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Better supplier management can begin in parallel to production-related improvements.
Operations Excellence, as applied most often in biopharmaceutical organizations, focuses almost entirely on internal manufacturing and quality operations. This is the right place to start; manufacturing effectively is the key to producing quality product on time.
However, once the quick wins are achieved in the plant, where should organizations look next for continuous improvement opportunities? The next logical place is upstream with the suppliers.
As a result, the topic at the most recent Operations Excellence Consortium meeting, held July 22 at Bayer Biologicals in Berkeley, CA, was highly relevant to Operations Excellence programs: Supplier Quality Management.
In highly competitive, commodity industries that have perfected Operations Excellence practices, material costs can compose more than 50% of the overall product costs. Additionally, profit margins can be so small that poor production yields can significantly impact the bottom line. As a result, Operations Excellence programs in those industries have applied Operations Excellence practices aggressively with their suppliers.
Some examples of supplier management practices at world-class organizations include:
When compared to those companies, the biopharmaceutical industry is relatively unsophisticated in dealing with suppliers. Some of the reasons for this were covered in the most recent consortium meeting, and include:
These may seem like significant challenges, but companies have found ways to circumvent these issues or minimize their impact:
Better supplier management doesn't need to wait for the Operations Excellence program to mature in production. Many of the above identified improvements can begin in parallel to production-related improvements.
However, companies need to face reality: The biopharm industry will not likely reach the production volumes of small molecule producers or companies in other industries for years to come. Until better leverage is achieved, your company will need to put in extra effort and management to minimize supplier risk to quality and delivery.
The latest East Coast consortium meeting was held August 22 at Human Genome Sciences in Rockville, MD. The meeting was well attended and focused on the challenges of moving a new plant from qualification to commercial development. The session included a tour of the new large scale facility. The next European Consortium is scheduled for September 26 at Avecia in the UK. Go to www.tefen.com/bio for information on past and future meetings.
Marc Puich is a partner at Tefen, Ltd., 1065 E. Hillsdale Blvd., Suite 421, Foster City, CA, 94404; Tel 650.357.1120 x117, Fax 650.372.1350, firstname.lastname@example.org