3 Steps You Should Not Skip Out While Supplier Audit in Asia

Supplier Audit in Asia

supplier audit in China & AsiaA supplier audit is a strategic approach to selecting and managing potential suppliers by verifying compliance of supplier’s products and processes. It is vital to your internal supply chain functions because an effective audit helps to identify and predict associated risks, manage imminent treats, and utilizes the opportunities of your supplier.

Who knows, but your supplier is trying to win your business. That’s why the more you know about your supplier, the profound relationship you can build with your supplier.

We have outlined the following steps to follow while conducting a factory audit (Know more…) to know your supplier clearly and concisely.

1. Post-Audit Activities:

Conducting a supplier audit involves a string of activities that usually starts with preparing an audit plan. Before setting your foot on the audit site, auditors should set the goals aiming the reason for performing the audit and make a checklist coinciding with the purpose of the inspection.

For example, if you are concerned about quality issues with your supplier, then it is highly recommended to spend more time auditing the areas of quality such as raw material specification, quality department, laboratory, and lab equipment. You first have to collect all the information and documents which have been exchanged between you and your supplier, i.e., contracts, proforma invoice, email communication, etc.

Additionally, pre-audit research includes past audit reports, history of the company, existing product as well as specification, geographical location of the company, and it’s competitors, major customers, etc.

2. Audit Activities

What to check, how to check are such common questions during auditing your supplier. Here are some tips on how to conduct an effective factory audit.

2.1 Factory Audit

You should not always trust on paper which is provided by your supplier. Have some experiences of what is happening in your supplier’s factory. Conducting an audit in factory premises not only removes the possibility of being cheated but also acts in furtherance of both parties’ interests. The following areas should be checked during the factory audit.

  • a. Quality

Admittedly, the quality of the final product depends on the quality of your suppliers. Thus, buyers must hold the right to check whether the buying goods are being made with minimum quality standards.  A quality audit uncovers any non-compliant material or process and leaves a recommendation to ensure conformance to industry standards.

  • b. Production Capacity

Whether your supplier meets your demand or you have to establish a new supplier, all these depend on the level of your demand against your supplier’s production capacity. As a result, you should audit average as well as maximum production capacity. The result of this supplier audit will help you to determine if the supplier is outsourcing anything.

In that case, you must be notified by your supplier along with the assurance the quality of products will remain the same as per quality agreements.

  • c. Testing instruments and equipment

You must not forget to check the testing equipment in the laboratory. You can be confident enough if they are monitoring the quality of the product with the latest technology before delivering it to their customers. Otherwise, it is definitely worrying, and you have to consult with experts as to what to do.

  • d. Plant equipment and machinery

Check out the condition, brand, capacity, etc. of machinery or equipment that are directly involved in plant operation.

  • e. Social compliance

Do your suppliers follow local labor laws? Do your suppliers indulge kids in their factory operation? Are employees of your supplier working at an inconvenient time or place?

Is there anything existing in your supplier’s activities that go against social compliance? You must find out these answers while conducting the supplier audit.

  • f. Delivery process

If you know how your supplier delivers the goods, which method they usually follow, how they support their customer in case of an emergency, you can design your internal supply chain process in line with them.

  • g. Employee qualification & training

Have a look at the educational qualification of employees of your suppliers’ organization. Are these employees adequately trained in their respective fields?

  • h. Security

You can also scrutinize the security system of your supplier if you have sufficient time after checking all your primary concerns.

2.2 Process Audit

A supplier audit identifies whether there is any gap in the production process, engineering process, quality process, packing process, manufacturing process, shipping process, and documentation. You can add value by minimizing deviation, or rectifying nonconformance, or eliminating any step that holds no value in the overall process.

You can also go through their documentation that will prove whether the supplier is maintaining quality standards in their operation from recruiting and employee to dispatching the goods.

Additionally, ensure that your supplier has established a functional and efficient Quality Management System (QMS) within their organization.

2.3 Compliance certification audit

According to Accounting Dictionary, “A certificate of compliance is a written document that states the fulfillment of a given requirement. It is a formal certification that declares that an individual or company met a set of conditions.”

During the audit, if you overlook checking the original copy of their certificates, you will leave your audit incomplete. Lack of knowledge as to how to verify certification constitutes a major hindrance to progress. In case of your inability, you are advised to get in touch with a third-party agency to determine whether the supplier’s certification is valid, manipulated, or expired. You should also check certificate-issuing institutions, whether they are accredited or not.

 2.4 Supplier reputation 

Besides the traditional audit activities, you should probe the supplier’s online presence. Checking the supplier’s website as well as social media profiles might be an effective way to know the supplier’s diverse business activities. Moreover, check with different institutions for information.

2.5 Associated Risk 

By conducting an audit, you should aim to discover all types of risks associated with a supplier. Risks might yield from its geographical location, production capacity, IT, inefficient employees, etc. An investigation into these weak points helps to take the necessary precautions to avoid supply chain interruption.

3. Audit follow-up 

 The supplier might have given you evasive answers and skillfully dodged your questions about various points. They also might have attempted deliberately to hide quality-related issues.

Assume, your supplier is aggressively leading your audit team down in some particular areas. Your audit team fails to identify subtle differences, nonconformance in raw material or process, and damaged lots. As a result, it is undoubtedly essential to follow up on the supplier’s performance after an audit and stay focused on achieving major objectives.

To conclude, a supplier audit provides not only a comprehensive look at your supplier’s organization but also it hugely impact on your supply chain performance. Moreover, an audit improves collaboration between you and your suppliers.

Author: AQI Service as a professional quality control service company in China specialized in providing a complete range of quality inspection and testing certification services in China & Asia for global importers, buyers, retailers, and sellers.

Leave a Reply