Matthew Littlefield, President & Principal Analyst, LNS Research
This article is part 2 of a 2-part supplier quality management series. The first article can be found here.
As was stated in the last blog post of this series, challenges to life sciences organizations are substantial, and poised to grow as time moves on. From one direction, life sciences companies are facing stiff competition within industry, which is putting pressures on speed of delivery and quality expectations. From another direction, the industry is battling with the tightening grip of government regulations, which is demanding higher proof of documentation and specification, with increased (and potentially devastating) penalties for noncompliance. Moreover, the industry itself, in large part as a response to these pressures, is rapidly transitioning to a distributed model of production to improve efficiencies across the product development lifecycle.
With many more players involved in the production process, the chances for costly errors rise, and the need for effective quality management across the value chain becomes increasingly important.
Honing in on the Increase in Outsourcing
The multi-directional squeeze being placed on companies in the life sciences industries has caused organizations to seek additional partners to disperse responsibility. There are a number of goals companies are trying to achieve with this trend, including:
- Reducing labor costs
- Improving time-to-market
- Leveraging external expertise
- Increasing capacity
- Gaining access to new markets
- Sharing and/or reducing risk exposure
Indeed, industry player Contract Pharma’s 2015 outsourcing survey (N=208) found that 80% of respondents reported increased demand for outsourcing.
Not surprisingly, this has led to a number of challenges. When asked in LNS Research’s quality management survey (N=800+) what the top challenge was in bringing new products to market, quality management issues topped the list.
Each of the top three responses can be viewed as an outgrowth of the outsourcing model. Lack of communication across partners, lack of visibility into partner processes and management tools are a large driver of the validation and supply chain optimization issues LNS frequently hears in discussions with life sciences organizations. Without a streamlined method to collect and record supplier data, many companies have time consuming manual processes and redundant solutions that make these challenges pop up again and again.
Redefining Supplier Quality Management
Supplier Quality Management is a set of cross-functional business capabilities and supporting technologies that allow organizations to move beyond managing the financial and compliance aspects of dealing with suppliers to fully engage and partner with suppliers, ensure end-to-end closed-loop quality for a responsive supply chain, and deliver on the value promise to final customers. Core business processes and supporting technologies that are typically included in the realm of Supplier Quality Management are:
- Supplier approval and management tools that account for financial, compliance, technical, quality, risk and other supplier engagement aspects
- The extension of continuous improvement and new product introduction processes to improve quality management and supplier engagement
- Risk-based auditing and real-time data collection and analysis of supplier performance
Supplier Quality Tools
Our last supplier quality management post focused on the importance of having full buy-in and participation from top level leadership in driving the type of cultural shift that drives improvements in supplier quality management capabilities. But there are also several supplier quality tools and methods that are needed to execute on company/supplier operations. These include:
- Supplier scorecards to provide ongoing ranking, review, and feedback on key supplier performance metrics.
- Real-time visibility and analytics
- Standardized escalation procedures
- Statistical analysis for supplier data
Implementing supplier quality tools and processes has a major effect on Supplier Defect Rate, a metric monitored closely by both suppliers and customers. Being able to record supplier quality data through a portal and immediately identify any nonconformances or quality issues is far quicker than time consuming manual transfer and analysis. Likewise, the continuous feedback loop of supplier scorecards gives suppliers reliable direction on areas that may need improvement. When applied across a global organization, the level of improvements displayed by having these capabilities in place could translate to millions in savings, transform the culture of quality from one of policing to one of business improvement, and perhaps keep your company name off the front page of the Wall Street Journal.
As time presses on, these trends around life sciences are only likely to become more commonplace in each niche sector, and intensify in general. As market leaders develop and implement more sophisticated supplier quality management tools and strategies, those that cling to the old model will be left behind.
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