity. Through factory audits, you can evaluate suppliers and get a clear understanding of the actual operation of their factories.

When is a factory audit required?

Importers usually choose to conduct factory audits in the following two situations:

1 As the final step in screening new suppliers

During the procurement process, you may find multiple suppliers who can produce your product. After multiple rounds of evaluation and sample testing, you will finally lock in one.

The supplier may appear to meet your production, quality and delivery requirements on paper, with reasonable quotes and excellent samples. But before you formally sign the contract, you can confirm whether they are hiding any problems through a factory audit.

Going to the factory in person or hiring a third-party agency (such as TESTCOO) to provide factory audit services will help you evaluate its actual capabilities and production capacity. Based on the audit results, you will be more confident in deciding whether to place an order.

2 As part of ongoing supplier quality management

As you work with suppliers, you need to ensure that their capabilities continue to meet your standards. You can conduct audits at a predetermined frequency (for example, every two years) to confirm that they are still meeting the standards.

Auditing a manufacturer can help identify issues in their quality management system. By proactively assessing them, you can address them before they impact your deliveries.

5 Types of Factory Audits

Depending on your needs, you can choose from the following five audit types:

• 1 Capacity Audit – Verify whether the factory can produce your product within the set time.
• 2 Quality Audit - Confirm whether the supplier has an effective quality management system (based on ISO9001 standard).
• 3 Security/C-TPAT Audit – Ensures compliance with the U.S. Customs and Border Protection’s Customs-Trade Partnership Against Terrorism (C-TPAT) Program.
• 4 Social responsibility audit - evaluate working conditions to ensure there is no human rights violation such as child labor (based on SA8000 standard).
• 5 Environmental Audit - Verify whether the factory complies with environmental standards and requirements.

What should a factory audit checklist include?

The steps of an audit vary by type - five audit focuses have been discussed above. Quality audits are the most common and usually include the following:

• Plant layout, maintenance and cleanliness
• Quality Control System Documentation and Practices
• Raw material handling and inspection
• Quality control procedures during production
• Final inspection process
• Packaging area and process assessment
• Disposal of unqualified materials
• Communication, document management, control and workflow
• Complaints Handling

What is the difference between a factory audit and a quality inspection?

Here are three main differences between factory audits and quality inspections:

1 Factory audit focuses on long-term

Factory audits usually assess the potential supplier's ability to deliver high-quality products over a long period of time, focusing on its ability to meet requirements and maintain quality. Product inspections only focus on a certain batch of goods.

2 Factory audits focus on the overall situation

Factory audits cover areas such as quality management systems and manufacturing practices, helping you determine whether a supplier is suitable for producing your products or find room for improvement in the partnership.

3 Factory audit is not only about product quality

Another reason for a factory audit might be to ensure that suppliers are operating in compliance with regulations. For example, a social compliance audit can verify compliance with health, environmental and safety standards.

How to prepare for a factory audit?

Factory audit is an indispensable part of supply chain management. It not only affects the stability of product quality, but also directly affects the long-term reputation and market competitiveness of enterprises. Whether it is screening new suppliers or supervising existing partners, systematic and multi-dimensional audits can effectively reduce risks and ensure the sustainability of cooperative relationships.

In this process, it is crucial to choose an experienced professional organization. As a global leading supply chain quality management service provider, we provide customized factory audit solutions for enterprises with our audit experience covering multiple industries and localized teams. From capability verification to social responsibility review, from environmental compliance to quality system assessment, we help enterprises accurately control supplier capabilities and avoid potential risks with rigorous processes, transparent reports and efficient communication.