How to Reduce Unnecessary Compliance Costs - By identifying and eliminating non-value-added activities, drug manufacturers can avoid falling into the same cost-traps in the future. - BioPharm

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How to Reduce Unnecessary Compliance Costs
By identifying and eliminating non-value-added activities, drug manufacturers can avoid falling into the same cost-traps in the future.


BioPharm International
Volume 23, Issue 7

OVER-REACTION TO PAST FAILURES

The evolution of unnecessary activities and excess infrastructure are often the remnants of reaction to past failures and incomplete corrective action where root cause and likelihood of repetition is unknown. Examples of activities driven by over-reaction to past failure include:

  • excessive sampling, inspection, and testing
  • shortened audit cycles for suppliers
  • excessive and complex documentation
  • excessive and complex review and approval routings
  • excessive equipment, spare parts, and service programs
  • meetings to discuss and manage all of the above.

Ironically, the risk of failure may actually have declined to the point that the excessive activities no longer are necessary, but the activity continues because it has become institutionalized. Often, those performing the activities aren't aware of the failure that drove the organization to this behavior in the first place. To them, the activity is simply the standard operating procedure (SOP), and therefore, they are now locked in it to be compliant. Even worse, unnecessary SOPs, activities, and documentation themselves become opportunities for deviation.

LOW INHERENT PROCESS CAPABILITY

A subtle, ongoing cost occurs when an organization accepts low process capability as status quo. Costs directly related to failure naturally are higher because the low capability process fails more often. Costs related to failure anticipation occur because, although the probability of failure is high, one cannot predict when a failure will occur. To cope with this high and unpredictable risk of failure, the organization keeps additional resources on hand, just in case.

OVERESTIMATION OF RISK

Even for organizations with reasonably capable processes, the costs of anticipating failure can be high simply because risk hasn't been rigorously assessed. Biopharmaceutical companies tend to over-estimate risk just to be safe. Overestimating risk naturally will lead to the same sort of NVA activities driven by failure whose root cause and likelihood of repetition are unknown.

TAKING A NEW LOOK AT COSTS


Figure 2.
With the knowledge that the sources of many compliance-related activities may be hidden or poorly understood, you can then take concrete steps listed below to build an accurate picture of your real cost structure (Figure 2).
  • Deconstruct all compliance-related spending to understand exactly where you're spending your money.
  • Understand your actual risk profile for all quality and regulatory activity to determine the actual requirements and establish prudent but reasonable contingency plans.
  • Examine the capability of compliance processes as you would any manufacturing or business process.
  • Identify activities, resources, and costs driven by failure (direct COPQ).
  • Identify activities, resources, and costs driven by the hidden cost of anticipating failure.
  • Re-examine and challenge BVA to relentlessly eliminate NVA.

By focusing current excess staffing capacity on identifying and eliminating non-value-added compliance activities, you can free capacity for growth and avoid falling into the same cost-traps in the future. Moreover, you will improve overall organizational competence because improvements in compliance-related activities have a collateral positive impact on manufacturing, engineering, maintenance, product development, planning, and procurement. It requires only that you take a fresh look at costs that have been unnecessarily accepted as inevitable.

James P. Catania is a managing consultant at Tunnell Consulting, King of Prussia, PA, 610.337.0820,

REFERENCE

1. Crosby P. Quality is free. New York, NY: Penguin Putnam Inc; 1980.


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