Untitled Document

TECHNICAL AUDIT

1. Introduction 2. Physical Facilities 3. Products 4. Production capacity 5. Quality control 6. Purchasing 7. Identification and traceability 8. Process Control 9. Inspection and Testing Monitoring the corrective actions 9.1. Incoming inspection and testing 9.2. In-process inspection and testing 9.3. Final inspection and testing Auditors’ profile

1. Introduction
Technical Factory audit...for what ?

To evaluate the capability of the factory to produce goods that conform to your specifications and meet the required quality.
To evaluate the capability of the factory to produce goods in a timely manner given production capacity and actual production.
To identify areas of potential improvement in the Quality Control operations of your key factories.
To investigate the roots of a Quality problem that occurred on your previous consignment, etc...

2. Physical Facilities

In this section, the auditor shall record the total surface area of the factory site in square meters, the floor areas of the manufacturing section, the assembly & packing section, the quality control & inspection section, the administrative section and the warehousing section.

This information is gathered during the introductory meeting. The familiarization with the site map will help the auditor to efficiently organize the subsequent factory tour and thus make sure that no parts of the factory are overlooked or concealed.

3. Products

In this section, the auditor shall list the main types of products made in the factory and indicate customer name/s, destination country and production capacity for each of them. The information gathered during the introductory meeting should be verified during the factory tour.

Specifically, the auditor should assess whether the factory has genuine experience of exporting the products that the customer intends to buy through, for example, shipping marks found on packaged goods in the warehouse.

Indeed, many Chinese manufacturers seeking to export their products may be able to make products compliant to Chinese standards but this may not be true if the products need to comply with the higher requirements of International Standards: there is a compliance gap.

The auditor should also try to identify products pictured in the factory’s catalogue (if available) which are not produced on the factory facilities but, sub-contracted to other factories:
the audit’s conclusion is relevant only for products made in the audited factory.

4. Production capacity

In this section, the auditor shall assess the production capacity and the actual production of the factory. Production capacity is the average quantity of products produced during one month under full load conditions while actual production is the average quantity of products produced in one month.

This information is crucial for the customer to ensure that goods can be produced and received in stores in a timely manner. Basically, if the production capacity is too small or, if the factory is overloaded, it is very likely that the factory cannot meet it’s commitment on shipment dates except by requiring extensive overtime work which, in turn will affect the quality of the goods due to fatigue of the workers.

As factories tend to overstate production capacity in order to obtain larger orders, the auditor shall crosscheck information obtained during the introductory meeting by on-site investigations in the workshops.

In the assembly workshop, the auditor should, if available, first check the “daily production board” or the “monthly production plan”. The auditor should then evaluate the average number of products produced (which may vary with the complexity of the product) in a day for a main assembly line. This figure would allow the auditor to make a rough estimation of the production capacity and the actual production, given the number of main lines and the number of main lines in use. Any discrepancy between the auditor’s findings and factory’s comments should be reported.

In the production workshop, an estimation of the production capacity is more complex. Given the limited time for the audit, the auditor cannot determine a production capacity for each production step. He should rather identify the production bottleneck and ask concerned workers about the number of pieces they can produce per day.

This method is generally helpful to obtain relevant data: “the bottleneck of the production in the air compressor factory is the painting process, which limits the production capacity to 2000 pcs/day for small air compressor (2 painting lines) and 500 pcs/day for big air compressors (1 painting line).”

5. Quality Control

Quality control includes all operations performed by the manufacturer to ensure that the product conforms to relevant technical specifications:

Verification of specifications of raw materials and constituents, so-called Incoming Quality Control;
Control and testing of semi-finished products during the manufacture, the so-called In-Process Quality Control
Verifications and tests on finished products, the so-called Final Quality Control
Given the rampant practice of document forgery in China, a valid ISO9001 certificate does not prove anything except that, the factory has a documented Quality System. Indeed, experience shows that, even certified factories are far from following their Quality Control procedures while other, non-certified factories may have practical and efficient methods to ensure that their products conform to the specifications.

Therefore, the auditor will investigate on the field in order to assess whether the Quality Control operations of the factory are consistent with the key principles of standard ISO9001 as summarized below:

All quality control operations IQC, IPQC, FQC shall be documented by the manufacturer in a systematic manner in the form of written procedures in order to ensure a common understanding of quality assurance and further the achievement of the required technical specifications.
Records shall be maintained to provide evidence that the product has been tested. These records should clearly show whether the product has satisfied or failed the defined acceptance criteria.
Where the product does not meet the requirements, the necessary corrective action must immediately be taken. Products or batches not conforming must be isolated and properly identified. Once the fault has been corrected, test or verification must be repeated.
With regards to any control result not meeting the requirements of the technical specification, the corrective measures taken to rectify the situation (e.g. a further test carried out, modification of manufacturing process, throwing away or putting right of product) must be indicated in the non-conformity form.

6. Purchasing

The manufacturer shall maintain a procedure to ensure that purchased products meet with requirements specified in the purchase orders. This procedure generally includes provisions for:

- Evaluation and selection of suppliers prior to the release of purchase orders.
Suppliers shall be assessed prior to the purchase order’s release to ensure that, they have the capability of supplying materials of the required quality. A formal assessment of this capability is needed, possibly through an audit or, by way of other evidence (supplier Final Quality Control test report, etc.). Documented evidence on formal assessments is required for each supplier.

- Evaluation of suppliers for the maintenance of a list of acceptable suppliers
Suppliers should be periodically evaluated and suppliers whose performance is not satisfactory shall be withdrawn from the list of acceptable suppliers. Good practice is to have a monthly mark for suppliers based on their performance in terms of quality, price, delay and cooperation plus a yearly audit with follow-up of necessary actions arising from the audit. Documentary evidence is required.

- Approval process for release of the purchase order
The purchase order release process shall ensure that all necessary information is given to a vendor.
Purchase orders shall clearly describe the product ordered (e.g. type, class and grade). Purchase orders shall also be reviewed and approved by the suppliers who take the commitment to supply materials of the required quality.

- Checking of purchased products
When purchased products are checked at supplier’s premises (factories will usually do it when problems have occurred in previous orders or if the order is big), clause 7.4.3 of ISO9001:2000 requires that all details in relation to the product verification and the method of product release shall be described on the purchasing documents.

7. Identification and traceability

Individual products or product batches must be identified and traced throughout the various stages of production when appropriate. It is of crucial help to identify the stage and hence the cause of any product non-conformity (or to allow later recall). Identification can take various forms: supplier batch number (or internal batch number) on the raw materials, lot identification card with quantity and name of persons involved successively in the production of the semi-finished goods, batch number stuck on products during assembly, stickers stuck on export cartons, etc.

When assessing traceability, the auditor should keep in view that, in certain cases a rigorous traceability is not possible and then consider whether traceability is adequate for the specific manufactured product audited based on normal industry practice.

In some cases, traceability is expressly requested by standards or regulations: a batch number is required for protective masks according EN149, a batch number is required for diamond discs according to EN13236 and EN12413, a test report by China Entry-Exit Inspection and Quarantine Bureau (CIQ) is required on each shipment of lighters according to Chinese standard SN/T 0761, etc. But in most of cases, if there is no such requirements then, the auditor shall compare practice in the factory audited to normal industry practice for the specific manufactured product audited. For instance, for the battery industry, normal practice is to have a batch number for each order. So, when there is a number written on each battery standing for date, time and production line number, traceability can be considered as outstanding.

8. Process Control

There are few rules prevailing for an efficient process control:

Space between workstations shall be adequate to allow efficient material flow.
There shall be approved procedures describing the different production steps with work instructions for the products being produced.
Work instructions shall be displayed nearby the workers at each workstation and correspond to the products being produced. The auditor may find lines where work instructions on assembly have not been replaced although the product being assembled has changed. The rule is that work instructions shall be replaced within 30 minutes of the start of a new production or assembly.
Test equipment shall be verified and calibrated at appropriate intervals (caliper, scale: yearly) to ensure the constant accuracy of control measurements taken during the production control. Whenever the factory does not have the equipment and the personnel with the necessary skills to carry out verifications and calibrations, it shall sub-contract the task to a recognized calibration body.
Employees who carry out tests should receive adequate training on testing procedures.

The manufacturer shall verify and maintain the production equipment in good operating conditions. Common practice is a daily check-up by the operator for simple machines or a weekly check-up by maintenance staff for complex machinery and a complete verification once a year according to the maintenance plan schedule. Maintenance records shall be kept.

9. Inspection and Testing

Product safety is of high concern in many importing countries. In order to protect their citizens, a series of directives and standards has been decreed with which imported products shall comply. In Europe, for example, the main directives and standards for electrical products include the Low-Voltage Directive (LVD) - standard EN60335 for household appliances -standards EN60745 and EN61029 for power tools
- standard EN60065 for audio video products -, the Electro-Magnetic Compatibility standards (EMC), the directive on the Restriction on Hazardous Substances (RoHS), and so forth.

As the applicable standards depend on the destination country (EN standards for EU countries, ASTM standards for USA, etc.), the auditor should find out whether the manufacturer has test reports available for each product manufactured and for each country of destination, with special attention to the product/s which the customer intends to buy.

However, given the limited time for an audit, the auditor can hardly check test reports for every single product, and therefore should rather ask the quality manager about his policy on the issue and crosscheck his answers by requesting test reports for products selected randomly from the manufacturer’s catalogue (if available).

In addition, test reports shall be issued by recognized laboratories. This point is quite crucial for customers, not only for building their confidence based on the result of the audit report but also, because the customs are more likely to re-check goods if they are in doubts about the credibility of the laboratory which performed the tests. However, this may be problematic given the following.

Test reports issued at design stage are based on samples submitted by the manufacturers. They cannot ensure that the final goods comply with applicable standards since deviations of product characteristics during manufacturing process may occur. Therefore, the auditor shall assess whether compliance with specific safety standards are re-checked at any stage during the process. As for electrical products, it is a mandatory requirement of the standard that routine tests (electric strength test, earth continuity test) be performed on every single product. These tests are generally performed during assembly.

Monitoring the corrective actions

When conclusions of the audit indicate the need for corrective actions, the supplier should propose to the customer a plan for corrective action within a timeframe of ten days for customer’s approval.

If requested, API can provide assistance when judging on the corrective action plan and under given circumstances perform a re-audit. Except minor corrective actions, we generally suggest to conduct a reaudit in order to verify the completion and the effectiveness of the corrective action within three months
after the first audit.

During re-audit, the auditor will mainly check the points identified as unsatisfactory in the first audit. Corrective actions may be (i) implemented in a relevant and permanent way with records and supporting evidences available, (ii) not fully implemented within the agreed timeframe, still in progress or totally irrelevant, (iii) not implemented.

If a supplier does not make progress in implementing corrective actions, it is at the customer’s discretion to decide whether the business relationship with the supplier should be terminated.

9.1. Incoming inspection and testing

During the document review, the auditor shall check the existence of written procedures for the Incoming Quality Control. This procedure shall include a sampling plan which details the sampling of materials for inspection/testing from each batch received and the criteria for their acceptance. Normal practice is to use AQL 0.65 for the inspection of incoming materials. Auditors should also request a copy of blank test forms mentioned in the procedure.

During the factory tour, the auditor will assess whether the Incoming Quality Control is in-line with the procedure. Inspection and tests detailed in the procedure shall be performed with the proper sampling size. A full set of records must be available to provide evidence that semi-finished goods have been tested.

The auditor shall request the factory to produce reports with defectives on record. If there is no failed report available, it generally indicates that the Quality control is not done properly and the auditor should investigate further. In case of defects over acceptance criteria, a non-conformity form shall be filled in with identification of the defect/s, reason for the defect/s and the corrective action.

Incoming materials must be held until inspection or testing is completed. Common practice is to use stickers in different colors printed with “Waiting for inspection”, “Pass” or “Fail” and, to allow workers to move incoming materials into the warehouse only when a “Pass” sticker is stuck on the batch.

9.2. In-process inspection and testing

During document review, the auditor shall check the existence of written procedures for In-Process Quality Control. The IPQC procedure, or the working instructions sheets, shall include a sampling plan which details the selection of semi-finished goods and the criteria for acceptance. In the production workshop normal practice is to inspect one piece every two hours. In the assembly workshop it is normal practice to perform testing on every product directly on the assembly line. The auditor should also request a copy of blank test forms mentioned in the procedure.

During his tour through the factory, the auditor will assess whether the In-Process Quality Control is inline with the procedure. Inspection and tests detailed in the procedure shall be performed with the proper sampling size. Full sets of records must be available to provide evidence that semi-finished goods have been tested.

QC stations in each workshop with well maintained records generally indicate that Quality Control is done properly. The auditor shall request from the factory’s representative to show reports with defects on record. In case that the number of defects is over the acceptance criteria, the non-conforming lot should be accompanied by a non-conformity form with clear description of the defect/s and the reason for the defect/s. Non-conforming product shall be reviewed by the person in charge of the disposition of non-conforming products and, it may be reworked to meet the specified requirements, accepted with or without repair, regraded for alternative applications or scrapped.

To prevent the accidental use of non-conforming materials, non-conforming materials shall be isolated from acceptable materials and properly identified at any production stage. Normal practice is a designated area for rejected parts near each worker and a special area for rejected parts for whole factory site.

9.3. Final inspection and testing

During document review, the auditor shall check the existence of a written procedure for the Final Quality Control. This procedure shall include details of tests performed and a sampling plan. Auditor should request a copy of blank test forms mentioned in the procedure.

On his tour through the factory, the auditor shall assess whether Final Quality Control is in-line with the procedure. To check that all tests mentioned in procedure are carried out, the auditor shall request Quality Control operators to perform testing in front of him. The auditor shall also check whether the proper sampling size is used.

Full set of records must be available to provide evidence that the finished goods have been tested. Records should show clearly whether the product has satisfied or failed the acceptance criteria. The Auditor shall request from the factory staff to show reports with defects. With regard to any ‘Fail’ report, the corrective measures taken to rectify the situation (e.g. a further test carried out, modification of manufacturing process, throwing away or putting right of product) must be indicated in the non-conformity form.

The finished goods shall not be released before all necessary tests have been carried out. This point is particularly at risk when testing requires a few days to be completed (discharge test for batteries, leakage test for lighter…)

In addition, auditor should assess on the background of his knowledge, whether all adequate tests have been performed on the finished products. He should also check that all necessary equipment will be put at the disposition of inspectors during Final Random Inspection. For power tools, for example, equipment available to the inspector in usual inspection should generally include hi-pot tester, earth continuity tester, power consumption tester, voltage adjuster, R.P.M tester, torque tester and drop tester.

VI. Auditors’ profile

Auditors are usually former inspectors who distinguished themselves by their excellent personal track records and integrity. They normally have 5 year working experience including at least 2 years in Quality Control. Their education background is at least secondary education.

All auditors receive 5 days in-house training during their training period. Content of training includes technical audit process, quality systems, industry specific issues etc. Training is provided by an experienced auditor whose proficiency is acknowledged by certificates issued by an accredited training body.

There are three levels for auditors: auditor-in-training, auditor and lead auditor. It is API’s policy that an audit shall be performed by a lead auditor who has proven his competence of conducting technical factory audit in an effective and efficient way.

In practice, to become an auditor, an auditor-in-training should have completed 10 audits under the direction and guidance of a lead auditor during the last two years. To become lead auditor, an auditor should have completed 5 audits acting in the role of audit leader under the direction and guidance of a lead auditor during the last three years.