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By Parag Patel, Janice Pai , JehanZeb Noor and Ramit Jain McKinsey & Co., Pharmaceutical Operations practice.
While quality problems can be found in any industry, they have become more frequent recently in the pharmaceutical and medical-device space. As a result, more pharmaceutical manufacturers are paying greater attention to supplier quality. The most progressive operating companies are taking a proactive, collaborative, and holistic approach to supplier quality management. Their goal is to manage and support suppliers, just as they would their own production facilities, to reduce risk and build better partnerships with these suppliers.
It’s not easy. Companies often tell us that they are struggling to master supplier quality — this is not due to a lack of effort, but because managing suppliers has become more challenging. There are several reasons for this, notably:
Given all these heightened challenges in managing supplier quality, we took a closer look at more than 40 recent pharmaceutical quality incidents (many of which were at pharmaceutical and/or medical device companies) to discern common themes and identify a holistic approach to improving them. We found that more than 40 percent of these incidents were actually due to supplier quality issues. An in-depth evaluation of these supplier quality issues found three main root causes:
1) lack of collaboration in the design phase
2) lack of a robust quality system/KPIs at the pharmaceutical company and/or the supplier
3) lack of capabilities in supplier manufacturing facilities.
Managing supplier quality cannot be a quick fix. Instead, it is a multi-stage journey and requires a holistic approach based on four key cornerstones:
1) Supplier strategy and KPI system: Companies must ensure that their supplier quality strategy is aligned with their overarching corporate and purchasing strategies. They must focus their attention on strategically important suppliers, define clear targets, and measure their progress against those targets. Often, companies fail to segment their supplier quality programs, spreading their effort too thinly. This can leave them with only the resources for firefighting, and responding to day-to-day operational incidents, rather than taking the proactive and preventative actions that will drive deep improvements upstream.
2) Functional supplier quality processes: Companies need to define and apply a structured set of standards and processes (advanced product quality planning, part approval processes and root cause analysis standards, for example), both internally for themselves and for their suppliers.
3) Supplier quality organization and governance.
4) Supplier quality mindsets and capabilities: Focused communication efforts with suppliers are required to maintain attention on quality issues. But it is equally important to invest in getting the right people with the right skills and expertise.
One large medical device company applied many of the techniques outlined above to uncover and rectify many of its supplier quality issues, summarized below:
This new assessment allowed the company to go from a reactive, audit-based approach to a proactive assessment toolkit that could be applied across multiple franchises and products. The company has improved many of its internal practices, completed more than 15 supplier assessments with clear action plans to improve the suppliers’ approach, and now is continuing to evaluate its other “high-risk” suppliers. Most importantly, there was a substantial improvement in the collaboration with suppliers that will continue to identify actions to reduce quality risks for both the suppliers and company itself in the future.
ABOUT THE AUTHORS:
Parag Patel (firstname.lastname@example.org), Janice Pai (email@example.com), JehanZeb Noor (firstname.lastname@example.org), and Ramit Jain (email@example.com) are part of McKinsey & Co.’s Pharmaceutical Operations practice.
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