As a buyer looking to find suppliers, there are many points of concern regarding a supplier that can cause a potential business deal to fall flat on its face. Factory audits are a great way to investigate these points of concern and give buyers ample information to make a financially sound business decision (see The 3 Most Common Types of Factory Audits). Supplier reviews are one of the most effective factory audits that can be used to find many of the potential faults a supplier may have. Unlike a social compliance audit, which focuses heavily on working conditions, a supplier review mainly evaluates a supplier’s quality management system and relies on ISO 9001 standards.
Here are five key findings that a buyer can expect from a professionally-conducted supplier review:
Factory Layout & Capacity
First and foremost, the supplier review will fill in basic data about your supplier. Did your supplier tell you they have a 35,000-sq.-meter factory? That is verified. Does the supplier have the capacity needed to handle your order? A supplier review can help you be sure. A buyer can find out the location, land area, production area, floor space, number of workers, QA staff, line workers and more. That way you can be sure about whether your supplier’s claims are valid and your complete order can actually be fulfilled.
Certification & Licensing
A supplier review will clear up any doubts a buyer has of a supplier with regard to certifications. During this type of audit, factories are required to provide certain documentation, such as an export license, business license, tax registration, technical certificates for qualified staff and others to show they are operating legally. A supplier review also helps the buyer to determine if the supplier they’re considering is qualified to manufacture their product.
Engineering & Design
A highly trained auditor will rate a supplier on their competency of using appropriate software, tooling, and the level of precision that can be achieved. This information can let a buyer know what product quality a supplier can consistently deliver. A supplier review can answer the following questions related to engineering and design:
- Does the factory have an R&D department?
- Does the factory hold any patents related to the client’s products?
- Does the factory have the ability to develop a product similar to the buyer’s from concept to production?
- What is the lead time for creating tooling for a new item for a regular client?
Auditors looks for answers to these question by looking at records and interviewing staff and management.
Business Development, Administration & HR
During a supplier review, the auditor will attempt to find out all past, current and future business operations of the supplier. The auditor will also report on the supplier’s business model, culture and values following discussion with the supplier factory representatives and reviewing records. An auditor seeks to provide the buyer with answers to the following questions:
- Does HR maintain hiring records?
- Is there a training program in place for new staff and are such records maintained?
- Does the supplier have the necessary business structure to communicate with clients, process orders and carry out day-to-day business functions?
This aspect of a factory audit allows buyers to investigate into a supplier’s past and find any questionable practices, in order to avoid any future problems.
Production & Operations
Last, but not least, a supplier review will provide information on hardware and machinery used at the facility and general working conditions. This often includes the overall production flow, the lighting, cleanliness and organization of each working station, packaging operation, etc. These findings will often tell a buyer if the supplier is working at high efficiency, which often directly relates to the quality of products suppliers are able to turn out.
A supplier review is an effective tool that can provide an in-depth look into a supplier’s capabilities and operations by providing details on:
- Factory layout and capacity
- Any licenses or certifications the factory holds
- Engineering competence and design capability
- Management structure, hiring and training practices; and
- Production flow and efficiency
Any buyer looking to work with a supplier for the first time should definitely consider carrying out a supplier review before placing an order. Still not convinced? Check out Top 5 Reasons to Conduct Factory Audits.
Do you have any interesting stories about findings at a factory? Share them in the comments below!