QMT Features: November 2010
Blinding quality
The drive for profits  in pharmaceutical and life science businesses can blind senior management to the impact supply chain quality has on company performance and reputation. By Tim Mohn, Sparta Systems

It is amazing how many senior managers in pharmaceutical and life science businesses still fail to recognise the importance quality plays in the success of the business.  Despite a catalogue of major brand recalls over the last few years the supply chain remains very much at factory floor level. 

From ingredient supplier selection, through the production processes, to packaging and labelling legalities, once the initial choices have been made and the costs agreed, the supply chain and the processes and relationships within it are rarely reviewed by the board – unless they are advised that costs are to increase. 
What should remain in the front of mind is that a business is only as good as the products it makes.

A high profile product recall can wipe out a company’s share price and destroy its reputation in one bad press headline. Highly regulated businesses, such as pharmaceutical and medical device manufacturers are under the additional pressures of experience ongoing struggles between two opposing forces — supply chain efficiency and supplier quality.

The key issue is the detachment between the board which drive product lifecycles for optimum profitability and the quality managers looking to enforce strict procedures to ensure product quality. This statement in no way implies that board level executives are not concerned about product quality, or that quality managers have no commercial understanding in relation to overall financial performance.  It simply means the responsibilities and objectives of these teams are very different and therefore quality can be overridden in favour of production efficiency and revenue increases.

However, the irony is that poor quality can devastate share prices and destroy brands.  Quality issues could stem, for example, from the quality of the ingredients; inferior packaging; contamination on the production line or incorrect information on the labels, all of which are likely to have been supplied by a ‘trusted’, yet unmanaged supplier.

Products can only be made to the standards determined by consumers, public health agencies and regulators if they are manufactured with the highest quality components and ingredients.  Gone are the days of supplier loyalty.  The quality teams need to continually monitor the quality and consistency of raw materials, from existing and new suppliers, and prioritising future procurement from these suppliers.

To do this manually is nigh on impossible. The process requires extensive tracking and management of supplier qualifications, audits, non-conformance, corrective actions and other processes. The total cost of the supplier relationship also has to be calculated and factored in.

To fully understand the critical need for managing supplier quality it has to be included as part of a company wide quality management process; and to do this it is necessary to audit all processes. There are several challenges that companies face when implementing an effective process for managing supplier quality and these extend beyond the elements of the supply chain into the overall quality control processes of the business operations.

1.Efficient, centralised reporting
Highly regulated businesses are required to audit suppliers and provide detailed reports to the appropriate regulatory body detailing their suppliers' operations.  Even with easy-to-use software applications available to track and report on supplier activities, too many, including Blue Chips, are still using ad hoc and often manual processes including pen and paper to document and record processes.  This results in inconsistencies, issues and compliance failings. 
A centralised system for tracking supplier data will streamline reporting efforts and realise the benefits of a more efficient and compliant process and difference departments or sites can learn from the experiences of others and ensure that no two mistakes are ever made.

2.Board level involvement in managing supply quality
Quality management is too often considered a departmental concern despite the impact quality has on profitability. With immediate effect the board needs to adjust its thinking and consider the operational costs of recalling and replacing a product line.
3. Risk-based analysis for supplier quality
A risk calculator will save valuable time and resources.  It removes the need to manually access the risk of suppliers.

4.Release Global Pressures
Global supply chains put incredible pressure on businesses.  Every year there are several high profile recalls of drugs and medical equipment. With increased competition and the impact the economy is having on the price of ingredients there is not room for supplier based issues.

Pharmaceutical businesses depend on internal and external manufacturing and compliance processes.  It is critical therefore that there are stringent standards for quality and compliance to support supply chain efficiencies and profits.
Companies need to be proactive and increase visibility so potential supplier problems can be highlighted via a global view of all quality issues and supplier scorecards. This offers far-reaching benefits including;

• compliance with industry regulations, good manufacturing practices (GMPs), and ISO standards
• eliminates high costs related to scrap, rework, and delays caused by supplier quality problems
• anticipates and eliminates repeat problems by improving supplier investigation and root cause analysis processes.

While upfront investment is required including system and infrastructure investments, training costs and implementation time, the end gain is worth more than the initial outlay. An enterprise-wide quality management program will improve quality trending and management reporting by integrating purchasing and inventory systems with the quality management system.

Supplier quality management
An enterprise-wide centralised process must encompass several quality management and compliance components, including:

• Supplier qualification: Managed qualification and approvals of new suppliers, including qualification steps, which may vary based on the supplier's risk assessment, and may include tasks such as self-assessment and onsite audit.
• Supplier audits: Audits based on the risk level, audit frequency, and the supplier rating or score established in a supplier's profile.  If a trend in supplier quality problems is identified ad-hoc audits should be ordered. The audit process, related audit findings and subsequent supplier corrective and preventive actions must be managed and tracked to ensure quick and effective resolution.
• Incoming material inspections: Create inspection records when materials are received to ensure tracking of all inspection activities, including inspection type, received date, material information, quantity, inspection results and related information.
• Approved supplier lists and scorecards: Enable the organisation to maintain and monitor approved or preferred supplier lists. Approved supplier lists can be customised reports or online databases that can be reviewed and updated by qualified staff.
• Supplier non-conformance: Directly generate nonconforming material reports (NCMRs) from the inspection record, or independently within the manufacturing operation when the materials are below quality control standards. Guarantee that the supplier investigations and root cause analyses are tracked through to completion.
• Supplier CAPAs: Track all supplier corrective and preventive actions (CAPAs) through to completion. Provide third-party suppliers with secure access to view only their specific NCMRs and audit findings and record corresponding corrective actions. • Supplier documentation: Maintain or link to documentation of important specifications, including inspection plans, delivery windows and acceptance sampling for received items.

Managing supply quality effectively serves not only to drive compliance, but also to reduce the cost of poor quality, which, with both tangible and intangible ramifications (costs of product recalls, tarnished reputations or brand image), can ultimately be a detriment to any biotech or pharmaceutical organisation.
Without a stringent, holistic and centralised supply quality management initiative that drives numerous supply chain and organisational efficiencies, companies' bottom-line objectives will be undermined, eroding any previous organisational successes.

Tim Mohn, Industry Principal at Sparta Systems
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