Situation

• Client developed a new supplier risk program and in the course of execution identified a need to close 100% of CAPAs in 2009.  Unfortunately, the client did not have the resources or bandwidth to complete this project in the timeframe set. 
  

Challenge

• Client had never outsourced CAPA management to any third party company in the past.  Naturally, the client was concerned about the process by which the CAPAs would be closed, the volume and meeting the timelines defined by client to close a CAPA.

• Multiple stakeholders (client, suppliers, & SQA) were involved, therefore coordinating and tracking communication, information and documentation was a major challenge.  There were multiple contacts at a variety of client sites around the world working with SQA to manage the corrective actions and numerous suppliers found globally which made streamlining the CAPA process an enormous task. 
  

Solution

• SQA provided Client with a clear, simple, and effective process to manage CAPAs with minimal error in the fastest time possible.

• SQA’s dedicated CAPA Team used STEPQ as the vehicle for communication and information flow for all client and supplier stakeholders.  STEPQ’s CAPA features such as the Ford 8D model, communication logs, history tabs, notes section, automatic notifications, and interactive approve and reject options allowed the client to stay connected with the activities that SQA was managing.

• SQA’s dedicated CAPA Team reached out to the suppliers at least once a week, thoroughly reviewed the suppliers’ root cause analysis and problem solving plans, and uploaded observations and actions taken by the supplier while simultaneously keeping the client involved.

Results

• SQA was able to close 289 CAPAs in 2009 for the client within an average of 45 days.

• SQA and Client signed an agreement to continue the partnership for an additional 3 years.

• SQA enhanced the CAPA program for the client to meet the client’s internal CAPA process.

     To learn more about SQA's Managed CAPA service click here

Feb 03, 2010 - SQA featured in Orthopedic Design & Technology magazine with commentary on A New Decade of Supplier Quality.  Read the full article here

November 10th 2009 : The Los Angeles Business Journal (LABJ) held the 13th annual “Fastest Growing Private Companies Award” at the Andaz in West Hollywood.  Among the top 100 fastest growing companies, SQA was ranked #38th. This ranking represents the true spirit of teamwork and great leadership at SQA.  We congratulate all LABJ companies that share the true spirit of entrepreneurship and the drive to take it to the next level!

Recently, SQA Services, Inc. attended “Risk Mitigation Strategies: The Sourcing Summit ‘09” held by the Drug, Chemical and Associated Technologies (DCAT) Association in New Brunswick, New Jersey on November 4 – 5, 2009.

The DCAT Conference reviewed topics from “Outlook for the Chemical Industry in 2010” to Supply Chain Reliability to Roundtables on Sourcing Strategies with Senior Executives from Hospira, Baxter and BMS.  Some key themes from the DCAT meeting are highlighted below…

Robert Fry, PhD, Senior Associate Economist, Dupont stated that,  “This has been the longest and deepest US recession since the Great Depression, with real GDP declining 3.9% over four quarters, 7.2 million jobs lost and at least an 18 month period of recession…But things are looking up.”  The recession probably ended in June, with leading indicators up strongly, including his favorite leading indicator—the ISM New Orders Index.

Martin Widman, Head of Global Business Unit Pharma Ingredients and Services, BASF stated, “With recent sourcing issues in Asia, some companies have unilaterally stopped sourcing from Asia.” But he suggested that it’s a matter of balancing opportunities and risks. Monitoring high-risk suppliers involves looking at a number of different indicators, including credit rankings and reports, lead buyers community network, news, and on-site audits. He emphasized that human interaction is critical. “You want people to know and trust each other and that can act together quickly.”

Mike Velez, Sourcing Director, Global Procurement, Merck, Inc. reviewed the components of Merck’s external manufacturing GSE evaluation program, which include governance structure, communication of expectations, initial risk assessment, performance assessment/audit, knowledge management and ongoing monitoring. With Merck’s supply strategy driving increased contract manufacturing, audits are focused on new and high risk facilities, as well as critical suppliers. Velez outlined lessons learned and pitfalls to avoid:
1) Ensure senior leadership sponsorship before implementing program. 2)  Clearly define governance structure.  3)  Physical audit requirements require additional resources-contracted externally.  4) Don’t try to audit every supplier; take a risk-based approach.

Janeen Skutnik, Director/Team Leader of Quality & Regulatory Policy, Pfizer Inc. focused on the benefit of geopolitical environmental scanning.   “Keeping tabs on the global economic and political situations, as well as what is happening in other industries, will allow us to to look for potential vulnerabilities within the supply chain,” stated Skutnik. Recent case studies, such as the Heparin, acetonitrile, and melamine events highlight the importance of understanding the dependence of a product on its sourcing components. “A proactive awareness of global issues and extrapolation to your company’s business can help you be better prepared,” said Skutnik.

Thomas LaVake, Manager, Worldwide Environmental, Health & Safety, Johnson & Johnson said that sustainability, is a mega trend, like globalization, that has multiple components—environmental, social and impact on profitability. The key challenge for companies is supply chain sustainability. Companies do a pretty good job with their top tier suppliers, but that lots of questions remain below that level. Companies must consistently ask themselves the following questions:
What do you buy? (How well do you know the properties of the materials/services?); Where does it come from? (How well do you understand the complete chain of supply?); Who do you buy it from? (How well do you know them? Look for companies that have a commitment and public stand) If you don’t have the answers to these questions now, put systems in place that will allow you to.

Kim Cauchy, Director, Global Sourcing, Hospira stated that the best way to manage risk is through knowledge based risk management spanning from your own company, suppliers and competition to the markets, geopolitics and cultures and languages. Sourcing professionals tend to focus on API’s and excipients, but Cauchy advised attendees to look closely at their intermediaries. Excipients are always a problem because  the pharmaceutical industry use is such a small percentage of total use. Do the best you can, advised Cauchy, keeping the process possible and practical.

Doctors can make the worst patients, and Quality Professionals can focus so closely on suppliers’ quality that they miss opportunities for improvement in their own programs.  By applying basic quality principles in the evaluation of suppliers, improved efficiency and effectiveness will have an impact well beyond the supplier quality function.

The number of FDA warning letters attributed to inadequate supplier evaluations has remained high over 2009.  In 2008, 45% of Medical Device Manufacturers that received warning letters concerning supplier practices were shown to be inadequate in meeting their supplier evaluation commitments per 21 CFR 820.50.  So far in 2009, this figure is still bordering 40%.  While many factors influence such a trend, one factor that can be easily and effectively controlled is the supplier audit process. Although it may seem painfully obvious, taking a quality approach to auditing your suppliers can often be overlooked.  There are numerous considerations that need to be properly managed beyond a basic procedure, checklist and spreadsheet of vendors.

The following quality fundamentals should be incorporated in your supplier audit program to maximize the effectiveness of your audit team:

• Define your process.  Supplier audits are the result of many events involving multiple stakeholders inside and outside your organization.  The act of having a quality auditor on-site at a supplier is but the tip of the iceberg, with a significant amount of supporting work required before and after.  The steps involved in audit preparation can include audit justification/prioritization, supplier liaison, legal approval, supplier history review, auditor coordination, and pre-audit briefings.  Following the audit there is immediate action (if required), report preparation, content review and corrective action management through to closure.  By mapping this process, steps and roles may be optimized (e.g. reassigning administrative tasks from auditors), and supplier audit as a risk management tool can be made more effective (e.g. defining broader internal action based on poor supplier audit results).

• Add checkpoints along the way.  Because the audit process is time-sensitive, back-tracking after an audit has been performed is time-consuming and not always effective – ask any busy auditor about a supplier audit two weeks ago.  Even changes made prior to an audit can have a major impact on the availability and efficiency of your audit team.  Therefore, the addition of checkpoints in the audit process will allow you to zero-in on all of the pre-requisites of a successful audit.  Basic questions such as “Has another division of our company already performed an audit we can use?” and “Are there any areas [such as special processes] that require added attention?” will help with auditor coordination, and produce audits with more ’teeth’.

• Put the audit process in context.  It is important look at the audit process flow in the context of overall supplier control – i.e. the ‘big picture’.  Many companies have developed an overall risk management strategy which both impacts, and will be impacted by, the supplier audit process.  For example, a risk management strategy will help determine the higher-priority supplier audits.  Likewise, results of the audit process will have an impact outside the audit process – like the action required from a major supplier finding, which could result in a change in risk status, a stop in production, or a product recall.

• Perform a FMEA on the process.  With a well-defined supplier audit process, a Failure Mode and Effects Analysis (FMEA) is an excellent way to prepare for exceptions that invariably occur.  This disciplined approach to identifying and preventing possible failures can save an enormous amount of time spent in escalation, back-tracking and rework.  It can address questions like “What happens if a supplier refuses an audit?”, “What happens if inadequate evidence is obtained during the audit?” and “What happens if a supplier is unresponsive?”  In performing a FMEA, you will map the entire process, showing every step, listing every critical feature.  You will determine possible failure modes for each critical feature – and their effects (like having to revisit a supplier).  Then you will rate the severity, occurrence and detection of the failure, and take appropriate preventative action.

• Add measurements and targets.  Another quality fundamental is the use of data to improve decisions and identify sources of variation.  There are many aspects of an audit program that may be monitored for control and improvement.  These include team optimization (e.g. no ‘dead time’, grouping audits for reduced travel), on-target audit dates, audit report turnaround, and corrective action closure.  Note that the tracking of such parameters should allow for exceptions, such as an unusually large or complex supplier requiring more on-site audit time.

• Don’t inspect quality in.  If supplier audits are viewed in isolation, there can be a tendency to focus on the finished product, as opposed to the process that created it.  If an audit report is incomplete or poorly written, there is a natural tendency to opt for greater screening, or ‘inspection’.  By looking further ‘upstream’ in the process, you are more likely to determine the source of variation, e.g. inadequate auditor preparation, lack of supplier guidance.  This may lead to the addition of a checkpoint (see above) that will save back-tracking, rework, and reoccurrence.

• Think CAPA.  For an audit team, the urgency of the next audit creates pressure to quickly fix any problems that arise and move on.  This approach covers the need for ‘containment’, but does not address the broader aspects of Corrective Action / Preventative Action (CAPA).  With a well-defined process and suitable measurements in place, it becomes easier to identify and address the real problem source (not just the symptom).  It also provides opportunities to spot potential problems and take action to prevent them from happening.  The process owner must ‘think CAPA’ when addressing problems and evaluating the process for effectiveness.

By applying all of the fundamentals above, your supplier audit process will be well-placed to meet the increasing demands of the supplier quality function.  Like other parts of your quality organization, they should be subject to regular review, and performance against goals.  A more effective process will deliver better performance of your audit team, better visibility of supply chain risks to your entire operation, and improved value from the supplier quality function.

About the author

Gerard Pearce is executive vice president of SQA Services Inc., a Rolling Hills, California-based company specializing in global supplier quality management. Gerard has more than 20 years’ experience in combining the fields of quality, supplier management and technology. He published The Purchasing Revolution in 1999 and served on the committee of the World Congress of the International Federation of Purchasing and Supply Management. He is heavily involved in shaping and implementing the global outsourcing quality strategy for SQA’s Fortune 500 clients in a variety of industries, including medical device, pharmaceutical, aerospace and high-tech. He can be reached at gpearce@sqaservices.com or through www.sqaservices.com.

Los Angeles, July 17, 2009 – SQA Services, Inc. and Honeywell announce another pioneering milestone in the area of on-demand global quality services.

SQA and Honeywell have over a decade of projects together, including the hugely successful Supplier Assurance Services program for NASA. They are now taking their multimillion dollar cost saving and quality services formula to the broader commercial and defense markets.

Following the signing of a formal Memorandum of Understanding earlier this year, SQA and Honeywell’s Technical Solutions Inc. division (HTSI) laid the foundations for the joint marketing of their managed quality inspection, audit and supplier development services around the globe.  Honeywell’s Vice President of Technical Services, Mark Dunn, indicated that this was a logical next step for the two companies.  “The services and technologies both our companies developed have saved our customers millions of dollars through productivity and improved quality. While we’ve worked together to achieve these savings with several customers, it makes sense to apply this winning formula on a broader scale.” Dunn said.

Our model incorporates project-based supplier quality programs that leverage a network of Quality experts across 50 countries.  “It’s the best of both worlds” said Mike McKay, President/CEO of SQA.  “Clients are looking for the scale and stability that comes from one of the world’s most respected names in Aerospace, plus the agility and global footprint that comes from a leading-edge services provider like SQA.”

In addition to the proven people and processes that make up the partnership, technology plays a key role in managing, measuring and optimizing this global operation.  “To be effective in these programs, we need good data fast” said McKay.  Their web-based central operations system, nicknamed “STEPQ” (or “Supplier Tracking of Events and Performance for Quality), provides this, offering visibility and control for all stakeholders involved in each program – Supplier Quality Managers, Suppliers, Field Engineers and Executive Management.  According to SQA’s Director of Technology, Michael Huynh, “Global quality programs require ‘24x7 care and feeding’, which means STEPQ has to be there all the time, for everyone… STEPQ provides a constant watch over every event, monitoring results, raising red flags, sending out reminders, and gathering data”.'

Honeywell and SQA are currently in discussions with several major aerospace and defense companies regarding their global supplier quality programs.  For more information, please contact SQA’s Vice President, Fred Williams, on 310-802-4442.

HTSI is based in Columbia, MD, while SQA’s world headquarters is in Rolling Hills, California.  For more information, see www.honeywell.com/htsi  or www.sqaservices.com.

We are always excited in staying in touch with the industry and sharing our best practice experience at these conferences. If you'd like SQA to participate in an upcoming event please contact us at +1-310-802-4448

Feb 8-11 2010 Anaheim, CA	Medical Design & Manufacturing Conference The definitive information resource for the medical device industry. - The MD&M West 2010 conference will once again provide medical manufacturing's premier educational content for R&D, design, engineering, and quality professionals. This year's new highlights include: more presentations from senior level executives from medical device companies than ever before; four days focused on everything from the process of innovation, to due diligence, through funding and regulatory approval; focus on quality and design engineering and best manufacturing practices; sessions on preparing for FDA's enforcement activities and focus on the supply chain; and how to use innovative materials in medical devices and still receive FDA approval in a timely manner. read more
Mar 4-5 2010 Puerto Rico	INTERPHEX Puerto Rico 2010 INTERPHEX Puerto Rico features MEDICAL DEVICE Puerto Rico - focusing on education, innovation, and collaborative opportunities in the field of high-tech precision medical device manufacturing and packaging. Networking essential to business growth, strengthened by the alignment with Puerto Rico's pharmaceutical industry, is as important here as the exploration of new products and services that enhance human life and health. read more
Mar 15-18 2010 New York, NY	DCAT Week '10 Listen, learn and dialogue - with industry experts at DCAT Week programs covering a variety of market segments, business development opportunites, import border processes and drug delivery technologies. read more
Mar 15-19 2010 Orlando, FL	2010 PDA Annual Meeting : Manufacturing Excellence The 2010 PDA Annual Meeting will explore Manufacturing Excellence. - The PDA Annual Meeting is the one meeting each year dedicated to advancing the careers of pharmaceutical and biopharmaceutical professionals by focusing program content on science and technology innovation, offering extensive formal and informal networking opportunities and providing a forum to contribute to, and influence the advancement of science and regulation in the industry. Everything we do has a link to supporting the manufacturing process and creating an environment of quality and excellence. It is important to explore and discover ways to improve yields and efficiency. read more

By: Gerard Pearce

As supply chains of medical device manufacturers evolve and the supplier quality function within them adapts accordingly, the issue of supplier data becomes more prominent. This is not just from a regulatory standpoint, but also stems from a need for the supplier quality function to leverage available information to reduce costs and improve quality.

Managing and maintaining supplier data is already a requirement of 21 CFR 820 of the U.S. Food and Drug Administration's good manufacturing practices requirements and quality system regulations. However, many companies remain unable to meet this obligation.

In 2008, 45 percent of medical device manufacturers that received warning letters about supplier practices were shown to have inadequate supplier evaluations (820.50.a). The other aspect of section 820.50 is the maintenance of adequate purchasing data. Of this same group of warning letter recipients, 55 percent were unable to conduct the required capture and tracking of purchasing data (820.50.b).

Obviously, maintaining compliance ensures that at least the basics of supplier data are in place.  However, many leading medical device manufacturers want to further develop their supplier data in the interests of saving money and reducing risk.

In the same way that there are different drivers for exploiting supplier data, there also are different characterizations of the term-from basic contact information to supplier-provided internal quality metrics. In order to take advantage of the benefits of such information, it is important to understand the different types of supplier data and where they come from.

What it is.

Without a concise definition of the term, supplier data may fall into one of three basic categories: background, transactional and upstream.

Background information is consistent with the "evaluation" aspect of 820.50.a, which provides a periodic snapshot of the capability and capacity of suppliers (as it relates to "their ability to meet specified requirements, including quality requirements.") This normally takes the form of a supplier audit.

Transactional information is consistent with the "purchasing data" aspects of 820.50.b and relates to products and services ordered, received and paid for. This is a traditional source of supplier quality metrics in the form of price, quantity received, quality received and on-time delivery.

Upstream information can be described as an extension and expansion of the first two categories. It looks at trends, in addition to "snapshots in time." It looks at the movement and stability of product before it is received-i.e., "upstream" in the supply chain. And it typically combines these measures with other aspects of supply and risk management to form a dynamic supplier scorecard.

In surveying dozens of leading medical device manufacturers, it was found that most of these companies suffer from gaps in their supplier data. In other words, many companies have one or two areas covered, but not all three.

Why it is important.

The bottom line is that companies with better supplier data will save money through fewer supplier problems and better use of finite supplier quality resources.

Problems detected early are less expensive to deal with. Catching problems early, or preventing them before they hit the loading dock, requires visibility across the organization and at the source. The growing emphasis on risk management tools is a good indicator of how important companies believe it is to anticipate and act on problems early.

Focusing on strategically important (as well as "problem" suppliers) will have a greater impact than spreading core resources across the whole supply base. Good supplier data will allow a company to right-size the amount of oversight required at a given supplier: more at strategic and problematic suppliers and less at stable, non-critical suppliers.

Where it is.

Ironically, much of the supplier data that would facilitate better purchasing and supply decisions is already being captured through existing operations.  The challenge is to develop the means to consolidate and distribute this information to stakeholders across different divisions within the organization.

Consistent with the different perceptions of supplier data, methods of capturing and managing such data vary.  ISO 13485 and 21 CFR 820 only go so far as to say that it must be defined and recorded – as they should.  There are many commercial systems that claim to satisfy all supplier data needs, but these are typically limited to one category.  For example, ERP systems are exceptionally good at handling transactional data.  Some of them can accommodate background data, but they are not designed to accommodate upstream data.  Similarly, ‘quality’ software systems are exceptionally good at handling background data, but do not easily combine this with transactional and upstream data.  Upstream data capture systems (with the exception of spend management, where numerous commercial systems exist) is typically a ‘home grown’ affair.  This varies in complexity from manual (e.g. emailing spreadsheets), to semi-structured (e.g. supplier portal), to automatic (e.g. data feeds).

Companies who have successfully tapped into all three categories use a combination of existing ERP, quality, and supplier-facing applications to capture the data.  Depending on the method used (either manual, batch, or through a data warehouse) the information is combined and distributed in a way that allows purchasing and quality stakeholders across the organization to make informed decisions.

Why companies struggle with it.

One of the reasons companies struggle with supplier data is that they only focus on one or two of the three categories-and if the purchasing and quality functions are not strongly aligned, even these are handled in isolation. Adding the decen-tralized nature of these functions across divisions (and the natural data boundaries that result) means that a lot of good information is not being shared.

Also, supplier data lacks priority. In the majority of companies surveyed in the healthcare industry-not just medical devices-emphasis on compliance means they do not take full advantage of much valuable and easily available supplier data. Interpreting data that already is being collected, such as trends in audit results or tracking responsiveness to corrective actions, actually makes the compliance task easier. Yet supplier quality teams often are stretched too thin to devote resources to this.

Lastly, the link back to improved quality and reduced cost is not always obvious. The value of purchasing or regulatory information speaks for itself; however, the positive impact of tying these together with upstream data requires some illustration or "selling" to gain support.

How to get the most out of it.

For multi-divisional companies, the easiest way to leverage supplier data is to share it.  Obviously keeping within the bounds of confidentiality, sharing supplier data – even informally – within an organization provides visibility that helps anticipate problems and gain purchasing power.  With several regulated industries sharing supplier data between companies – even between competitors – there is no good reason why one company shouldn’t share data between divisions.

Another ‘quick win’ to be gained from consolidating supplier data is the maintenance of current information.  By keeping consistency between background, transactional and upstream supplier data, purchasing and quality groups eliminate wasted time and resources due to duplicate, redundant and obsolete data.  For example, updated contact information from purchasing can prevent a time-consuming chase for the right data an auditing team (and vice versa).  Similarly, a change, determined by operations, in the level of criticality of a supplier can impact its audit schedule.  Or a quality problem being experienced by one division that is communicated to other divisions can prevent the problems from being repeated elsewhere.

A major benefit from good supplier data is the effective planning and coordination of resources.  Audit programs based on current supplier information spend less time auditing suppliers that are no longer being used, and more time working with suppliers that are strategically important or high-risk.

Good supplier data provides a foundation for risk management.  Leading medical device manufacturers are using ‘Supplier Scorecards’ as a means of anticipating problems and focusing their purchasing and quality efforts.  Good supplier scorecards combine the three categories of supplier data, and match these against supplier criticality and impact of disruption, to determine immediate actions and long-term supply strategies.

The payoff: Return on Investment from better supplier data

There are many benefits from having better supplier data, from controlling supplier numbers to closer strategic relationships.  However, justifying the time and effort required involves making a convincing business case.  The good news is that the relatively low investment required can be offset by only a few cost saving examples.

An obvious return on investment from better supplier data is the reduction in duplicate work.  Divisions in large companies that can take advantage of pre-existing audit and performance data from other divisions will save on their own audit costs.  Using even a conservative figure of $5,000 per audit, saving 100 duplicate orders out of many thousands of suppliers provides a healthy foundation for investing in better systems.

Another area of return comes from ‘right-sizing’ quality controls for suppliers according to risk category or performance.  For low-risk and proven, stable suppliers, a ‘reduced inspection’ approach may be taken – which delivers tangible savings against 100% inspection and more frequent audits.  Again, taking simple, representative cost savings (reduced number of audits, reduced number of inspections X number of deliveries) and multiplying them across a broad supply base, provides a substantial return.

The one area of savings that makes all the others pale by comparison is that of preventing a field failure.  Recalls and failures are by far the costliest aspects of supply chain failure, but they are also difficult to quantify, and like insurance, even harder to tie back to a supplier quality management program.  The scale of these savings however, demand consideration – even if they cannot be accurately quantified.

A good supplier data program reinforces every aspect of supplier quality, from developing fewer and better suppliers, to reducing internal and external failures, to optimizing supplier quality resources.  Companies that take advantage of this by tying together background, transaction and upstream data will find their primary goals of improving quality and reducing cost will be much less of a struggle.

Gerard Pearce is executive vice president of SQA Services Inc., a Rolling Hill, Calif.-based company specializing in global supplier quality management. Gerard has more than 20 years' experience in combining the fields of quality, supplier management and technology. He published The Purchasing Revolution in 1999 and served on the committee of the World Congress of the International Federation of Purchasing and Supply Management. He is heavily involved in shaping and implementing the global outsourcing quality strategy for SQA's Fortune 500 clients in a variety of industries, including medical device, pharmaceutical, aerospace and high-tech. He can be reached at gpearce@sqaservices.com or through www.sqaservices.com

Source: Chemical & Engineering News (June 22 2009)

Patient safety has always been a top concern of pharmaceutical manufacturers and the government agencies that regulate them. The ability of producers and regulators to ensure drug safety, however, has been stretched to the breaking point in recent years.

The death of 81 people in the U.S. last year from adulterated heparin is a stark reminder of the Food & Drug Administration’s inability to vouch for the safety of all of the drug ingredients imported from producers in regions where the agency’s oversight is limited and local quality standards are lacking. The threat of poorly manufactured materials, counterfeits, and what FDA has dubbed economically motivated adulteration of drugs has the agency and the manufacturers it oversees scrambling to fortify safeguards.

The focus in industry is on improving the efficiency of manufacturing plant audits, the number of which has grown exponentially with the steady rise in outsourced manufacturing. A new industry initiative, Rx-360, is attempting to coordinate the efforts of drug companies and their suppliers by establishing a framework for shared audits and a clearinghouse for information on drug safety and quality.

Martin Van Trieste, vice president of quality at Amgen and interim director of the group, says the intricacy of the global drug supply chain is just one factor that makes the effort daunting. Rx-360 is also contending with an industry culture that is counter-collaborative. “Our industry is so based on intellectual property that everyone is afraid to share,” Van Trieste says.

Pressure to improve supply-chain monitoring is mounting, however, and suppliers are increasingly willing to surmount these obstacles. “Everyone has been working over the last few years to improve the security of the supply chain because of rampant counterfeiting,” says Gerald Migliaccio, a quality vice president at Pfizer. “The criminal adulteration on top of the counterfeiting—that got everyone to really start talking about it.”

Van Trieste says the discussion turned to action at meetings on supply-chain security sponsored by FDA and the Parenteral Drug Association last year. Baxter Healthcare was coming under scrutiny for marketing Chinese-made heparin adulterated with oversulfated chondroitin sulfate. A group of drug-company quality, supply-chain, and procurement managers discussed how all of their supply chains are vulnerable to intentional product tampering.

“We are designed to monitor Good Manufacturing Practices, not to capture unethical people,” Van Trieste says. “None of us could solve this kind of problem on our own.”

Rx-360 was incorporated as a nonprofit consortium and held a launch meeting earlier this month in Washington, D.C. Van Trieste outlined an agenda that includes implementing auditing standards, training auditors, and establishing the means to share data. Rx-360 will also fund the development of new screening technologies to detect adulteration, according to Van Trieste, who emphasized that Rx-360 will first seek to employ available techniques developed by other industries.

One of the first connections that Rx-360’s advisory committee made was with Fair Factories Clearinghouse (FFC), a consortium that supports collaborative auditing and information sharing on factory safety in the apparel industry. Initiated by the shoe manufacturer Reebok in the wake of Asian sweatshop scandals in the late 1990s, the group faced many of the challenges that the drugmakers have identified in getting their consortium started, says Marianne Voss, FFC’s executive director.

“There was also a strong sense that sharing information on conditions in factories and what FFC members are doing is a competitive issue,” Voss says. “We wanted to understand if there was a possible violation in our developing a platform to share information as a nonprofit organization.”

Voss says the Department of Justice (DOJ) determined that sharing information through FFC’s database does not constitute an antitrust violation, as long as FFC has equal and open membership with optional rather than mandatory information sharing. DOJ also stipulated that FFC members can act unilaterally only on information in the database, and that the organization cannot rate supplier factories as good or bad.

Van Trieste says Rx-360 is studying the use of three types of audits: sponsored audits, where individual members perform audits using their own or Rx-360’s criteria and contribute the results to a shared database; Rx-360-led audits, where several members coordinate a third-party audit that employs the consortium’s standards; and subscription audits, in which members access auditing information in the database and pay a credit to the companies that did the audit.

One benefit of Rx-360 will be cost savings, Van Trieste says. An audit that would cost a single company $7,000–$10,000 could cost $800–$2,000 per participant as part of a shared program. The consortium will also foster more comprehensive oversight of the drug supply chain, he says, helping to head off criminals who know that counterfeiting prescription drugs can earn them orders of magnitude more than making knock-off Gucci purses or dealing in crack cocaine.

Quality auditing and supply-chain management firms agree that the drug industry has much to gain from collaborating on quality and safety. They also note that drugmakers can look to other government and industry efforts for guidance. Gerard Pearce, executive vice president of SQA Services, an auditing firm, points to the Restriction of Hazardous Substances Directive, a European Union initiative that restricts six hazardous substances from electronics products, as an example of manufacturers successfully accounting for their entire supply chains.

“Electronics manufacturers in Europe need to trace pieces of their products back to the chemical element at the point of origin,” he says. “It can be done. The pharmaceutical industry needs to recognize that a lot of other regulated industries have overcome these kinds of challenges.”

Drugmakers are learning this lesson, Van Trieste says, and they are learning to share. He relates that Amgen, recognizing last year that a shortage of the chromatography solvent acetonitrile posed a counterfeiting threat, developed a means of analyzing the chemical’s purity. The company decided that its method would be of use to the drug industry at large and posted it on the Rx-360 website.

Vel Dhinagaravel, chief executive officer of Beroe, a developer of supply-chain security strategies, says the drug industry has made a lot of headway in sharing information with contractors over the past 10 years. During that time, he notes, pharmaceutical chemical production has shifted significantly to outside suppliers. Now that the outsourced supply is moving from the U.S. and Europe to Asia, drug companies are likely to make the progress needed in communicating with each other for Rx-360 to work.

Although FDA does not formally endorse organizations such as Rx-360, it encourages collaboration and has long permitted third-party audits. “Given what we have observed globally in recent years, there is a compelling need for new approaches by industry worldwide to prevent risks to the consumer,” says Richard Friedman, director of the division of manufacturing and product quality at FDA’s Center for Drug Evaluation & Research. “So we tend to be optimistic of the benefit of such collaboration when it balances competing interests to the benefit of greater quality assurance.”

Van Trieste told the meeting attendees in Washington that Rx-360 would be viable with 50 members, including major drug companies, generic drugmakers, biotech firms, and their suppliers. About 150 people attended. Van Trieste says he had originally planned for 35.

In an electronic audience poll, 100% of attendees agreed such a consortium is needed and said they would discuss joining the group with their managers. Of the attendees, 90% said they view the Rx-360-led auditing model as viable, 81% view the subscription auditing model as viable, and 67% view the sponsored model as viable.

“At this point I have not signed anything,” Pfizer’s Migliaccio says. He says he is waiting to learn the final details of Rx-360’s auditing agenda. “But I am committed to the concept of collaboration to ensure we have a secure supply chain,” he adds.

Tom Biel, vice president for quality and regulatory affairs at SAFC, the fine chemicals division of Sigma-Aldrich, says his firm may work with Rx-360. Biel, who attended the meeting, says participation would be an extension of Sigma-Aldrich’s Enhanced Quality Profile program, which performs in-depth quality audits on key products. A standardized format for auditing, such as Rx-360 is proposing, he says, has the potential to cut days from the auditing process.

“We have to look at alternatives,” 
Biel says. “We can’t keep doing this by 
ourselves.”

The challenges of today

Supplier audits are a critical component of ensuring the integrity of the supply chain. However, evolving supply chains are outpacing traditional audit program methods. Today, effective supplier audit programs require a fresh look at the people, processes and technology involved.

Looking at all of the FDA warning letters for 2008, Medical Device manufacturers still struggle with supplier controls, with nearly one in five highlighting deficiencies in this area.  In hundreds of discussions with major healthcare manufacturers and their suppliers, this arose as a constant cause for concern on both sides.  A good supplier audit program is the cornerstone of supply chain integrity.  By acknowledging and addressing the challenges to an effective supplier audit program, companies can improve their supplier controls, while improving quality and supplier relations, and reducing costs and risk.

From an external complexity standpoint, almost all companies reported an increasingly global supply chain.  Auditing from a world away comes with a new set of challenges.  In addition to reducing the availability of the audit team through increased travel, cultural and language differences have an impact on the final result, and follow-up actions.  A ‘local knowledge factor’ can be particularly important when exploring risks such as intellectual property loss and counterfeiting.

Companies are aware of the need to control supplier numbers.  However, growth of the supplier base over time, and changes on the supplier side (name, location, etc.) make this increasingly difficult – especially when managing thousands of suppliers.  In some cases, companies are unable to give a fair estimate of the number of their suppliers.  An increasing amount of the audit team’s time is devoted to determining if suppliers are still an active part of the supply chain.

With a more diverse supply chain comes a greater risk, and, reducing that risk in the supply chain means increasing the number, frequency, and duration of audits performed.  Even without increasing the scope of the audit function, the natural growth and diversification of the supplier base will outpace the structure and resources of a static supplier audit program.

Companies must also deal with internal complexity, where multiple divisions spawn supplier quality ‘islands’, that operate in functional and data isolation.  The supplier quality structure reflects the organizational structure.  This leads to isolated pockets of activity that are neither standardized, nor coordinated.  Poor visibility between these business areas causes duplication and redundancy between supplier audit programs – not to mention frustration for suppliers.

Companies that are successful in overcoming these challenges are focusing less on the actual auditing (although this is still critical), and more on the infrastructure and process involved.

Program Foundations

An effective supplier audit program must be built on a strong, yet versatile foundation.  This foundation, comprised of solid team structure, process definition, tools, data systems, and standardization, will help the audit program keep up with the supply base.

The team structure for an audit program must include resources for management and coordination.  Many audit programs consist of groups of supplier quality engineers that audit part-time, against a general supplier list.  While this may be appropriate in ‘For Cause’ audits, it is inefficient for a widespread supplier audit program.  The audit program team should include dedicated resources for overall management, program tools, supplier verification, scheduling, document control, results verification, and corrective action follow-up.  Not all of these roles require senior quality management expertise, and an increase in the number of team members will be more than offset by the time saved in administrative activity.

Auditors need to be local, or at least regional to the supply base.  As mentioned above, audits that begin from 10,000 miles away are inefficient due to travel time and potential cultural and language differences.  At the very least, a local contact to accompany a non-local auditor is highly recommended.

To maximize effectiveness and minimize redundancy, the supplier audit process should be defined, consolidated and standardized across the organization.  This also applies to the various tools used in the process – not just the audit checklist.  Standard items, such as supplier letters, auditor training, sample audits and corrective actions, FAQs and contact details should be controlled and made available to all stakeholders.

Fast access to better supplier data is critical to eliminating wasted time.  At the very least, the supplier audit program should be based on a data system that maintains the status and results of the supplier audit program – and makes this data available to all stakeholders.  Ideally, the system will not simply be a repository for results, but integrate with supplier ERP data, and automate many of the administrative aspects of the program (notifications, reminders, monitoring of due dates, etc.)

Effective Execution

The constantly moving parts of an effective supplier audit program must be monitored, managed, and acted upon by the program team.  Prioritization, resource management and measurement of the process help maximize the output of every audit ‘event’.

Typically, supplier audits are prioritized based on criticality of the supplier.  More critical or strategic suppliers warrant a more in-depth audit using key program personnel.  Less critical, less strategic suppliers may warrant a more high-level audit with non-program-core or even third-party audit resources.  By managing resources in this way, key program personnel are optimized, while the overall program volume may be managed evenly throughout the year (rather than a flurry of activity at the end).

Aside from the audit itself, there are many behind-the-scenes aspects of the program that ensure consistent results, a fine-tuned, closed-loop process, and visibility for stakeholders throughout the organization.  Firstly, the verification of a supplier audit can yield several benefits, including updating contact/location details, determining if the supplier is still active, and determining if a current audit for that supplier already exists.  Having a resource dedicated to coordinating schedules of suppliers and auditors (rather than having auditors do it themselves) saves time and results in audits being scheduled and conducted sooner.  Applying a ‘content management’ or validation function against every audit will help maintain consistency and improve audit team performance.  By splitting the corrective action process between monitoring/follow-up and actual technical approval, it is possible to close the loop faster and cheaper than if a senior quality resource were to handle it all – even better if the monitoring/follow-up process can be automated.  Throughout the execution of an audit ‘event’ stakeholders across the company should have visibility into its status and results via the program’s data system.  Ideally, these stakeholders receive an automated email as each event passes through a stage in the process.

Companies with more effective supplier audit programs are focused on making the most out of each audit – not just satisfying the requirements of ISO 13485.  Additional areas of focus include overall capability and capacity, financial stability, sub-tier suppliers, counterfeit risk, and social and environmental accountability.

Lastly, the effective execution of the process cannot be gauged until it is measured.  This allows for improvement and fine-tuning.  Some examples of program measures include number of on-time audits, average audit report turn-around time, average time for corrective action closure, and average number of overdue corrective actions.  These measures greatly enhance the resource planning and management aspect of the program.

Adapting to the Environment

One of the greatest challenges of an effective audit program is the changing supplier environment.  In order to prevent the program from falling behind the supply chain, companies should explore ways to ‘stack’ audit events with additional supplier insights, balance key resources through effective use of third parties, automate laborious manual processes, and improve the process by learning from meaningful data.

Each of these initiatives are extensions of the effective execution of the program.  Learning more about suppliers will help keep the supplier base in check by taking a “Use, Improve or Lose” action as a result of the audit.  With dedicated scheduling and coordination resources, program resources can be utilized more efficiently, and supplemental resources (internal and external) can be used for exceptions and less critical audits.  Automation and information go hand-in-hand, and emphasize the need for an effective data system that provides visibility and control to stakeholders in multiple parts of the organization.

The new global standard for supplier audit programs is an agile, multi-faceted model that comprises a disciplined process, optimized key resources, versatile tools and complete stakeholder visibility.  This results in greater supply chain integrity and improvement – the goal being, in the words of Thomas Huxley, “not knowledge but action.”