China factory audit or supplier report: which one your order needs

An on-site factory audit and a records-based supplier report answer different questions. Used together, in the right order, they cost less and catch more than either one alone.

What an on-site factory audit covers

An auditor from an inspection company spends one or more days at the address the supplier gives. A typical manufacturing audit covers:

• the production lines, machines and capacity in use on the day;
• the quality system: incoming material checks, in-process checks, final inspection, records;
• staff numbers and, in a social-compliance audit, working hours, wages and safety;
• photos and a scored report, usually within a few days of the visit.

Audits are priced per auditor-day and need to be booked ahead. They are the only way to see the line that will run your order.

What a records-based supplier report covers

A report reads what the company has filed with the Chinese authorities, which a supplier cannot stage for a visit:

• the registered legal entity, its business scope, shareholders, changes and annual reports;
• pollutant-discharge permits and registrations, production licences and certificates;
• court cases, enforcement, dishonest-debtor and consumption-restriction records, penalties;
• the supplier's own VAT invoices: who it buys from and how regularly it bills.

From these a Factory or Trader report gives a verdict (factory, trader, combined, or insufficient evidence), the factories a trader most likely buys from, and risk points with advice for your order size. It is ready the same day.

Use them in this order

1. Before you shortlist: run a report on each candidate. It tells you which ones are factories, which entity should sign the contract, and which registered site an auditor should visit.
2. Before a large order: book an audit at the production entity and site the report names. If the supplier turns out to be a trader, audit the source factory instead of the sales office.
3. During production: a pre-shipment inspection checks the goods themselves.

By order size

• Under $50K: run a report before the first deposit. An on-site audit is optional; a pre-shipment inspection covers most of the exposure.
• $50K to $500K: run a report, and audit traders and any supplier with medium or high risk points.
• Over $500K: run a report, again before each large order, and audit the production site named in the report.

Check a supplier or read the sample report.