Supply disruptions can have catastrophic consequences on a drug sponsor, costing the company precious time, money, and customers. Having a backup supplier in place is one of the most crucial steps a pharma company can take to protect its delivery schedule and ensure a continuous supply of product.
“In this industry, choosing a supplier is not always about cost,” says Randy Johnson, director, supply chain for Cook Pharmica. “The three most important factors affecting the supply chain are cost, quality and timing. Although we hear a lot of talk about pricing, most firms will tell you that getting a quality product, and getting it on time, is more important to them than cost. Having a backup supplier in place will help companies get product out on time and with minimal disruptions caused by unexpected increases in demand or regulatory issues with a primary source.”
While the decision to have backup suppliers in place is a no brainer, choosing that supplier can be a challenge. Johnson and Tami Schnatzmeyer, director, project management for Cook Pharmica, share five qualities companies should look for in a dependable backup partner.
1. They Make Quality Their Primary Concern.
When searching for a primary or backup supplier for products, the grade of the materials and the quality management system in place at the supplier should be examined closely. “At our company, we cannot deal with a supplier unless they can prove to us that they meet our quality requirements and the requirements of our client,” says Johnson. “When companies look at the three main supply considerations, quality, time, and cost, they often realize they may not be able to get all three. If that’s the case, always focus on quality first, since that is the most likely of the three considerations to get you into trouble. The second consideration should be on-time delivery, and finally cost. Poor quality has buried many companies and their suppliers. That is the reality in this business.”
2. They Are Willing To Be Flexible.
All good supplier relationships should involve a good deal of flexibility. Johnson believes your supplier should always be willing to take your preferences into account, and work with you in providing options for sourcing it. “Sometimes these relationships can get a little twisted,” he notes. “There have been times when our client was the secondary supplier for our material. If the client has enough components in its manufacturing system to fill an order, we do not have a problem with using that source to complete the job. Sometimes a client will have a small project and will not want to wait to get those components from a syringe or bio company, which can sometimes take months. We have also filled a few orders by using supply from a client, materials from our own inventory, and then getting the rest from another supplier. In those cases it is important to remain focused on quality and timing, even when dealing with multiple sources.
3. They Can Perform The Job As Well As Your Primary.
Once you have a backup supplier in place, you must put them to work to ensure they can produce for you when called upon to do so. “You should always purchase a certain portion of your supply from the backup, even when it is not necessary to do so,” says Schnatzmeyer. “You need to keep the relationship warm and know they are capable of providing the material timely and at the right quality and cost. Sometimes, they may even surprise you. We are working with a secondary supplier right now that has been a partner for a few years. Recently they have been giving us better pricing and lead times, while maintaining the same level of quality. This has led to us purchasing more materials from them, while still keeping the channel open with our primary supplier. I think that is one of the keys to a successful dual-sourcing strategy. You need to be confident that you can order from either source at any time, and that both will be able to adequately meet your needs.
4. They Are Ready To Take Over At Any Time.
Most companies will hire individuals who are ready to step in and replace more senior employees when called upon to do so. The same should be true of backup suppliers. Schnatzmeyer notes it is not unusual for a company that starts off as a secondary supplier to suddenly become the primary. This can be due to several factors, including delivery or quality issues at the primary, or the secondary simply providing better pricing or service. “Companies should always be on the lookout for secondary suppliers that have performed well enough to be made the primary,” she states. “It can be difficult to demote your primary, and you want to make sure you do not burn any bridges during that transition, since you may need to make them primary again at some point. If we are a secondary supplier to another firm, we will always perform as if we ARE the primary. There have been a couple of instances where that has worked out in our favor.”
5. They Are As Concerned About Your Success As You Are.
The best way to ensure that your supplier or CMO can meet your primary or secondary supplier needs is to perform a thorough risk analysis. “This should always be done right up front, before you sign any papers or accept any materials or product,” says Johnson. “Your supplier or CMO should always ask what elements of the supply chain are the most crucial to your success. If they don’t, they may not have your long term best interests in mind. Once they know what those are, they should always ensure there is a secondary supplier to fall back on, to ensure there is a dual source for those mission-critical products. The selection process can be done by either the sponsor or the CMO, but it generally works best when made as a joint decision.”
Finally, companies should always perform a proper vetting of any company that they plan to partner with. “We have a complete SOP around vendor qualification,” says Schnatzmeyer. “We also have a team of in-house auditors who go out and perform site audits. One of our auditors spends 70% to 80% of her time on the road simply performing these site visits. Some vendors get a site visit and a questionnaire to complete. Suppliers that are not as mission-critical or do not present a high risk might only receive the questionnaire. The auditors should carefully examine all 483s, warning letters, policies and procedures, and the company’s culture. How are their decisions made? How much information is made available to the employees making the decisions? Do people have an incentive to make the right decision? This is not the focus of a quality audit but could be taken into consideration as it may affect the quality of the product.”
For example, Johnson notes there are still concerns regarding some of the material coming out of China. Often, the search for a supplier will uncover seven vendors supplying the product. Unfortunately, you may later realize all of them are getting their material from the same manufacturer in China, or that there are only one or two manufacturers in the whole world. “That is where it gets a little scary depending on what the material is,” he says. “Getting information on where the material is manufactured has become a growing requirement for us. That is why, regardless of the supplier, your partners should always have a quality management system in place to verify that suppliers can meet internal standards.”