The Importer's Guide To A Successful Quality Audit

How can you make the supplier selection process easier for your organization?

By conducting a quality audit.

A quality audit is able to identify potential risks there may be in working with a particular supplier. These audits are also able to help you manage this risk through the thorough assessment procedure and improvement strategies that are offered as a part of this process.

A quality audit is crucial in evaluating a suppliers capability and performance as well as in protecting your brand’s image as you don’t want to be aligning yourself with a supplier who is noncompliant or unable to meet your production requirements.

Let’s put this into perspective.

In 2015, product returns accounted for an estimated 4.4% of $14.5 trillion in global retail sales. Electronics, books and other hard-goods retailers see an average of 8.8% returns.

The largest reason for returns? Defective or poor-quality products.

This can be prevented and managed.

Learn how to successfully navigate your next quality audit, protect your brand's image and consistently produce high quality products in the following section. 

What is a Quality Audit?

A quality audit is a program designed to assess the existing quality systems of your factory and supplier/s. An audit of your supplier and their facility will determine whether or not they can produce your products according to certain directives and requirements.

As auditing is one of the key steps in the sourcing process, it will be important to ensure that new or existing manufacturers/suppliers can deliver quality products, undertake continuous improvements and operate efficiently in compliance with social and environmental standards.

By providing a means to examine a factory’s structure, organisation, quality process and experience, the audit enables you to compare potential suppliers and select the best possible one for your production needs.

3 Types of Quality Audits For Your Household Goods Brand

Household goods brands should understand that you get three main quality audits that are used to assess your supplier’s factory and existing quality systems.

That being said, your supplier may not need all three audits done to produce high-quality products and meet the levels of regulation and conformance that your brand requires.

So let’s explore what the quality audits are and what each offers your brand in return:

A technical quality audit assesses your supplier’s existing quality systems. A third party quality auditor will assess the following:

ISO 9001:2015 

This auditing system is based on the following key requirements:

• Requirements for a quality management system - This deals with the more general requirements of a QMS such as documentation and records, if any, quality manuals are available and in use by your supplier.
• Management responsibility - Organizational structure is important for effective production processes. This is done through defining roles and responsibilities, authority platforms and ways and means of appropriate communication. This structure creates transparency and clarity into what everyone’s role and position are.
• Resource management - This section covers the need for management to provide adequate and necessary resources be that human resources, work environment and infrastructure.
• Product realization - How does your supplier review and revise a product's requirements? From design to development and purchasing to the very tools that are used to monitor and measure product performance.
• Control of conformity & control of compliance - is your supplier pro-active in the determination of product compliance according to regulation in Europe, or are they completely reactive? Are there any credible equipment, methodologies and/or people to drive a consistent verification of the compliance during the production process?
• Measurement, analysis, and improvement of your QMS - How do you analyse whether or not your QMS is working? There should be systems in place to measure your brand's successes, but also to identify areas for improvement. Your household goods brand will need to know how to deal with a defective product and what procedures; corrective or preventative to follow in the abovementioned case.
  
  

The key benefits that a QMS such as ISO 9001 has for brands

• Improvement of your credibility and image - Many brands require this standard as the norm, so by your supplier being certified it enhances your image and credibility in the marketplace.
• Improvement of customer satisfaction - It is essential for you to keep your end user in mind - this system does just that.
• Better process integration - By closely analysing your processes, you will easily be able to identify areas that are in need of improvement.
• Improve your evidence for decision making - More access to data allows you to make decisions and allocate resources to areas that need them.
• Create a continuous improvement culture - This QMS seeks to set a continuous improvement system in place, where you can frequently identify any problems and address them early on.

Making sure that your supplier is ISO 9001:2015 certified places your brand at a strategic competitive advantage.

The Benefits Of A Factory Technical Quality Audit

Factory technical audits are a great at assessing your factory’s quality systems, from quality manuals, any previous certifications to its production processes and whether or not they have internal QC teams, designated storage space to the calibration of machinery and factory floor layout.

All of the above-mentioned things add to the functionality of your supplier’s factory and plays a huge role in the quality of product that they can produce for your brand.

A factory technical audit will have the following benefits for your brand:

• Ensure that your factory’s quality systems are up to date, organized and well recorded.
• Ensure confidence in the selection of your supplier based on the assessments insights.
• Ensure confidence in the quality of the product that is manufactured.

This assesses the social systems and structures that your supplier has in place. These are normally inclusive of work hours, overtime and things like child labour. A third party quality auditor will do an assessment based on the standards as laid out by SA8000:

The Nine SA8000 social compliance requirements are:

1. Child labour - No children younger than 15 years of age may be employed by any factory.
   
   
2. Forced labour - No person may be employed by a factory if they haven’t offered to do so voluntarily or be forced to work under the threat of punishment or retaliation.
   
   
3. Health and safety - A safe and healthy workplace environment must be provided by the factory, who should also prevent any potential health and safety incidents and work related injury or illness from occurring. You would need to ensure that there is sufficient personal protective equipment within hard labouring factories.
   
   
4. Freedom of association and collective bargaining - All staff have the right to form, join and organize trade unions and to bargain collectively on their behalf.
   
   
5. Discrimination - A factory is prohibited from engaging in discrimination in hiring, remuneration, access to training, promotion, termination or retirement.
   
   
6. Disciplinary practices - A factory is prohibited from engaging in or tolerating the use of corporal punishment, mental or physical coercion or verbal abuse of employees.
   
   
7. Working hours - A factory must comply with applicable laws, collective bargaining agreements and industry standards on working hours, breaks and public holidays.
   
   
8. Remuneration - The right of staff to a living wage must be respected by the factory.
   
   
9. Management systems - Compliance must be reviewed and implemented to the SA8000 standard through developed policies and procedures.

We have created an easy to navigate infographic to visually represent the compliance requirements of this standard:

The risk assessment of the social situation of your supplier is a key priority in the risk management toolbox, as social audits are directly linked to your brand’s immediate interests and also your bottom line.

End consumers will not be happy with a factory that exercises violence over female workers, or employs 12 year old children to polish their coffee mugs. It is your responsibility to conduct Due Diligence to ensure your factories are “clean” for your whole panel of external providers (suppliers).

If a factory is not clean of social violations it is recommended to stop to working with that supplier.

Consumers today are looking to pursue more ethical means of purchasing their favorite products, you should be leveraging this as an opportunity for growth and sustainability.

What Are The Benefits Of A Social Compliance Quality Audit?

The trends in retail have shifted and indicate that consumers today are more concerned about the way in which their products are made and the conditions in which they were made, than the actual product.

In saying this, a social compliance audit will go a long way in making sure that:

• You protect your brand’s image from unnecessary risk.
• Your supply chain is clean, organised and well documented.
• You identify key weak points in your supply chain.

This quality audit assesses your supplier's current environmental activities such as waste disposal, waste storage to air and noise pollution.

A third party quality auditor, will assess the following:

ISO14001:15 - This is the international standard for implementing an environmental management system (EMS) for your household goods brand, the key thing to note here is that it is voluntary to comply with this standard.

This auditing system is based on the following key components:

• Context of the organization - This forces your hand to become more aware of how your production process currently affects the environment and what can be done to change this. This requires quite a bit of planning, but this kind of in-depth introspection will only benefit your organization.
• Leadership - There needs to be a greater focus and understanding of role and responsibility from leadership to achieve your set EMS objectives.
• Planning - Integrated and strategic planning processes need to be taken into consideration in light of best environmental practices moving forward.
• Support - This will determine what resources are made available such as training to ensure your supplier will meet its EMS objectives.
• Operation - How does your brand manage to implement EMS plans and processes to meet environmental objectives.
• Performance evaluation - This means that you continuously need to measure and analyze the performance and outcomes of your adopted EMS.
• Improvement - How will your brand deal with non-conformities? How is your brand committed to a continuous improvement quality cycle for your brand? 

The Benefits Of An Environmental Quality Audit

• It ensures legislative compliance
• It reduces your environmental impact.
• It reduces your water and energy usage, which has affects on your bottom line.

Your supplier may not need this standard as yet, or you may be thinking about adopting environmental practices into your manufacturing processes, but, a quality audit like this will go a long way in building out your own EMS for future certification.

Different Factory Quality Audit Options

Working with third-party quality auditors is the most common method of auditing your supplier.

However, there are other ways:

• In-house quality audit - This is performed internally by an in-house team. They measure the strengths and weakness of quality and production systems against any international/external standards and regulation.
• Third-party quality audit - This is conducted by a qualified audit organization, that is not connected to the supplier or brand by any nature. This is often a preferred audit option as the results are unbiased. A third party quality audit aims to provide your supplier with certain certification or verification based on the audit your brand has asked your supplier to conduct.

Read more on the In-house Vs. Third Party auditing debate.

Quality management from systems, processes to quality products is a constant struggle that household goods brand face. The state of retail has recently seen an increase in supply chain pressure from retail giants like Amazon that are increasing the pace at which supply chains need to operate.

How to retain consistent quality

Retailers today have begun increasingly outsourcing their quality systems to qualified third-party providers to help alleviate some of that supply chain pressure.

Many importers feel that they are capable of maintaining high levels of product quality through in-house quality teams, and while this may be true for now you need to ask whether or not you can maintain and meet the increasing demands of the consumer.

The benefits that a third-party quality provider can provide are shown below:

What to Look for in a Quality Auditor?

The qualification of your auditor is crucial to the overall audit result.

According to the Management System ISO 17021, the audit body, your thid-party provider must make sure that its auditors go through some extensive external and internal training.

External training

The external certifications that an accredited auditor must contain are the following; ISO 9001:2015, ISO14001:2015, OHSAS18001, TS61949, SA8000:2014.

No matter the audit you require, the auditors should also hold qualifications and training in “hazardous substance management”.

Some of the soft skills training should include: 7QC, 8D, Root cause analysis, TPM, FEMA, DFMEA/PFMEA where they will also proceed to supervision on site with a duplicate audit and will be evaluated with a close follow up.

Internal training

Intensive Cross Skill training follows a skill matrix where auditors are closely trained and monitored to understand a large variety of products and industries. They should be trained to diagnose risks in the factory and prevent mishaps for the importer, the customer and the end user. If products are found to be dangerous, the auditor is trained to use RAPEX (Rapid Alert System for non-food dangerous products) and then the product will be removed from the market.

Workgroup training

The lead auditor should organize that trainees meet up to discuss different methodologies and to standardize work practices across their different service countries. This is crucial to meeting customer requirements. In these sessions, auditors are also training on their hard product skills - the handling of things like; glassware, die casting, hand tools, power tools, ceramic products, etc. This, along with peer learning will give the auditor a solid knowledge base of the skills required.

The Most Common Reasons For Quality Audit Failure

Here are common failures across the 3 audit types: 

• Lack of/disorganised documentation - Many factories often run on outdated systems like old excel spreadsheets, which opens their brand up to human error and potential risks that can be avoided. Without adequate reporting procedures or quality policies, the likelihood that your production requirements will be met is not very high.
• Calibration and Upkeep of Machinery and Equipment - Many factories struggle with resources and finances, which means their money will often go into sourcing raw materials for the next production before putting money into the servicing of their machinery and equipment. 
• Hazardous working conditions - Things like faulty Personal Protective Equipment (PPE), expired fire extinguishers, no clearly marked exit signs, exits not in working order, machinery that is in need of calibration or lack of safety gear found on heavy machinery can lead to audit failure. 
• Incorrect methods of waste storage or disposal - This is often a problem as many factories do not have the capability or facility to dispose of their waste correctly. If your factory disposes fumes into the atmosphere or disposes untreated water into sewerage systems, it is considered to be an environmental risk and grounds for audit failure.

CONCLUSION

As a key step in the sourcing process, conducting a quality audit is a crucial element in understanding the risks your brand may be opening itself up to.

By analysing and assessing your quality systems, your business will be in a favourable position for growth.

Look to choose third-party quality providers that can help you create a continuous improvement culture for your brand where you can identify risk early on and avoid it!

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