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We continue our exploration of the vetting process when sourcing new Chinese suppliers in this episode. You can read more about this topic in the series of blog posts on QualityInspection.org which we refer to throughout - read all of those posts here.

Social compliance audits are the next factory audit type that buyers need to be aware of and consider, certainly if you're from a big brand or in a niche where social issues (such as child labor) are common, for example, apparel.

Ideally, using a social compliance audit to assure that your supply chain is free from illegal practices such as modern slavery is an important factor in vetting and working with a new supplier. Many large companies, like Walmart for instance, have their own standards that they insist that suppliers meet concerning employee welfare, adherence to local laws, and elements like environmental standards, too. Fundamentally, a social compliance audit protects you from being associated with things in your supply chain which could damage your company or brand.

So, let's explore what this type of audit is, how effective it is, and the drawbacks it has, too.

Show Notes

Start to 8:53 - Introduction + explaining WHAT a social compliance audit is. Some examples of the 3 'big' circumstances that importers want to avoid: Child laborforced labor, and dangerous working conditions.

8:53 to 10:24 - Does adding in the cost of improving working conditions increase costs overall for buyers? Why the costs associated with paying injured staff, negative government scrutiny, or reduced efficiency due to a shortage of staff put off by unsafe conditions can quickly escalate.

10:24 to 13:55 - Elements of a social compliance audit that are probably given too much importance, for example, working longer working hours and overtime. Even where hours worked are into an 'illegal' amount, this doesn't mean that abuses are occurring, especially in China with migrant workers.

13:55 to 17:20 - What does a 'dumb' importer do when performing a social compliance audit? The dangers of sticking rigidly to a standard in terms of forcing suppliers to lie in order to pass (this may be unavoidable if big customers demand certain things).

17:20 to 18:00 - How the 'smarter' importer approaches social compliance auditing with a selective focus. If the supplier is safe and improving, this should be the goal. Focusing on things like consensual overtime is a red herring.

18:00 to 20:30 - The different social compliance standards and how these have become a good business for large testing groups, to the point where it can be used by buyers and labs to profit from the suppliers who are forced to be audited in order to win business.

20:30 to 22:30 - How and why factories in places like China and Vietnam are improving over time naturally these days and why, therefore, many social compliance audits aren't helping other than for improving the buyer's image.

22:30 to 23:26 - The risks of social compliance auditors being corrupt.

23:26 to 24:45 - How buyers train their suppliers to lie by enforcing rigid social compliance audits with a lot of short-term pressure (pass or lose the order) and also possibly create corruption in the supply chain if the wrong auditor goes in.

24:45 to 26:52 - Why a rigid social compliance scale is good for a buyer's statistics, but not so helpful on the ground. Is it merely ass-covering?

26:52 to END - Exploring a better, more holistic way to approach social compliance audits which is likely to be less open to abuse and more likely to lead to positive changes.

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A lot of commentators are discussing what's going to happen to the manufacturing industry 'post-COVID19,' in fact, we've discussed it ourselves before here!

But one topic keeps coming up, JIT manufacturing and how it has been negatively affected by the virus and other circumstances.

So, let's explore this supply chain model - why has it been so popular, how has it come under strain this year, and what's next for importers who currently use it?

Show Notes

Start to 1:31 - Introduction

1:31 to 11:22 - Some examples of what JIT is and what it isn't. Discussing the dangers of holding too much inventory, especially where risk and working capital is concerned, and long supply chains.

11:22 to 12:51 - 3 benefits of JIT: Lower working capital, ability to be more responsive to the market by accelerating production of good sellers rapidly, and the ability to cut losses on poor sellers and halt production quickly in order not to hold stock of them.

12:51 to 16:00 - Why JIT (Just In Time) Manufacturing works well with a short supply chain with fast processing times, such as automakers.

16:00 to 23:05 - How and why is JIT susceptible to external circumstances, such as the coronavirus pandemic. Is it even JIT's fault that disruption from the outside can happen, or is it actually your supply chain's setup? 

23:05 to END - What's the scope for things to get 'back to normal' or will there be lasting changing to the way supply chains are structured? The role of the US/China trade war in spurring change in, specifically, American companies.

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In This Episode...

We continue our exploration of the vetting process when sourcing new Chinese suppliers in this episode. You can read more about this topic in the series of blog posts on QualityInspection.org which we refer to throughout - read all of those posts here.

Now that you have done a preliminary investigation into your potential new Chinese supplier and perhaps even visited their factory to do a subjective evaluation, the next step in the vetting process is to perform a factory quality audit.

Understanding your manufacturer's grasp of quality and in-house quality systems means that you're able to assess whether they're going to be able to fulfil your quality needs down the line. Even if they're a legitimate company, this doesn't mean that they're able to produce your goods at the quality you need.

This is where an experienced auditor's keen eye and checklist can help you. A personal factory visit is useful, but do you have the expertise to look into the quality system (or lack of one) and root causes of quality issues?

So, this episode will give you a detailed introduction into how and why factory quality audits are a logical 'next-step' in your supplier vetting process as now you start to get a real understanding of your supplier's quality capabilities and reliability.

Show Notes

Start to 2:00 - Introduction + China/UK weather update (!). A reminder of the vetting new Chinese suppliers mini-series of episodes (here's episode 1 to get you started). 

2:00 to 9:00 - WHAT is a factory quality audit? Factory audits defined, different types, the difference between such an audit and a factory-visit where you form subjective evaluations.

9:00 to 12:15 - Talking about audit structure and standards, such as ISO 9001:2015.

12:15 to 15:33 - Explaining what a 'Quality System' is and why it's important to audit it. The effect that ancient Chinese wisdom from Sun Tzu, for example, still has on today's Chinese businesses and their approaches to quality.

15:33 to 19:15 - How the auditor will approach auditing your potential supplier. Importance of the checklist they need to follow and controlling the audit. What they do to cut through 'BS' manufacturers are likely to show or tell them.

19:15 to 35:47 - Renaud's TOP 8 CHECKPOINTS to focus on in a factory quality audit.

35:47 to 38:55 - Will potential suppliers be resistant to a factory audit which could be uncomfortable for them? How some suppliers can try to discourage visits by professional auditors.

38:55 to END - What can factory audits miss or what are their blind spots? Wrapping up the pod.

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What are the relationships between foreign importers and their Chinese suppliers like in 2020? Have they been negatively affected by the coronavirus pandemic or other reasons?

To find out, we sent a survey to both our Sofeast and QualityInspection.org readers to assess the state of manufacturing in China in 2020. 

The results are discussed in this episode. Listen in and you may get some helpful insights that could help you anticipate possible issues that we're seeing occurring this year.

Do any of our findings resonate with what you're seeing from your Chinese suppliers?

Show Notes

Start to 3:40 - Introduction. What was the survey and what were we expecting from it?

3:40 to 36:30 - Going through each of the survey's 7 questions one-by-one, providing the statistics, and feedback per point from Renaud.

36:30 to end - A quick summary. What did and didn't surprise us about the results of the survey?

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