PROCESS IMPROVEMENT
Supply Chain Management:
It’s Just Good Business
Joe Condon
Plante &
Moran PLLC
To achieve best outcomes,
use multiple strategies, but
focus on specific segments.
lmost every time I open my
inbox, there’s an article to
read or an industry conference invitation focusing on issues of
corporate responsibility and liability,
pushing regulatory agencies to implement stricter supply chain regulations. Our industry has an opportunity to take meaningful action rather
than continue to motivate the lawmakers and government regulators
into action. I recommend we exercise
some time-tested, old-fashioned good
manufacturing practices (excuse the
pun).
According to industry quality control and compliance publication The
Silver Sheet, of the 97 warning letters
issued by the U.S. Food and Drug
Administration (FDA) to device makers in 2008, including at least one
quality system violation, 35 contained
purchasing control citations. Our collective industry performance in managing our supply chains has caused
FDA leaders to rethink their Quality
System Inspection Technique focus
and to leverage some of the $511 million budget increase for 2010 to deploy
A
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November/December 2009
an additional 346 staffers
to focus on drug and medical
device
products.
Rather than speculating
about upcoming regulatory
changes and scrutiny, I
advocate doing what we
can (and should): improve our supply
chain management practices.
Supply Chain
Management as
a Business Process
Viewed as a business process, supply
chain management breaks down to four
key elements: supply chain strategy,
supplier qualification, supplier selection and supply chain surveillance.
Supply chain strategy defines the relationship between a company and its
suppliers in terms of collectively serving stakeholders: customers, industry
and ownership. Supplier qualification
defines the minimum characteristics of
partner candidates, while supplier
selection is more granular in guiding
specific decision in awarding business.
Finally, supply chain surveillance is the
“trust but verify” prudent element of
any relationship. As with any good business process, this one is most effective
when iterative in nature. Surveillance
observations either challenge or confirm the effectiveness of the strategy,
qualification and selection, and adjust-
Orthopedic Design & Technology • www.odtmag.com
PROCESS IMPROVEMENT
ments follow. There are many tactical
tools worthy of a closer look.
Supply Chain Strategy
Supply chain strategy is the relationship basis to best serve our stakeholders. There are many points to consider when defining these critical relationships, including:
• Technology integration
• Cash-to-cash management
• Target pricing
• Capacity management
• Regional presence
• Make/buy positioning
• Intellectual property management
• Product design
• Material optimization
• Collaborative research and
development
Companies exhibiting best practices in supply chain management typically have multiple strategies, each
focused on a specific business segment.
Strategies can be focused by raw material, product category, operating division, market position, product life cycle
position, technology, manufacturing
process, geography, risk, cost or intellectual property. The supply chain
strategy for high-risk, high-tech, intellectual property-rich products should
be very different than the strategy for
low-risk commodity products. The
entire materials portfolio should be
analyzed, grouped in a logical fashion,
and a strategy should be developed for
each. Although often tempting to limit
the work on low-risk commodity products, all disruptions in the supply
chain are costly, regardless of complexity and financial value of the products.
Once strategies are well-defined, characteristics of suitable partner candidates can be identified.
Supplier Qualification
Supplier Selection
Supplier qualification is the most frequently overlooked step in supply chain
management. Supplier qualification is
the opportunity to define the key characteristics of ideal supplier candidates
for each strategy. Characteristics worth
considering include:
Supplier selection is a granularlevel process where business is awarded based on specific requirements and
vendor candidate differentiators.
Depending upon the type of supplier
sought, typical selection criteria include:
• Quality and continuous
improvement
• Industry experience
• Technological capabilities
• Financial stability
• Infrastructure alignment
• Management team strength
• Company size
• Client portfolio
• Design for manufacturability
capability
• Quality system
• Engineering and design
capabilities
• Compliance: TS/ISO 16949, ISO
9001, etc.
• Supply chain management
The primary consideration here
must be possible risk to the business.
Questions to ask in this evaluation
are: What do we risk in the event of a
supply disruption? What are our risks
associated with undetected product
quality problems from this material/component? What are the risks of
our intellectual property rights being
violated by a supplier partner? What
are the risks of outgrowing a supplier
partner in this product category or of
a supplier outgrowing us? What are
our risks of a supplier partner failing
financially? What could be gained
and/or lost if we’re their largest client
or the smallest?
Answering these critical questions
will narrow the focus of supplier candidates, facilitating a more efficient
supplier selection process.
Orthopedic Design & Technology • www.odtmag.com
• Elemental level quote analysis
• Program/launch management
• Preproduction approval process
• Agility and flexibility
• Total cost
• Production and distribution
capacity
• Advanced product quality
planning
• Design and process failure
and effect mode analysis
• Technology capabilities
• Packaging capabilities
• Control plans
Selection may be on one or several
criteria depending upon what’s critical
for the specific piece of business.
Criteria should be established, quantified and prioritized. Request for
quotes can then be standardized, uniformly issued and responses evaluated
fairly and efficiently. Awarding business to a vendor candidate changes
the relationship from a courtship to a
marriage, requiring ongoing review
and support.
Supply Chain Surveillance
Supply chain surveillance is most
effective and value-added for both parties when approached with a collaborative partnership style. Traditional
audits that “catch” problems, discrepancies and non-compliances issuing
corrective actions and/or penalties are
costly, ineffective and archaic. The
most effective surveillance systems
typically contain many assessment
elements including:
November/December 2009
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PROCESS IMPROVEMENT
Business relationships are
dynamic; as the business
climate changes, supply chain
relationships also will change.
Every supply chain is an extension of
the base enterprise, offering many
opportunities waiting to be leveraged.
Managing supply chain resources
warrants the same degree of management discipline and rigor as strategiz-
• Launch management
• Lead time reduction
• Supply chain scorecard
• Product and service delivery
• Product and service quality
• Problem reporting and resolution
• Financial stability
• Continuous Improvement
• Supplier chain management
• Scheduled price reductions
• Joint venture value-added
exercises
The goals of the surveillance
process are to keep both parties honest, review additional opportunities
and build the relationship. If done
well, there should be no surprises.
When the relationship adds value to
both enterprises, then it should be
grown. If not, and there’s sufficient
trust, resolutions can be explored, or a
constructive exit plan devised. Bus-
iness relationships are dynamic; as
the business climate changes, supply
chain relationships also will change.
Consider supplier surveillance as a
proactive change control tool.
Leveraging Opportunities
FDA 21 CFR 820 Sub Part E Purchasing Controls regulation requires
medical device companies to establish
and maintain procedures to evaluate
suppliers, exercise supplier controls
commensurate with evaluations and
performance, as well as establish and
maintain associated records. In addition to meeting these requirements,
this process also deploys a variety of
time-tested tools and methodologies,
yielding cost-effective risk management, predictable quality and delivery performance, methods to manage
cutting-edge technologies, ongoing
cost controls and sustained growth.
ing, qualifying, selecting and monitoring a company’s internal human and
capital resources, with or without regulations. It’s just good business. O
Joe Condon is management consulting
leader for the Life Sciences group of
Plante & Moran, PLLC, an accounting
and business advisory firm. Prior to
joining Plante & Moran, Condon
served as vice president of operations
and corporate officer for RTI Biologics.
His previous experience also includes
work as vice president of operations
and executive plant manager for
Stryker Orthopaedics, where his management practices were consistently
recognized as best in corporation
across 17 international plant sites.
Plante & Moran is the nation’s 12th largest certified public accounting and business
advisory firm, providing clients in the life sciences industry with financial, human capital,
operations improvement, strategic planning, technology selection and implementation,
and family wealth management services. Plante & Moran has a staff of more than 1,500
professionals in 20 offices throughout Michigan, Ohio, Illinois, Monterrey, Mexico and
Shanghai, China. Plante & Moran has been recognized by a number of organizations,
including FORTUNE magazine, as one of the country’s best places to work.
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November/December 2009
Orthopedic Design & Technology • www.odtmag.com
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