Regaining control of the supply chain when outsourcing
As more pharma manufacturers outsource elements of their process, Steve Cottrell, president at Maetrics, looks at the importance of supply chain visibility and how companies can regain full control.
Pharmaceutical manufacturers are increasingly outsourcing elements of the manufacturing process in order to boost capacity, improve speed-to-market and to capitalise on the availability of new suppliers in Asia. A recent survey found that 44% of pharmaceutical companies expected to outsource more business in 2017 than the previous year, and only 11% expected more business to be brought in-house.1A potential drawback of this surge in outsourcing activity is the difficulty manufacturers then face to maintain sufficient visibility and control of the supply chain once they have relinquished ownership of individual elements of their operation.
Lapses in quality control
Manufacturers are ultimately responsible for guaranteeing the control and monitoring of outsourced activities and the quality of purchased goods and services. The increasing complexity and fragmentation of multi-tiered supply chains, as outsourcing takes away direct control and sight of all stages in the manufacturing process, is making it harder for businesses to achieve this. Factor in as well the lack of appropriate IT systems, limited personnel experience or capacity and resource constraints and it is clear to see why poor supply chain visibility is often unavoidable.
With Chinese firms now producing 40% of the world’s active pharmaceutical ingredients (API) it is understandable that they are increasingly sought out as suppliers to European and US-based manufacturers. Their quality control levels, however, are not commensurate with those of Western markets so manufacturers risk attracting regulatory penalties if safety standards are not met. The FDA and other regulators specifically address this matter, emphasising that manufacturers must assure the ultimate safety of all operations and that their responsibility ‘extends to the control and review of any outsourced activities and quality of purchased materials’.2
Mergers and acquisitions are another example of how manufacturers are losing control over supply chain visibility, exposing their businesses to the associated operational risks in the process. With all efforts concentrated on signing on the dotted line and tying up deals, manufacturing operations are often scaled back and tight control and monitoring of day-to-day processes tends to slip. Personnel typically do not have the required capacity to perform adequate supply chain gap analyses and supplier assessments, as well as manage any quality issues that arise from deviations, out-of-specification (OOS) issues, non-conformances and below par investigations into supplier corrective action reports (SCAR). Substandard quality and performance are the potential outcome.
Operational impact
Clouded supply chain visibility introduces operational risks because manufacturers are unable to ensure compliance, to fully understand demand and capacity or to effectively assess and respond to any disruptions in the supply chain. Productivity suffers as a result with delays in operations becoming unavoidable.
Unforeseen delays to operations can result from numerous risk factors. For example, when incoming goods fail to conform to required specifications or lack a certificate of analysis, production must be put on hold until the matter is addressed. Sometimes materials received might fail to perform in the manufacturing process despite meeting regulatory standards. This can be due to poor shipping temperature controls or data integrity issues that internal auditors were not trained to spot. Poorly written quality agreements can also delay operations, for example by leaving a legal loophole open which exonerates a supplier from notifying their client of a quality issue encountered during the manufacture of an API.
One vision
Supply chain visibility, when operating efficiently, gives manufacturers sight of and control over components or products in transit at all stages of the chain. It also gives them accurate and real-time access to data, for example on supplier inventory levels or customer demand capacity, which allows them to respond quickly to fluctuations from the norm and run flexible and efficient production operations where quality standards are consistently maintained.
When asked in a recent ‘Trends in Supply Chain Visibility’ study whether anyone in their organisation had an end-to-end comprehensive view of supply chain data, only 19% of respondents felt that this was the case. The majority felt that visibility data was fragmented and scattered throughout the business.3No wonder then that achieving full supply chain visibility is now one of the top strategic priorities for professionals in all sectors. So what action do pharmaceutical manufacturers need to take to put their organisations on the path to enhanced visibility?
Firstly, supply chain stakeholders should be treated as partners; it’s important to work together to produce supplier and quality agreements that are clearly written and planned to adequately cover all interested parties and their respective legal requirements. Encourage the sharing of information between stakeholders, which will be easier to achieve by investing in the right IT infrastructures, allowing real time data to be leveraged and shared at all points in the supply chain. Any potential interruptions, such as falling supplier stock levels, can then be identified and rectified as soon as they occur.
Recording and reviewing detailed records of the quality and timely receipt of materials is paramount. Regularly monitor suppliers using periodic scorecard assessments, SCAR and investigative reviews, and ensure that you perform on-site audits, paying particular attention to the qualification and re-qualifications audit, and for-cause investigations.
Interruptions to supply chain activity can also originate from external factors such as political disorder or environmental disasters so keep an eye on global developments to be in a position to respond promptly.
Many manufacturers, rather than facing these challenges on their own, choose to bring in specialist consultants with the requisite experience of tightening up supply chains to mitigate risk while boosting business efficiency. This route allows companies to benefit from adopting the SQ outsourcing model, which enables cost savings of up to 48% by managing costs per audit versus full-time equivalent (FTE) resources. It maintains a higher level of compliance and inspection readiness while allowing internal resources to focus on other business needs.
Taking these steps will help your business regain full control and vision over all elements of your supply chain ensuring that not only can you identify problems as and when they occur, but that you are well placed to solve them quickly.
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