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.