Why Factory Audits Are Crucial When Selling to Target
Target is one of the largest retailers in the United States, with over 1,900 stores across the country. With such a massive reach, it's no surprise that Target has strict requirements for the suppliers that it works with. One of the most important of these requirements is passing a factory audit.
Factory audits are crucial for businesses that want to sell their products to Target, as they help to ensure that all products meet the retailer's high standards for quality, safety, and ethical practices. In this article, SVI Global will explore Target's audit requirements and provide with the information you need to successfully pass the audit. By following SVI Global’s guidance, you can ensure that your operations comply with Target's standards, minimizing the risk of disruption to your business. Our expert team will work with you to identify and address any compliance gaps, ensuring that you meet all of Target's requirements and maintain a successful business relationship with the retailer.
Different Types of Target Factory Audits
Target is one of the world's largest retailers, with a significant presence in the United States and around the world. The company has a reputation for quality and ethical sourcing, and as such, it places a high priority on conducting factory evaluations to ensure that its suppliers meet its standards.
For factory evaluation, Target typically focuses on three different audits: Factory Assessment (Quality Control), Responsible Sourcing & Sustainability (Human Rights), and C-TPAT (Security Audit).
Factory Assessment (Quality Control) is a Top Priority for Target
Factory Assessment (Quality Control) is a top priority for Target, and the Target internal teams are responsible for conducting these inspections. This involves a thorough review of the factory facility and various documents and records related to the quality management system. This includes quality manuals, approved supplier lists, purchase orders, incoming material and finished product records, inspection methods and records, training plans for workers, corrective action procedures, customer complaint procedures, and machine safety guidelines. The checklist is designed to ensure that the factory meets the necessary quality standards and that all processes are properly documented and controlled.
Responsible Sourcing & Sustainability (Human Rights) are Also Critical
Target is committed to ensuring that its suppliers operate ethically and responsibly, and Target hires third-party audit companies like BV or SGS to conduct unannounced RS audit. These audits examine working conditions, labor practices, and other factors that impact the rights of workers in the factory.
C-TPAT (Security Audit) Audit Focus on Ensuring that The Factory Has Appropriate Measures in Place to Prevent Terrorism-related Activities
Target accepts the Scan report issued by third parties.
Reasons Why Target Conducts Audits on Its Suppliers
One of the main reasons why Target conducts audits on its suppliers is to ensure that the products they sell meet the company's quality standards. Target's customers expect high-quality products, and the company holds its suppliers accountable for delivering on this promise. In addition to quality, Target also evaluates its suppliers based on their ethical and sustainable practices. Target is committed to promoting sustainability and ensuring that its suppliers meet the same standards.
Ways for a Factory to Improve Its Score on a Target Supplier Evaluation
Implement corrective actions. If a factory has received a low score on an audit, it's important to take the findings seriously and implement corrective actions to address any issues. This could include anything from improving working conditions for employees to improving environmental sustainability practices.
To ensure ongoing compliance, Target audits their suppliers on an annual basis. Rather than viewing the audit as a one-time occurrence, factories can aim for continuous improvement in their operations. This involves establishing improvement objectives and regularly measuring and assessing progress towards these goals.
How Target Ensures Ethical and Sustainable Practices in Its Approved Target Suppliers
One of Target's main initiatives is its Responsible Sourcing program. This program aims to ensure that Target's products are made in factories that treat workers with respect, provide safe and healthy working conditions, and adhere to environmental standards. To achieve this, Target works with its suppliers to identify areas for improvement and provides guidance and resources to help them make necessary changes.
Target also requires its suppliers to comply with the company's Code of Conduct, which sets out ethical and social standards for suppliers. The code covers a range of issues, including child labor, forced labor, working hours, wages, and health and safety. Target conducts regular audits of its suppliers to ensure that they are complying with the code and takes corrective action if necessary.
In addition, Target is committed to promoting sustainable practices in its supply chain. Target encourages its suppliers to adopt sustainable manufacturing practices, such as reducing energy and water use and minimizing waste.
Consequences of Failing a Compliance Audit
As part of its commitment to ethical and sustainable sourcing, Target conducts factory audits to ensure that its suppliers meet its standards for quality, safety, and working conditions. In cases where factories do not meet these standards, fines and penalties may be imposed.
If a factory fails a Target audit, there are serious consequences for the supplier. Consequences are divided into three stages:
1. First violation: warning + potential fine
2. Second violation: vendor probation + fine
3. Third violation: vendor deactivation + fine
If a factory has their first critical failure during an audit but submits a proper and approved Corrective Action Plan (CAP), there will be no fine.
If a factory has their first critical failure during an audit and fails to take any corrective action or submit a CAP, they will be fined $1,000 USD.
If a factory has a second critical failure during an audit, they will be fined $5,000 USD, put on probation, and their business opportunities for future projects will be limited.
If a factory receives a third critical failure issue during an audit, they will be fined $10,000 USD and completely deactivated from doing business with Target for at least one year.
Suppliers should take steps to ensure compliance with Target's standards to avoid penalties and maintain their ability to do business with Target.
The 3 Strike Policy for Target Suppliers
Target has a zero-tolerance policy for certain violations known as "Strike Violations." If a factory commits any of the 10 Strike Violations, they will face serious consequences, including a minimum fine of $25,000 USD and an immediate ban from doing business with Target for at least one year.
In addition, if a factory is found to be involved in three Strike Violations within a three-year period, they will face a three-year suspension from doing business with Target.
Here are the 10 Strike Violations
1. Unauthorized subcontracting
2. Forced labor
3. Falsified documents
4. Circumventing of QC process
6. Production in an unregistered factory
8. Underage labor
9. Wastewater violations
10. Contraband container substance
In case of any of the above violations, not only will the factory be suspended for three years, but also the already shipped goods will be returned.
To avoid such penalties, factories must follow Target's ethical and sustainable practices and work towards continuous improvement.
If a factory fails to meet Target's standards during a factory evaluation, there can be serious consequences. These can include loss of business from Target, loss of reputation, and even legal action. It's crucial for businesses to take the necessary steps to prepare for a Target audit or factory evaluation.
SVI Global has been managing supply chains for companies selling to major US retailers for over 20 years, giving us a wealth of experience in factory audits of various retailer standards. Our team of factory audit experts works with new factories each year to help them improve and meet the compliance requirements of major retailers.
If you're facing concerns or issues related to having your supplier pass a retailer audit, don't hesitate to contact us. We are here to help address your concerns and ensure that your business moves smoothly with retailers on time. Partner with SVI Global to ensure compliance and success in your supply chain.