Supplier Quality Management: A Risk-Based Approach

A systematic classification system makes supplier quality management feasible, even if you are dealing with hundreds of suppliers worldwide.
Jan 01, 2010
Volume 23, Issue 1

Bob Rhoades
Melamine-tainted baby formula and pet food. Allergic reactions and deaths from contaminated heparin. Recent events have made supplier quality issues a top priority, for both the biopharmaceutical industry and its regulators in the US and Europe. Bottom line, what happens at any outsourced manufacturing operation can cause your company legal liability, damage your reputation, and subject you to the considerable expense of a recall. Yet outsourcing some or all of the manufacturing process has become an inevitable part of doing business for the vast majority of biopharmaceutical companies.

Managing supplier quality is always a challenge. When you're dealing with possibly hundreds of suppliers around the globe who are engaged in a broad array of complex manufacturing processes, the challenge often appears to be insurmountable.

Rather than apply a single quality management approach to all suppliers—an approach that frequently is unworkable and invariably is inefficient—we recommend that companies develop a robust, risk-based approach that addresses each supplier situation individually, but always within the context of a carefully thought-out overall quality management system.

Risk-based quality management is one of those brilliantly simple concepts that makes all the sense in the world when you see it spelled out: When you focus on the risks with the potential to cause the greatest damage, you will almost certainly reap the greatest rewards from mitigating those risks. Or, to put it another way, you want to expend the greatest efforts in areas where you'll get the greatest "bang for the buck."

Yet, unfortunately, implementing a risk-based supplier quality management system isn't simple. Over and over, we have encountered companies whose best efforts were frustrated by failure to master one or more of a very short list of critical steps to success. If you get these five building blocks right, however, you will be well on the way to implementing a risk-based supplier quality management system that will not only prevent errors before they can develop into major problems, but also will improve the productivity and efficiency of your whole manufacturing process.

1. Classify Every Supplier by Risk Level—and Deal With Them Accordingly

Classifying suppliers by risk is the heart and soul of every risk-based quality management program. The risk level refers not to the probability of some particular event occurring, or even to the effectiveness of the supplier's internal quality system. Rather, labelling suppliers as "highest risk" means simply that what they provide is "most critical to your product," even if that particular supplier is completely reliable.

Components that present a lower risk to product safety or performance but are essential to the manufacturing process also may be considered critical and may need special measures to ensure an uninterrupted supply. Criticality should also be considered in terms of process complexity or the inability to obtain the product from a different supplier.

We generally recommend that our clients establish four risk-based categories of suppliers:

  • Tier 1: The highest risk suppliers, that have a critical impact on the quality or availability of your product. You can't get along without them.
  • Tier 2: Significant-risk suppliers that have a direct impact on your product, but for which alternatives are available.
  • Tier 3: Moderate risk suppliers that have an indirect impact on the product.
  • Tier 4: Low risk suppliers, that have no product impact.

It makes sense, both financially and in terms of quality management, to expend the greatest effort on the most critical suppliers. The quality assessment and control measures used, and the duration or interval between assessments, are adjusted based on the degree of risk exposure to each individual supplier. The higher the importance of the supplied product to the quality of the finished product, the more vigilant you must be in establishing adequate controls over the supplier. It all comes back to getting the most bang for your buck. Without a coherent system in place, you can drive yourself crazy trying to determine how much control to exert and how to apply it.

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