Conducting a Supplier Capabilities Audit

Be more effective when auditing Chinese suppliers

Nearly every company can agree that auditing a new Chinese supplier is essential in determining the capabilities and worthiness for inclusion in a company’s global supply-chain. Too many companies however still struggle conducting these audits due to limited manpower, while also overlooking the need to perform valuable re-audits.

To ensure your company receives the most out of your next supplier audit, consider the following:

Understand relationship between audit breadth, supplier size, and business objectives.

If your target supplier is a mid-sized Chinese manufacturer, do not expect the same audit criteria used by Honda or Apple to be effective. Additionally, avoid gathering simple demographic details and instead focus on key processes affecting day-to-day operations.

Minimize bias by using a team or third party with diverse skill sets.

Directors of Procurement , Engineering, and Chief Operating Officers all have unique and invaluable expertise, consider listening to all of their voices when assessing a foreign supplier.

Verify continuous improvements have been fully adopted through re-audits.

Out of sight out of mind, has derailed many supplier improvement programs. Avoid supplier complacency by having an on-site presence more than just once or twice a year; and hold suppliers accountable for failure to perform or implement improvement recommendations.

Use a standardized grading system to clearly classify a supplier’s capabilities.

Not all suppliers are created equal. Understanding who are primary and secondary suppliers can help your organization more efficiently place purchase orders and assess supply-chain sustainability.

Resources, ease of implementation, and ROI all impact supplier improvement programs.

Many under-performing Chinese suppliers can be improved with assistance from US customers, but not all importers have time and resources available to overhaul these manufacturers. When determining how to best manage a troublesome Asian supplier, conduct a cost-benefit analysis comparing a supplier improvement program with qualifying a new vendor altogether.

By clearly defining audit criteria and increasing continual supplier oversight through routine re-audits, most companies soon find their Chinese suppliers are performing better and more consistently. While nothing can overcome choosing the wrong Asian supplier, proper and recurring audits are key tools in aiding companies document a supplier’s true capabilities and addressing any hidden risk they pose to a supply-chain.

To learn more about these tips and other ways you can improve the performance of your Asian staff, visit ABC University or watch any of our 30 min educational webinars.