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What to check during a China factory inspection

Download a free and ready-to-use China factory audit checklist (Word document).

This comprehensive template has been created exclusively for Global Sources' buyers and is not available anywhere else. Just print and bring with you on your next factory visit.

by Renaud Anjoran

This is a checklist for the average purchaser who has a few notions about how a factory is run but has no specific training or experience in quality and manufacturing management.

CMC's Kim Pen (a veteran factory general manager) assisted with many of these benchmarks during our client factory audits.

1. The basics that all buyers should look at

Whatever your main goal is, there are certain things you should look at carefully.

1.1 Objective evaluations

  • The number of operators, and the number of production lines/cells
  • The capacity, in number of pieces per day, of one production line/cell (for the type of product you would purchase)
  • The main process steps, and products being made during your visit
  • The main market: Export vs. domestic, main export market, quality standard of 2 or 3 major customers (look at the products, their labeling and carton marks)

1.2 Subjective evaluations

  • Motivation of top managers when you describe your project
  • Understanding of your demands/requirements by managers and technicians
  • Focus of the factory: High volume at a low cost, or high quality, or constant development of new products?

2. Ability to control quality

The way to check a manufacturer will be totally different depending on their size and their internal organization.

2.1 If the factory is pretty small and is not structured

They probably have no quality system in place. If the operators check their work and if the owner (or his wife) supervises everything, they do not need a quality system at this point.

In most cases, you will need to make a subjective call. My advice is to sit down and check about 50 finished products that have passed final QC and were classified as good. If you find 20 percent of pieces with a visual defect, your decision is easy.

I would add that the motivation of the owner is probably the most determining criterion, in such a situation.

2.2 If the factory has a quality system

  • Does the factory communicate requirements to its suppliers on its POs (or other documents)? Are these requirements clearly listed?
  • Are incoming QC results recorded in a formal report?
  • Are clear procedures given to each operator and to the QC staff for each job?
  • Are conform samples available to workers in production and QC areas?
  • Are in-process QC results recorded in a formal report?
  • Does final QC occur before or after packing is completed?
  • What proportion of products is checked during final QC?
  • Are there QC staff dedicated solely to final QC? How many? Do they only do QC, or also a finishing operation at the same time?
  • Are final QC results recorded in a formal report?
  • Is the first-pass yield displayed on a wall, and tracked day-by-day and line-by-line?
  • Are numbers and details of customer complaints displayed on a wall?

Important notes

Do not simply ask questions and say, "OK, thanks" when they show you a piece of paper written in Chinese. Ask to see the records written on one line of your choice, for a production that is going on.

And remember, if they do not have any records, you should assume that they do not check anything!

3. Ability to control costs in the long term

I advise to look at many different aspects of the factory.

3.1 Overhead costs

  • Number of professional managers
  • Standing of factory building, and number of empty floors in the factory building
  • Recent investments in expensive machinery
  • How many of these expensive machines are idle? Is it because of poor maintenance, or because of low production volume?

3.2 Quality system

You should still check the quality system (see previous part), because a high rate of defective products necessitates some re-working or discarding, and costs a lot of money.

In the long term, the buyer ends up paying for quality issues, even if they are contained at the factory level.

3.3 Maintenance

  • Is equipment failure down time calculated?
  • Are there checklists for maintenance? Do they seem to be followed?

3.4 Visual control

  • Is the number of pieces per labor hour displayed on a wall, and tracked day-by-day?
  • Is the amount of scrapped material displayed on a wall, and tracked day-by-day?
  • Is the total unit cost displayed on a wall, and tracked day-by-day?

3.5 Degree of “lean-ness”

If you see a lot of inventory kept before production and kept between each production step, you are observing a traditional (batch-and-queue) system. In other words, it is very "un-lean".

I placed this criterion at the end, even though it is the most important factor in determining costs, because less than 1 percent of factories in China are truly lean.

4. Production speed

4.1 Organization

  • Before a new production is launched, are some jigs/tools prepared by the engineering department?
  • Is pre-production inventory well organized?
  • Is work-in-process inventory stored in a predictable way, or do people need to look around to find what they need?
  • What is the lead-time to get all the components necessary to launch production?

4.2 Planning

  • Is production organized as a continuous flow, without any work-in-process inventory visible in the workshop? (best)
  • Is there a kanban system? (very good)
  • Is there a production planning, with details for each workshop, and updated every day? (good)
  • Is there no production planning at all? (worst)

4.3 Flexibility

  • Is there a list of approved subcontractors who can take over part of the job? For which process steps?
  • Is there a power generator?

4.4 Maintenance

  • Is equipment failure down time calculated?
  • Are there checklists for maintenance? Do they seem to be followed?

4.5 Visual control

  • Is the proportion of on-time shipments displayed on a wall, and updated at least weekly?
  • Is the time to make one piece, from start to finish, displayed on a wall, and updated daily?

4.6 Degree of "lean-ness"

In a factory, certain physical laws cannot be ignored. For example, Little’s law: cycle time = work-in-process / production speed at the bottleneck.

So, if you see a lot of inventory between each production step, production tends to be messy and to spread over several weeks. More inventory lying around means longer manufacturing cycles.

5. Social compliance

5.1 Fire prevention

  • Are there enough fire extinguishers (in workshops, dormitories)? Are they accessible, and up to date?
  • Are there enough emergency exits? Is it possible to lock them? Are they used as storage areas?

5.2 Worker protection

  • Do workers have appropriate personal protective equipment (gloves, masks, glasses, safety boots)?
  • Are there enough first-aid kits? Are they available and full?

5.3 Environmental policy

  • Does production generate a lot of waste? Is this waste treated?
  • Has the factory invested in energy-efficient equipment?

5.4 Working hours

  • Does the factory respect Chinese law of 44 hours a week with maximum overtime of 3 hours a day?

Important notes

Less than 1 percent of Chinese factories respect this law. And, though it is illegal, it is not unethical per se, since most workers insist to work longer hours and earn more money.

If you see that operators get paid by the piece, you can assume the law is not followed, whatever managers tell you and whatever papers they show you.

5.5 Child labor

  • Look at the list of employees, and check if all are at least 16 years old.
  • Select 2 young employees at random, and ask to see their ID cards.

5.6 Other

  • Labor contracts: Ask to see the labor contracts of 2 workers selected at random. Chinese law requires each employee to sign a labor contract.
  • Management-worker relations: Do the operators get nervous when you watch them?

6. Engineering capabilities

  • What is the number of designers? Designers who can read and write English?
  • What is the number of engineers? Engineers solely dedicated to new developments? Engineers solely dedicated to new developments who can read & write English?
  • What software do they use?
  • Ask for examples of complex new product developments they successfully completed recently, in collaboration with overseas customers.
  • Ask questions about the IP rights of these new developments. Does the supplier understand that they cannot sell these products to other customers?

Renaud Anjoran is the founder of Sofeast Quality Control and helps importers to improve and secure their product quality in China. He writes advice for importers on the Quality Inspection blog. He lives full time in Shenzhen, China. You can contact him at This email address is being protected from spambots. You need JavaScript enabled to view it.This email address is being protected from spambots. You need JavaScript enabled to view it." target="_top">.

Comments   

 
0#BILL2013-07-28 16:01
very wonderful as a check list of factory audit. thanks for sharing.
Reply | Reply with quote | Quote
 
 
0#Renaud2013-07-29 10:23
Thanks Bill! Any advice to improve this checklist is welcome :-)
Reply | Reply with quote | Quote
 

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