Whether it's yourself, a colleague or a 3rd party sourcing company that conducts your China Factory Audits - it's an operation that simply needs to be done at some point. Keeping costs down is a wonderful thing put we need to be mindful not to squeeze to tight in this area - it's really about managing your risk. China factory visits can be really great, really difficult, can be very interesting and can even be a bit shocking. You are certain to have experiences to conjure lots of different adjectives, boring is unlikely to be one of them no matter how many visits you make.
When speaking about factory audits in China, it is assumed that we have completed a great deal of research on a list of potential supply partners. Normally, I would target finding a nice round number of 10 who can supply the product to the required specification and standard. Dependent on the product it may not always be feasible to get 10 viable options but you really should have 8-10 as a target to then shortlist to 3-5 from your initial research. Last week I talked about assessing Chinese suppliers and Product Sourcing Reports (free template download) which is of course an important element of your initial research. When you are sourcing companies in China you are really doing a lot of research to shortlist your best options. Before making any big decisions the all important China factory audits need to take place. Check out our free report template to get you started on the type of questions you should be asking.
China Factory Audits - So what Questions should you be asking?
Having a good structure for the information you would like to gather from your China product sourcing missions is essential. It is too easy to go through a few days visiting factories in China on a whirlwind trip and suddenly realise you are struggling to clinically assess one supplier from the next. The first supplier definitely provided the best dinner but I can't quite remember...what product testing equipment they were using or what they said their capacity for product design was.....hmm.
In the Factory Visit Audit Report here are some of the main question areas we highlight in no particular order of importance.
- Buildings & Facilities
What makes up this suppliers facilities and how are they being used?
- Management Staff
Who are a few key personnel and do I have their business cards?
- Factory Workers
What is their schedule like? What is their demeanour like?
What are the main products that you witness?
What are the major equipment types in use?
Do you know production capacity? Are there critical factors to running production?
- Warehousing & Storage
What condition are products being stored in?
Is there any security or any risk to damage or theft? Is it an organised space?
Is there a quality process visibly in place?
Would you pigeon hole the production into low cost or is their attention to detail and workmanship?
How are quality issues dealt with internally? or externally from a sub suppliers?
- Product Development
Does the supplier have concrete experience in product development of their own brand or overseas clients products?
Are they experienced in mold manufacturing or how do they outsource this?
It might all seem like of lot of questions and and a bit "forensic" but actually these are basics that you need to cover. I'm not saying you need to get the lab coat out, strap the goggles on and have the clipboard on your arm with the red pen ready every time but there is nothing wrong with a level of it and all of it dependent on industry....at least the "clipboard" slash notepad element when you are starting out importing from China. You definitely need to take some notes and images and that's a different process for everyone. After a while most people will start to develop a sixth sense for what they need to ask/record, then the questions like the ones listed above will become and ingrained list with a few additions and subtractions depending on what you are looking at.
Don't Forget the Goal
Once you have completed factory audits either by yourself or using 3rd party factory inspection services in China then you need to reflect and evaluate the information gathered. The goal is to settle on your primary partner with 1-2 backups who could step up if anything unforeseen happened with your No. 1 choice. Samples also enter into the equation here but we'll save some ink on them for another day.
Finally do remember when you are going through the inspection - where you ask questions that can be backed up with information that the supplier does follow through and do that. It's understandable they may not provide everything then and there, but do follow up. Another final bit of advice is to balance your own demeanour for China factory audits to be a bit informal where you can, you are still doing a serious job but don't come across too judgemental - you can still record and assess the information without making it "all awkward". With some practice you know when to badger a little bit and when not to. At the end of the day you will be making the decision so try keep everyone relaxed.
John O' Grady has been living and working in Shanghai, China, since 2004. In all of that time John has worked in sourcing and supply chain management. Currently he is General Manager of Found China, a provider of China Sourcing Services. John enjoys travelling to factories throughout China to find new suppliers, make deals, oversee QC and stay in touch with good friends. Keep up to date with John and Found on their No. 1 China Procurement blog.