Guest Column | March 21, 2024

A Guide To Proactive Supplier Management In The Pharma/Biotech Industry

By Ash Gude, senior pharmaceutical manufacturing leader, TBM Consulting

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In every industry, supply chain management presents significant challenges, yet within the pharmaceutical sector, the imperative to track and manage supplies escalates dramatically, given the critical necessity of delivering essential medications. From the global pandemic's far-reaching impacts to trade tensions and environmental disruptions, today's pharmaceutical companies face a myriad of obstacles that underscore the critical need for adept supply chain management. In life sciences, supply chain management is not just about keeping the production lines and distribution centers moving, it’s also about navigating the complexities of global supply networks, ensuring the quality of raw materials, sub-components, and finished goods, and responding swiftly to unforeseen shortages or delays.

On the supply side, one important element for creating resilience in the pharmaceutical supply chain is developing a comprehensive approach to supplier management. It underscores the significance of methodically selecting and diversifying suppliers, fostering resilient long-term partnerships, and instituting robust commodity strategies and risk management practices. Moreover, it stresses the vital role of regulatory compliance and the innovative use of technology to maintain a seamless flow of operations. In doing so, pharmaceutical companies must implement strategies to overcome the current challenges and pave the way for a future where supply disruptions no longer jeopardize the timely delivery of lifesaving drugs.

Supplier Selection And Diversification: The First Line Of Defense

The foundation of a robust supply chain lies in a comprehensive and effective segmentation of products, commodities, or inventory, taking into account the impact on patients to pinpoint strategic and bottleneck items. This segmentation then informs the commodity strategy and strategic sourcing process, guiding the selection, qualification, and diversification of suppliers. The supplier selection and qualification phase then must involve detailed on-site evaluations by cross-functional teams, aimed at evaluating and ranking suppliers based on their manufacturing and distribution capacity and capabilities, quality control measures, delivery timelines, and pricing. At a high level, here are some key steps involved in conducting an effective supplier selection audit:

1. Preparation and Planning: Define the scope and objectives of the audit. Gather initial information about the supplier, including their history, product or service offerings, and previous audit reports if available. Develop an audit checklist tailored to the specific requirements of the products or services being sourced.

2. Assemble an Audit Team: Form a cross-functional team that includes members with expertise in quality assurance, supply chain management, production, and any other relevant areas. This team will bring diverse perspectives and expertise to the evaluation process.

3. Conduct an On-Site Audit: Visit the supplier’s facility to assess their operations firsthand. Evaluate aspects such as manufacturing processes, quality control measures, inventory management, and compliance with regulatory standards. Use the audit checklist as a guide to ensure all relevant areas are covered.

4. Evaluate Supplier Performance: Assess the supplier’s performance and capability to meet your company’s requirements. Consider factors such as their production capacity, lead times, cost structures, and the robustness of their quality management system.

5. Make a Decision: Based on the audit findings and the supplier’s response to any identified issues, decide whether to proceed with the supplier, require corrective actions before proceeding, or look for alternative suppliers.

This assessment and the periodic reviews that follow are important to ensure uninterrupted availability of crucial drugs and components to address immediate healthcare demands, while also reducing the likelihood of challenges such as supply chain interruptions and quality discrepancies.

Fostering Long-term Partnerships Through Effective Communication

Beyond mere transactions, forging long-term relationships with suppliers ensures a stable and consistent supply chain. This involves moving beyond transactional interactions to establishing long-term agreements and other alliances with the important suppliers, thereby building a foundation for shared growth and development. Utilizing tools like relationship profiling enables you to evaluate and enhance supplier relations systematically. Relationship profiling is important to the long-term success of the relationship by evaluating suppliers based on various dimensions of their relationship with the buying organization. This process goes beyond the traditional metrics of cost, quality, and delivery times to include a broader set of criteria such cultural fit, innovation, flexibility and adaptability, communication, and responsiveness. The aim is to develop a nuanced understanding of each supplier’s strengths, weaknesses, strategic importance, and alignment with your company’s values and goals.

Effective communication with suppliers is also crucial for fostering strong, collaborative partnerships that enhance supply chain efficiency and resilience. It ensures transparency, enabling quick identification and resolution of issues, aligns expectations, and facilitates the seamless flow of information regarding demand forecasts, inventory levels, and changes in market conditions. This open line of communication not only helps in preemptively addressing potential disruptions but also in leveraging suppliers’ innovations and capabilities, thereby optimizing operations and driving mutual growth. In essence, maintaining robust communication channels with suppliers is foundational to achieving operational excellence and sustaining competitive advantage in today’s dynamic market environment.

Navigating Risks Through Supplier Management Practices

Risk management is an indispensable facet of supplier management, encompassing the identification, assessment, and mitigation of potential supply chain disruptions. Supply network mapping and process mapping offer valuable insights into potential risks, including geographical, political, or financial vulnerabilities. A proactive stance involves developing contingency plans and establishing dual sourcing strategies to ensure supply chain resilience. Moreover, understanding the repercussions of missed deadlines and implementing measures like supplier scorecards can drive performance improvements across quality, delivery, and inventory management.

Supply network mapping and process mapping are strategic tools in supplier management that help organizations understand, analyze, and optimize their supply chains for better resilience, efficiency, and risk management. Here are elements of each mapping exercise that will help mitigate risk within your supplier network:

Supply network mapping is the process of visually documenting the relationships between various entities in the supply chain, including suppliers, manufacturers, distributors, and customers. The main objectives of supply network mapping include:

  • Identifying Dependencies: Understanding how different nodes in the supply chain are connected helps identify critical dependencies and potential bottlenecks.
  • Risk Assessment: By mapping the supply network, companies can pinpoint geographic, political, or financial risks associated with specific regions or entities.
  • Optimizing the Supply Chain: This aids in finding inefficiencies and opportunities for consolidation or diversification to improve supply chain resilience and performance.

Process mapping involves creating a detailed diagram or flowchart of the processes involved in the procurement, production, and delivery of goods and services. The goals of process mapping are to:

  • Streamline Operations: Identifying each step in the supply chain processes allows for the elimination of redundancies, reducing lead times and costs.
  • Enhance Quality and Compliance: Documenting processes helps ensure consistent quality and regulatory compliance by establishing clear standards and procedures.
  • Improve Communication and Collaboration: A clear understanding of the processes fosters better communication and collaboration among all stakeholders involved in the supply chain.

Together, supply network mapping and process mapping provide a comprehensive view of the supply chain’s structure and operations. These tools enable organizations to make informed decisions about supplier selection, risk management strategies, and process improvements. They are particularly valuable in complex, global supply chains, where visibility into the network and processes is crucial for managing risks and ensuring a reliable supply of goods and services.

Ensuring Compliance And Quality Assurance

Regulatory compliance and quality assurance are non-negotiable in the pharmaceutical industry. Early engagement in supplier assessments — focusing on their compliance with regulatory standards and quality management systems — is critical. Periodic audits and requiring documentation with each shipment ensure ongoing compliance and product quality. This proactive governance model safeguards against compliance gaps and quality assurance concerns, which are all too common in global supply chains. Below are some best practices to ensure that pharmaceutical suppliers meet and maintain high standards:

1. Establish Clear Standards and Expectations: Define specific quality and compliance standards that align with regulatory requirements and industry best practices. Communicate these expectations clearly to all suppliers at the outset of your relationship.

2. Conduct Thorough Supplier Audits: Before onboarding new suppliers, and periodically thereafter, conduct comprehensive audits of their facilities, processes, and quality management systems. These audits should assess the supplier’s ability to meet your standards consistently and should include evaluations of their sourcing of raw materials, manufacturing processes, handling and storage procedures, and quality control measures.

3. Foster Collaborative Relationships for Continuous Improvement: Work closely with suppliers to identify areas for improvement and collaborate on initiatives aimed at enhancing quality and compliance. Establish mechanisms for ongoing monitoring of supplier performance against agreed-upon quality and compliance metrics. Encourage open communication about challenges and support suppliers in implementing corrective actions when necessary.

4. Ensure Traceability and Transparency: Require suppliers to maintain detailed records that provide traceability of their materials and processes. This transparency is crucial for verifying compliance, conducting investigations in case of quality issues, and facilitating recall procedures if necessary.

By systematically implementing these practices, you can significantly enhance the compliance and quality assurance of your suppliers, thereby safeguarding your supply chain, ensuring patient safety and maintaining regulatory compliance.

Leveraging Technology For Enhanced Supply Chain Visibility

Technological advancements offer unprecedented opportunities to enhance supply chain visibility and responsiveness. Digital transformation initiatives, including the adoption of IoT, digital twins, and blockchain, provide real-time insights into supply chain operations. This not only facilitates event management but also enables you to monitor sensitive shipments and manage by exception. However, it’s crucial to start with a clear understanding of the objectives behind technological integration, ensuring that technology serves as an enabler rather than a stand-alone solution. Take a crawl, walk, run approach to ensure you are getting the value and ROI you expect from the technologies you implement.

Securing The Future Of Pharma Through Tight Supplier Relationships

The intricacies of pharmaceutical supply chains demand a comprehensive approach to supplier management, followed by integrating demand planning, strategic sourcing, operations performance measurement, and technological innovation. While some of these elements are not new, they are poorly deployed or historically ignored. Various sources have revealed that very few organizations had active supplier development programs and even fewer had visibility beyond their second level (tier 2) suppliers. By adopting these strategies, you can not only mitigate risks and ensure regulatory compliance but also drive efficiency and innovation within your supply chains. As the industry continues to navigate a very sensitive and ever-evolving landscape, the principles of strategic supplier management remain a constant beacon, guiding companies toward operational excellence and improved delivery of critical healthcare products solutions.

About The Author:

Ashay Gude is a senior management consultant at TBM Consulting Group with 16 years of expertise in management consulting, operations and supply chain management, operational excellence, change management and team leadership in the United States, Japan, and Canada. He drives organizational transformation, cost reduction, and performance improvement. Gude has led a progressive career at pharmaceutical and medical solutions manufacturers such as Abbott Laboratories, Young Innovations, and Germiphene. He has bachelor’s and master’s degrees in mechanical engineering and an MBA. He is also a Lean Six Sigma Black Belt (ASQ).