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.