Factory audits are a very standard service offered by all third-party quality control agencies. They are typically used by buyers who want an evaluation of a manufacturer, before they start a business relationship.
Different aspects of a manufacturer’s operations can be evaluated. Here are the most common:
- Reliability (is there a good quality management system?)
- Processes (how well do they perform certain key processes?)
- Capacity (how many pieces can they produce in a day?)
- Workplace conditions (do they respect the local law and some international standards?)
How often to audit a factory?
Large retailers usually conduct a first audit before placing the first order with a new supplier, and they re-audit the same facility at a certain interval.
For example, if several serious issues were raised, the interval may be 6 months. If the result was very positive, there may be no re-audit at all.
But some importers are more hands-on. They want to push their manufacturers to improve constantly. They audit and re-audit the processes and the quality system. It is a loop:
- After the first audit, a few high-priority issues are noticed, and the factory signs on mutually-agreed corrective actions;
- The factory is expected to implement corresponding corrective actions and, if possible, to send regular status updates about this implementation;
- During the following audit, the above-mentioned corrective actions are evaluated;
- The auditor also keeps looking for opportunities for improvement (holes in the quality system, poor process setup…), and discusses new recommendations;
- And so on.
It forms the basis for a good supplier development program. Brad Pritts, an experienced quality auditor, is the one who opened my eyes on the effectiveness of such programs. He often comes to China and runs such programs with his company’s suppliers.
Is it really useful to audit the same factory every month?
If you get really serious about continuous improvement, you can send an auditor back once a month. Naturally, your supplier will accept this more easily if you buy 40% of his capacity than if you buy 1% of his output…
Every time, the auditor will focus only on one thing:
- Month 1: the instruments (are they correctly calibrated, correctly used…?)
- Month 2: the quality control records (are they correctly filled out and archived?)
- Month 3: maintenance of production equipment
- Month 4: standard work instructions for operators
- Month 5: staff training
- Month 6: mistake proofing
- Month 7: labeling and identification
- Month 8: general housekeeping, cleanliness, storage
- Month 9: machine setup
- And so on…
Checking just one thing, in great depth and throughout the factory, is a great way of catching problems and inconsistencies. It also puts the factory in a “system” kind of thinking mode, and that is already a victory in China.
For the auditor, one day of work could be divided as follows: 30-90 min of follow-up of corrective actions, 60-90 min of randomized audit of the quality system (not focused on one area), and the whole afternoon focused on one area.
And the basis for every one of these audits should be a well-documented control plan.
What do you think?
I would say the idea is more of an ideal model
rather than reality, as cost of these audits would always be a concern, either
it is to be paid by retailer or factory. As a 3rd party audit firm,
we are constantly being asked to offer something called bundled audit, a
combination of various audit aspects including quality system, social system, security
system, environmental, intellectual property and to pack everything into 1 day
audit. If retailers could put more focus on factory improvement and less on
so-called ROI, it benefits every involved parties.
Well, it depends on the audit price and on the amount of business with that one manufacturer. If you can negotiate an audit price is 600 USD and if you buy 150k USD a month from that factory, isn’t it worth it?
If you do what you call a “bundled audit”, you get an idea of how good/safe the factory is, but it is NOT for improvement purposes. It seems like we both agree that focused audits, for improvement purposes, would make a lot of sense.
I think the key here is the relationship between the client and their supplier. Like you said, a supplier would be much more open to the idea of continuous improvement if the client represents a large chunk of their revenues.
If the client does generate a lot of revenue, and the supplier is committed to continuous improvement, then the in-depth check of single issues on a monthly basis sounds like it could be highly effective. However, I do feel like that represents an ideal scenario as Mac Chan mentioned.
Checking things in great detail once and then ignoring them in subsequent audits may allow improvements to lapse over time. In the plan you outline above, would each audit follow up on the previous month’s audit?
I think conducting monthly general follow-up audits with a rotating or randomized emphasis on one aspect of factory operations could be even more effective.
The best would probably be to divide 1 day of work as follows: 30-90 min of followup of corrective actions, 60-90 min of randomized audit, and the whole afternoon focused on one area.
Would that make better sense?
I revised the article to incorporate this remark.
Renaud, what is described here is a little like what I would call a supplier development program. When stayed like that it is less “authoritarian” then an audit, but serves a similar purpose.
If a supplier shows enough advantages for the buyer but still shows some areas where improvement is welcome, it is sometimes possible to enter in an improvement/development program. This can relate to QC, to documentation, to packaging or to many other aspects of production and supply chain.
In fact, this is also a great opportunity to evaluate the capabilities of the supplier and to keep them engaged.
This cannot always be done. It is only possible when (1) volumes are high or (2) buyer has some good practices the the supplier understand it can benefit from.
Etienne,
Great point. It should not be called an audit. Or maybe, if the supplier welcomes this assistance, he can understand that it replaces the internal audit that they should perform (that’s really what it is, in my mind).