October 25, 2021
Effective supplier quality management offers value to the operations of any organization by improving efficiency, reducing risks, and helping to ensure that products are safe and have the highest quality. There are, however, challenges that effect the optimization of supplier management. These challenges can be resolved by first understanding what causes them to occur and then focusing on implementing the proper management controls to ensure they don’t happen.
Supplier Scorecard Challenges
There are three key challenges organizations face with respect to scorecards that effect the optimization of Supplier Quality Management. They involve the metrics used, the data integrity, and the communication effectiveness.
Metrics Associated with Scorecards
With respect to the scorecard metrics, they should be aligned with the company’s business goals. However, many times less effective metrics are incorporated because they are easier to integrate or are more readily available. This weakens the effectiveness of the scorecards since they don’t reflect what is really important. There should also not be too many metrics to measure. This makes the process burdensome and less effective. The quality of the metrics should be a much higher priority than the quantity of them. The number one main concern should be that the metrics align with the business objectives of the organization. Misaligned metrics lead to insights that provide no actionable information and reduce confidence in the scorecard results over time.
Data Integrity and Manipulation of Scorecard Data – Storing and accessing data on the same platform simplifies the tracking of data inputs. Email chains and Excel spreadsheets make the process of gathering and displaying data more difficult. While email/ excel tracking might work for a smaller supplier population, at scale integrated tooling becomes the only viable option to conduct a scorecard program, short of hiring more people. Appropriate tools should be leveraged to collect, track, and manage workflows while maintaining the data integrity and ensuring a “single source of truth”.
Ineffective Communication with Suppliers Regarding Scorecards – A regular feedback mechanism improves the success of the scorecard program implementation. To effectively use scorecards, suppliers must first understand the buyer’s business objectives and how their performance influences these objectives. The value of this process is diminished if the scorecard findings and insights are not shared with suppliers in a timely manner. While internal vendor rationalization is usually the top priority, a scorecard program is less effective when used alone. On the other hand, regular communication may be the missing link in the performance enhancement process.
Suppliers will likely become confused by the purpose of the scorecard program if there is no action or follow up to the scorecard results. Connecting recognition, rewards, and corrective guidance to further build on this exercise is very important.
Supplier data is fragmented and poorly managed
An organization’s inability to monitor input from suppliers points to an apparent lack of control on the process. In a regulated environment, supplier control is crucial. The FDA’s Quality System Regulation, for example, requires medical device organizations to “maintain data that clearly describe or reference the specified requirements, including quality requirements, for purchased or otherwise received products and services.” Being able to monitor and track supplier input is necessary in maintaining such data.
Supplier data is therefore one of the most important assets of any company. The supplier’s data ensures the overall integrity of data across the enterprise as well as that the ROI of the organization is accurate. It also provides a way to ensure the organization can precisely evaluate the supplier’s performance. Many organizations do not have an actual strategy when it comes to managing supplier data. The data from suppliers can reside in multiple places or silos. It can be in the ERP system, in AP solutions and in a number of different procurement systems. There is often a misunderstanding in the procurement/finance area of the business as to what the supplier master data management (MDM) means and why it is essential. The IT department may also misinterpret this information and view it simply as a technical data integration issue rather than a significant business problem.
The absence of a centralized platform and structure for managing multiple suppliers causes significant challenges for Life Sciences organizations. Without this platform and structure for gathering or receiving data, the organization will need to look for information from each supplier in multiple locations. Information stored on specific servers may have to be printed and routed manually, which causes making any document-based process to be inefficient.
What is needed is a strong MDM system. The system needs to not only maintain a supplier profile but have the capability to translate the supplier data into the formats of all other systems that need it. The Supplier data can be considered to be master data based on the system it is used by and hence, there is a need to implement and maintain appropriate controls (security, access, storage etc.)
There are procurement vendors who can do this well, however. in most cases, a real MDM solution is required. This adds complexity yet it is needed. Procurement solutions, however, collect supplier data very effectively and ensure it is up to date. Suppliers typically do this as a self-service function and are accountable for keeping their data in whatever solution the buyer organization provides them with to use. The Supplier, however, is overwhelmed by hundreds of different networks, portals, and applications where they are supposed to maintain their data. This causes in many cases the actual data sharing to be limited as suppliers are often required to upload the same information many times across multiple buyer’s systems.
Lack of or Improper Risk-based Analysis for Supplier Quality
Another potential challenge is measuring the risk of suppliers inappropriately. For years, FDA-regulated manufacturers have tried to apply a “one-size-fits-all” quality management approach to their entire roster of suppliers.
However, this approach with so much variability from one supplier to another is unfortunately inefficient and dangerous when delays in management decisions allow potentially serious compliance issues to develop.
There is a better approach. A good risk-based method to manage supplier quality is one that allows organizations to create a flexible quality management system which can be designed to fit each supplier or a group of “like suppliers”. This enables the organization to spend the greatest effort toward controlling and/or mitigating the risks that pose the most damage.
Poor communication with supplier
The success of any business relationship requires successful communication between the parties involved. It is extremely important that suppliers and the contracting organization are on the same page relative to the who, what, when, why and how. This is especially critical in the regulated Life Sciences industry. It is crucial that all the key information is documented. Additionally, FDA-regulated companies are required to spell out the quality-related duties in their Quality Agreements with suppliers. These agreements should include events that will trigger an on-site audit and a change to control expectations. They should also include periodic reviews of validation efforts as well as reviews of documentation. These types of controls in the agreement will reduce risk, eliminate vagueness, and help to ensure optimal effectiveness.
Inability to Report Problems and Changes Involving Suppliers Quickly And Effectively
Each activity that involves suppliers must follow well-defined methods and standards. All activities including delivery of parts or ingredients require documentation and assessment. This becomes particularly critical when problems arise. The emphasis on suppliers and control and risk management will continue to increase. Therefore, the ability to report problems and changes that effect products safety and quality is critical. Unfortunately, organizations are not always equipped with the proper tools to identify these issues and deviations leveraging their current methods and technology.
Best Practices to Improve Quality in Supplier Quality Management
- Broaden supplier assessments – Most organizations limit the supplier performance measurement and monitoring to less than 2.5% of the total supply base. The focus of supplier measurement and monitoring is typically on suppliers that:
- Comprise the largest portion of spend
- Have a strategic relationship with regard to a key product
- Have a strategic relationship with the client company
By limiting the number of suppliers monitored to a very small number, there is a lack of visibility on the level of quality in the entire supply chain. This causes companies to be exposed to potentially significant quality incidents and cost increases that can negatively t impact profit and brand. In order to avoid this situation, organizations should invest in infrastructure and technology solutions that enable broader visibility into the supplier base as well as allow for better risk management across the supplier population.
- Establish clear measurement program – The key to success is to have clear and consistent measurement criteria and processes across all suppliers. The measurement of suppliers should include specific areas that are important to the business including quality, on-time delivery, service, price, total cost, contract compliance, and responsiveness. Establishing agreed upon goals and metrics while leveraging tools and data analytics will allow for accurate data representation as well as decision making
- Invest in infrastructure that supports visibility into the supply chain – Communication with suppliers is a major challenge in assuring supply chain quality. To be responsive to the needs of the organization’s vendors, many businesses maintain decentralized supplier quality functions. While this method ensures issue response, it is frequently characterized by limited information exchange and best practice sharing, both of which could give better economies of scale. The tools and methodologies for monitoring quality in the supply chain have not kept up with the supply chain’s evolution In order to fix these issues, businesses are investing in infrastructure that integrates their supplier ecosystem more tightly and automates operations that were previously manual or disjointed. This provides for improved visibility and control through enabling process-based communications such as escalations and approvals, as well as automating quality workflows such as Supplier Corrective Actions. This correlates to a cheaper quality cost due to lower detection costs and fewer remediations.
- Leverage Technology to Optimize – To enable organizations to control their supplier quality management operations more effectively, cloud-based technologies are available to facilitate the communication and collection of information from suppliers in a timely and efficient way. Some of these technologies include:
- Robust Reporting – Organizations require the ability to identify issues with suppliers that could jeopardize product safety or compliance. To effectively control this aspect, powerful reporting capabilities are available in many systems that allow organizations to trend and track a supplier’s quality events such as deviations and CAPAs.
- Tools for Better Communication with Suppliers – In a regulated industry, communication involves more than making a call, sending an e-mail, or faxing information to your suppliers. Organizations need to have a system for communicating and receiving information from suppliers that is well-documented and can be tracked, to be in compliance. Leveraging technology, organizations should be communicating essential information with suppliers and documenting the important aspects of the parts, materials, and services that they provide for the organization.
- Automatic Tracking of Audit results – Monitoring supplier audit results and supplier nonconformances is an ongoing process. Using a manual process causes the organization to rely on paper documents and disparate electronic files to monitor supplier information. Using this method, it is difficult to repeat the process on a regular basis. Organizations need to incorporate the latest in technology to make tracking supplier information an automated and continuous process with all critical information residing in a centralized location. This information can be collected easily for supplier quality ratings. Additionally, workflows should be leveraged for approving suppliers. These workflows track new parts or services from suppliers by linking them.
- Embedded AI for Prioritization, Automatic Issue Categorization, and Risk Assessment – You can now leverage advanced AI capabilities to provide predictive analytics and intelligence to automatically categorize suppliers into risk classifications, as well as prioritize issues to solve. These capabilities save valuable time for quality and supply chain functional leaders.
- Integrated Risk Management – Defining the success criteria and identifying risks, is the first step of the supplier qualification process. To do this, the organization needs to leverage a proactive approach to mitigating risk through existing technology. This is the core of building a quality culture that spreads across the supply chain.
Focusing on effective Supplier Quality Management is important if the organization intends to improve overall efficiency, reduce risk, and ensure that products are safe and have the highest quality. There are, however, challenges that impact the optimization of supplier management. These challenges can be resolved by first understanding what causes them to occur and then focusing on implementing the proper management controls to prevent or reduce the severity of their occurrence.
The challenges can come from multiple areas including scorecard issues, improper risk analysis, inadequately managed supplier data, poor communication with suppliers, and an inability to report problems and changes. These challenges can significantly impact the effectiveness of supplier quality management.
There are, however, ways to improve the situation. The first step is to have the right experts involved, both internally and externally, who understand the processes, people, and technology to ensure these challenges are addressed. Additionally, by leveraging new methods and technology solutions in the appropriate manner, Life Sciences organizations can address these challenges and optimize supplier quality management.
Why It Matters to You
The Life Sciences organization’s quality system needs to ensure that products manufactured are of the desired quality and safe for patients. A key area to ensure the overall quality of the enterprise is to focus on the suppliers. There are, however, challenges faced by organizations in attempting to optimize supplier quality. In this blog, we discuss:
- Some of the key challenges faced in ensuring effective supplier quality management.
- Best Practices to support effective supplier quality management.
- How technology can be leveraged to optimize supplier quality management.
For over 25 years, Astrix has been a market-leader in dedicated digital transformation & dedicated staffing services for science-based businesses. Through our proven laboratory informatics, digital quality & compliance, and scientific staffing services we deliver the highly specialized people, processes, and technology to fundamentally transform how science-based businesses operate. Astrix was founded by scientists to solve the unique challenges which science-based businesses face in the laboratory and beyond. We’re dedicated to helping our clients speed & improve scientific outcomes to help people everywhere.