Managing supplier quality does not impact profits or supply chain efficiency despite concerns of food & beverage directors

Tim Mohn, industry principle, Sparta Systems, explains how an enterprise-wide quality management policy can maintain supplier quality without sacrificing bottom-line objectives. 
Highly regulated businesses, such as food and beverage manufacturers are experience ongoing struggles between two opposing forces supply chain efficiency and supplier quality. The key issue is the detachment between the board which drive product lifecycles for optimum profitability and the quality managers looking to enforce strict procedures to ensure product quality. This statement in no way implies that C-level executives are not concerned about product quality, or that quality managers have no commercial understanding in relation to overall financial performance.  It simply means the responsibilities and objectives of these teams are very different and therefore quality can be overridden in favour of production efficiency and revenue increases.

However, the irony is that poor quality can devastate share prices and destroy brands.  Quality issues could stem, for example, from the quality of the ingredients; inferior packaging; contamination on the production line or incorrect information on the labels, all of which are likely to have been supplied by a 'trusted', yet unmanaged supplier.
Products can only be made to the standards determined by consumers, public health agencies and regulators if they are manufactured with the highest quality components and ingredients.  Gone are the days of supplier loyalty.  The quality teams need to continually monitor the quality and consistency of raw materials, from existing and new suppliers, and prioritising future procurement from these suppliers.
To do this manually is nigh on impossible. The process requires extensive tracking and management of supplier qualifications, audits, non-conformance, corrective actions and other processes. The total cost of the supplier relationship also has to be calculated and factored in.
What are the challenges faced by quality management teams?
To better understand the critical need for managing supply quality as part of a broader quality management system, it is necessary to examine where things currently stand. There are several challenges that companies face when implementing an effective process for managing supplier quality and these extend beyond the elements of the supply chain into the overall quality control processes of the business operations.
1. Inefficient, decentralised reporting
Highly regulated businesses are required to audit all suppliers and provide detailed reports to the appropriate regulatory body detailing their suppliers' operations. However, even with the technology available to track and report on supplier activities, many businesses, including Blue Chips, still use ad hoc and often manual processes combining pen and paper with Excel spreadsheets to document and record processes.  This results in inconsistencies, issues and compliance failings. 
By implementing a centralised system for the tracking of supplier data organisations can not only streamline reporting efforts and realise the benefits of a more efficient and compliant process, difference departments or sites can learn from the experience of others and ensure that no two mistakes are ever made.
2. Lack of C-Level involvement in managing supply quality
Senior executives are usually focused on running the business.  Quality management is considered to be a departmental concern despite the parallels that run between quality and profitability. The board needs to adjust its thinking and consider the operational costs of recalling and replacing a product line.
3. Lack of risk-based analysis for supplier quality
Without a risk-based calculator, valuable time and resources are allocated to assessing the risk of reliable suppliers that pose no threat to the larger operation.

4. Increased Global Pressures
Companies face extreme challenges as they manage increasingly global supply chains. Last year, there were several high profile recalls of foodstuffs that had gone on sale in the UK. Increased competition and the impact the economy has had on the price of ingredients has meant the management of supply chain quality has become more challenging.
Balancing internal processes and third-party providers
Highly regulated industries depend on both internal manufacturing and compliance processes as well as third-party suppliers. Between these intertwined parties, it's critical for companies to find a way to hold itself and its suppliers to stringent standards for quality and compliance, whilst still driving supply chain efficiencies and profits.
Companies must take a proactive approach and increase visibility into potential supplier problems by obtaining a global view of all quality issues and supplier scorecards. This has far-reaching benefits, as it;
ensures compliance with industry regulations, good manufacturing practices (GMPs), and ISO standards

eliminates high costs related to scrap, rework, and delays caused by supplier quality problems

 anticipates and eliminates repeat problems by improving supplier investigation and root cause analysis processes.
Although implementing a holistic program can require significant upfront resources, including system and infrastructure investments, training costs, and implementation time, the end gain is worth more than the initial outlay. With an enterprise-wide quality management program, companies also can improve quality trending and management reporting by integrating purchasing and inventory systems with the quality management system.
Critical components for supplier quality management
An enterprise-wide centralised process must encompass several quality management and compliance components, including:
Supplier qualification: Managed qualification and approvals of new suppliers, including all necessary qualification steps, which may vary based on the supplier's risk assessment, and may include tasks such as self-assessment and onsite audit.

Supplier audits: Handle audits based on the risk level, audit frequency, and the supplier rating or score established in a supplier's profile. When a trend in supplier quality problems is identified, companies must schedule ad-hoc supplier audits. The audit process, related audit findings, and subsequent supplier corrective and preventive actions must be managed and tracked to ensure quick and effective resolution.

Incoming material inspections: Create inspection records when materials are received to ensure tracking of all inspection activities, including inspection type, received date, material information, quantity, inspection results and related information.

Approved supplier lists and scorecards: Enable the organisation to maintain and monitor approved or preferred supplier lists. Approved supplier lists can be customised reports or online databases that can be reviewed and updated by qualified staff.

Supplier non-conformance: Directly generate nonconforming material reports (NCMRs) from the inspection record, or independently within the manufacturing operation when the materials are below quality control standards. Guarantee that the supplier investigations and root cause analyses are tracked through to completion.

Supplier CAPAs: Track all supplier corrective and preventive actions (CAPAs) through to completion. Provide third-party suppliers with secure access to view only their specific NCMRs and audit findings and record corresponding corrective actions.

Supplier documentation: Maintain or link to documentation of important specifications, including inspection plans, delivery windows and acceptance sampling for received items.

Managing supply quality effectively serves not only to drive compliance, but also to reduce the cost of poor quality, which, with both tangible and intangible ramifications (costs of product recalls, tarnished reputations or brand image), can ultimately be a detriment to any biotech or pharmaceutical organisation.
Without a stringent, holistic and centralised supply quality management initiative that drives numerous supply chain and organisational efficiencies, companies' bottom-line objectives will be undermined, eroding any previous organisational successes.

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