Vendor Auditing SOP (with FAQ's) V 1.

0 | 2022

What is a vendor auditing ?

A vendor audit is an assessment that takes place at the manufacturer’s facility to assess their systems, capacity, workplace environment or capabilities
to ensure they meet your requirements as a buyer. A vendor audit can be used as the last step in qualifying a potential supplier or as a tool for
ongoing supplier management with an existing supplier.

Why should we perform a vendor audit?

A vendor audit helps us assess a supplier's systems, capacity, workplace environment, or capabilities to ensure they meet our requirements as a
buyer. Whenever we are going through the sourcing process, we are likely to identify several suppliers that can manufacture our product. Then, after
evaluating them in various ways and getting product samples, we can narrow them down. On paper, that supplier may seem to meet our
requirements for production, quality, and delivery. They may offer reasonable pricing and produce superb samples. But how can we genuinely verify
that they will meet our standards? Before we sign on the dotted line, we can conduct a vendor audit to be sure.

When Should we conduct a vendor audit?

When we are considering a new supplier, it is essential to get as thorough information as possible by performing vendor assessment via audits.
1. While on boarding a new vendor
2. While assessing our current vendors

How should we perform a vendor audit ?

Visiting the vendor in person or hiring a third party or arranging virtual visits on video calls will tell us whether the vendor has the capacity and
capability to produce our goods and can ship on time or not. With this information, we’ll have the confidence we need to place an order with the
vendor and build on future prospects.

Types of vendor Audits

Major types of vendor audits carried in order to know the vendor completely and secure our business
Capability audits
carried on to help verify whether the vendor can manufacture our product within the set timelines.
Quality audits
Carried to measure whether the supplier has an effective quality management system in place (Based on ISO9001 standards etc).
Social compliance audits
Carried to assess working conditions and ensure no human rights violations occur, such as child labor (Based on the SA8000 standard).
Environmental audits
Carried to verify whether the vendor complies with environmental standards and requirements. Eg: GRS Certification requirement etc
Financial audits

Carried to verify if the company's financial status is stable and they have enough financial back up in order to run the vendor for fair amount of time.

Tool for Vendor Auditing

Vendor Evalutation Form, which is uploaded on Asana in supplier database template and on google drive shared folder.

Process of Vendor Auditing

Get the filled up "vendor evaluation form" from vendor and assess the check points.
Arrange a virtual vendor visit or 3rd party audit or self walk-in audit with the vendor to see the machine set up/production capacity, other in-house
facilities (testing/inspection etc).
Based on information received about the vendor via vendor evaluation form and assessed machine set-up, testing facilities and certain observations
during virtual visit, or a report prepared by 3rd party company or self created. We should mark the points as allocated below against each parameter
in order to have final assessed report about a particular vendor.

Assessment based on various marked parameters Max points

Machinery Setup - 20 Points 20
In-house end-to-end set-up for our product with compliance - 20 points,
In-house end-to-end set-up for our product but without compliance - 18 points,
Outsourcing the partial manufacturing set-up with compliance - 15 points,
Outsourcing the complete manufacturing set-up with compliance - 12 points
Outsourcing the partial manufacturing set-up with without compliance - 8 points,
Outsourcing the complete manufacturing set-up without compliance - 5 points
No Clear information on Machinery set-up - 0 Points
In-house Testing Lab/Facilities - 10 points 10
In-house fully functional testing laboratory with certifications - 10 points,
In-house testing facility but without certifications - 8 points,
In-house basic testing facility - 5 points
In-house testing facility not available - 0 points
Raw Material Source - 20 Points 20
3-4 fixed resources - 20 points,
3-4 random resources - 15 points,
2-3 fixed resources - 12 points
2-3 random resources - 8 points
less than 2 fixed resources - 5 points
less than 2 random resources - 0 points
Internal Quality Control System - 10 Points 10
4-point system quality mointoring system in place at every stage with complete documentation - 10 Points,
4-point system at finishing packaging stage - 5 points
No documentation of inspection or set inspection quality control system - 0 points
Technical Capabilities of Staff - 20 Points 20
Inhouse technician and design team - 20 Points,
outsourcing design and inhouse technician team - 15 points,
outsourcing design and development expertise - 10 points
No design team only Technical support - 5 points
No Technical support or design support - 0 Points
Pricing and Attitude - 20 Points 20
Supportive approach to meet target prices - 20 Points,
Strict payment terms and good approach to meet target prices - 15 points,
Overpriced but reliable and customer centric payment terms - 10 points
No support offered on pricing and but have relaxed payment terms - 5 points
No support at all on pricing or payment terms but products are good - 0 points

Vendor Categories
The vendors are segregated into 4 categories that are
A+ with 90-100 points,
A with 80-90 points,
B+ with 80-90 points and
B with 70-80 points.

3rd Party Vendor Assessment Firms

3rd party vendor auditing companies (China/Taiwan/HK) shortlisted are :
www.easyimex.com - Ivo Duits - ivo.duits@easyimex.net
www.gmetqc.com - Vera - contact@gmetqc.com
www.codetex.com - Leila - leila@codetex.com.cn