Pharmaceutical Supplier Performance Evaluation: Quality as a Metric

Since 2005, there has been a dramatic increase in pharmaceutical companies engagingoverseas suppliers and contract manufacturers. A report by the US Government Accountability office says that up to 40% of all pharmaceuticals sold in the U.S. are manufactured overseas in Asia.

In direct correlation to the rise of overseas suppliers, there has also been an increase in the number of pharmaceutical recalls. Between 2006 and 2011, the number of products recalled by the FDA rose from 4,266 to 9,288. Experts attribute the rise in recalls to lapses in the manufacturing process, particularly where it concerns the quality of raw materials, faulty labeling, and package contamination.

Despite these alarming statistics, one way pharmaceutical companies can avoid becoming a part of these statistics themselves is to establish a firm supplier quality management system.

Measuring Supplier Performance

To measure supplier performance, clear KPIs are first established. As part of a supplier rating system, suppliers are qualified on a variety of metrics including percentage of on-time performance, the number of times they deliver a quality part, ingredient or product, and prompt response to requests for quotes.

With KPIs in place, a benchmark is then established. A manufacturer's qualityrequirements vary depending upon a number of benchmarked factors. Since benchmarks are based on risk, there are no one-size-fits-all solutions. Managing the risk of what that supplier is providing is critical and determines how often a company must measure that supplier -- be it through audit, inspection, or a combination of the above.

To that end, just because a supplier is approved to provide a pharmaceutical company with a certain ingredient or products, it does not necessarily mean that they are qualified to provide a company with other pharmaceutical ingredients or products. For instance, a supplier that is qualified to provide Ingredient X may manufacture Ingredient Y. However, that same supplier's Ingredient Y may not be of as high a standard as the Ingredient X they are qualified to supply. Suppliers must be approved for each of the ingredient they provide.

Quality: The Missing Ingredient in the Supplier Benchmarking Equation

Most companies already have a supplier scorecard in place in their ERP system. A supplier's score can increase or decrease depending upon their performance. Benchmarking is important to determine whether a supplier is performing as expected, improving, or worse compared to other supplier performance KPIs.

ERP systems are well equipped to record and measure price, on time delivery and assuring the correct ingredient is delivered. However, one key component missing from this scorecard is quality. In order to lessen recall rate, quality needs to be a metric in the pharmaceutical supply chain benchmarking process, as well as part of the initial negotiation process with prospective vendors and suppliers – whether they exist inside the U.S. or outside its borders. Quality issues are usually discovered during laboratory testing, causing deviations during the manufacturing process, during audits or the worst scenario, from a product related complaint once the product has reached the market.  However, in some instances where a pharmaceutical supplier has a monopoly on certain products or ingredients, they may be less likely to put a quality system in place. In this case, the onus is on the manufacturer to do consistent testing to make sure the ingredient always meets specifications.

For manufacturers with a large-scale product, having visibility to metrics as they happen in real-time can help nip problems in the bud prior to release, staving off costly rework or recalls. A QMS software product such as TrackWise allows pharmaceutical manufacturers to incorporate quality into the supplier benchmarking equation at each phase of the process, encouraging more frequent monitoring and reporting on established KPIs. These quality metrics can be combined with those collected within the ERP system to provide a more comprehensive supplier rating.   As a logical extension, quality becomes a centralized part of the process at various checkpoints in the production cycle – long before a final pharmaceutical product goes to market.

In the weeks ahead, we will be addressing more topics within the realm of pharmaceutical supplier quality management. In the meantime, download our eBook that offers Six Steps to Maximize Supplier Relationships.

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