5 Rules for a Hardware Startup


May 11, 2020

Rules to remember about the factory audit when setting up production in Asia

Hard lessons, from our experience…

The gadget world is impressive. New ideas pop up here and there every day, some of them really worth pursuing. It is very competitive too, and many startups hurry to start production and launch their products as early as possible, forgetting the most important rules of setting up manufacturing that are crucial for building a sustainable business.

Today we’d like to cover the essential checkpoints during a factory audit.

Rule 1. Call it an audit, not a factory tour

Already started to look for an ideal ODM partner for your project? Fine, then you’ll soon be invited for a factory tour by them. But don’t just say “yes” to the invitation; the correct answer would be, “Sure, we’re ready to visit your factory to make an audit.”

It’s crucial to set ODM’s expectations right from the very beginning. They need to know that you are a professional, and they need to treat you like one. It’s good to ask your ODM partner to prepare for the audit in advance and see whether they took your request seriously.

Request the factory management to appoint someone who understands how the factory works, not just some account manager or sales guy who is only trained to do a quick tour and show the best parts of the production area.

There is a massive difference between the audit and the factory tour. You must lead the audit. Ask questions, get inside their processes, and talk to their engineers and line managers. Be proactive.

Rule 2: Make sure it’s their factory.

As silly as it may sound, many companies out there try to resell products and services from other ODM companies. A friend of mine was brought to the same factory by two different ODMs; later, they stated they were “solution companies.”

It’s not difficult to reveal whether the ODM owns and manages the factory. Ask them about each product that you see on production lines. Ask as many technical details as possible, which market they make it for, and how long. The ODM always knows everything about their products. A “solution company” only knows what’s in the product specification (in the best scenario) and is only aware of a few products they promote. Find out about the history of the factory and products or technology roadmap.

Finally, request a meeting with the engineering team. The “solution companies” never have access to the ODM’s engineering resources.

Rule 3: Follow the material flow.

This is one of the key principles of the factory audit that we once learned from one of our partners who had built a very efficient production process himself.

So, don't just walk around different floors and rooms. Insist on their showing you exactly how the material flows, and ask them to lead you through the factory as if you were the material.

It will help you to understand how the factory works:

  • how they take care of security
  • whether the warehouse is well-organized and if they take good care of the goods
  • how professional their staff is
  • if they have all the required equipment and make the full production cycle in-house
  • whether or not they follow the processes that they state on paper
  • if they have enough capacity for your new project
  • and many other things

Rule 4: Check the quality control implementation on each stage of production

Don’t forget to find out what quality metrics they follow during each stage and ask for particular examples of how well products meet those requirements. Check which ISO certificates they have.

Ensure you spend enough time checking the key quality control processes, such as

  • IQC — Incoming Material Quality Control
  • IPQC — In-Process Quality Control
  • OQC — Outgoing Quality Control

Besides, ask if they are using an ERP system. Ideally, a single system must be used in each production stage, from receiving the goods to final product shipment.

Rule 5: Professionally and personally

If you are not familiar with the production yet, we strongly recommend asking a professional to assist you during the audit. However, don’t just hire someone to do it for you.

Always attend the audit. Nobody knows your product better than you do, so you are the one who knows best what is important. You’ll be surprised by how many things can be observed based on your common sense. For example, you can understand how important your project is for the ODM just by looking at how busy the production lines are.

In addition, your presence will help you establish better personal connections with the factory management and define step-by-step what needs to be organized by ODM to produce your product.

Remember, the results of a proper factory audit usually play the most significant role in your final decision about the ODM selection. So, better make sure you’ve done it right ☺

After a busy day ☺