Factory inspections in Asia are the subject of renewed discussion in the wake of a tragic fire in a Bangladesh textile factory this past summer. And yesterday there was a lengthy article in the NY Times about the inefficiency of factory inspections in China and Bangladesh. The point of the article is that getting vendors to comply with product or labor standards is just as difficult now as ever.
The article details some Wal-Mart experiences in China where extensive inspections failed to stop bad product from getting on the shelves in US stores. If you have read the China Price by Alexandra Harvey ( here is a review The China Price ), a 2008 book which details all the problems Wal-Mart has had in China trying to get its vendors to be compliant with international labor standards, you will come to the conclusion that, no, things are not getting better. It is the same old song and dance with factory audits in China.
I think one of the problems is the concept and structure of the audit itself. Audits are usually done by third party inspectors who schedule their visits with the vendor and then show up for half a day with a checklist in hand. Vendors have plenty of advance notice to clean up and usually they do so. But the clean up is only temporary. As soon as the audit is over, vendors revert to their bad practices. This point is made in the Times article as well as by Harvey. It is also an SOP known to anyone who has done business in China for any length of time.
From my experience, the only way to really know what your vendors are doing is to spend considerable time with them and observe your product being made at every step of the way. We are talking about multiple visits over the course of a production cycle. But of course this is time-consuming and expensive and most small to mid-sized companies simply cannot afford to do this. So they have to rely on quick audits that many vendors either do not take seriously ( if the orders or customer is small), or take seriously enough that they go to great lengths to conceal problems that will allow them to pass the audit ( if the orders are sizeable).
Still, I think you have to look at your business and at your investment in China. If you plan to build your business sourcing out of China for many years to come, then it behooves you to spend time there working with your vendor and coming to an understanding of how they operate, and how extensively they use sub-contractors, one of the big problems that audits sometimes fail to catch and what is so often a source of problems in off-shore manufacturing.
Here is the link to the article.