Extending Quality Management Through Vendor Compliance Audits

When conducted correctly, audits can be beneficial to both the manufacturer receiving goods and services and the vendors who supply them. Both parties can come together as partners and collaborate to improve and maintain product quality and compliance efforts. This reminds me of a song from an old musical, “The Manufacturers and the Suppliers Should Be Friends.” Vendor compliance audits, however, take more than good will to have successful outcomes with objectives that go well beyond friendship.

This post addresses the primary responsibilities of both parties as well as some practical strategies and tools, including audit management software, that make them possible. Successful self-regulation takes some maturity, including quality management maturity and digital maturity.

Primary Responsibilities for Quality Management in Supplier/Vendor Compliance Audits

A manufacturer’s ability to deliver high-quality products and maintain regulatory compliance relies in part on the quality-related activities of its own suppliers and vendors. However, the party that is ultimately responsible remains the manufacturer. The U.S. Food and Drug Administration (FDA) considers a manufacturer’s suppliers an extension of the manufacturer, insofar as a manufacturer is ultimately responsible for the FDA-regulated products it produces and sells – even if it outsources some or all of its manufacturing or other operations. Both parties should work to establish an active, ongoing partnership.

The Supplier/Vendor’s Responsibilities

In order to foster a sustainable partnership, the suppliers, vendors, and other third-party partners must submit to audits and should proactively fulfill the following responsibilities.

• Remain fully compliant with current good manufacturing practices (CGMPs). Be prepared to demonstrate quality management system (QMS) controls.
• Reveal any previous compliance issues such as FDA Form 483s, warning letters, or consent decrees.
• Consciously establish an optimal balance between risk, cost, and quality. Incorporate robust and redundant risk management where appropriate according to FDA guidelines for primary and secondary stakeholders in the pharmaceutical¹ or medical device² industry to prevent disruptions and/or harm.
• Undergo a and continue to honor terms of contract.
• Outside of any vendor compliance audit, notify the manufacturer of changes in the product or service you are providing so that manufacturers may determine whether the changes affect the quality of a finished product.

The Manufacturer’s Responsibilities

In order to maintain compliance along with a productive partnership, the manufacturer must perform audits and fulfill the following responsibilities.

• Clearly outline a comprehensive supplier quality risk management plan that incorporates specific metrics and thresholds; a level of risk matrix; and action plans. Communicate these requirements to your supplier/vendor before qualifying them.
• Speak up! If a situation seems noncompliant, the manufacturer should ask.
• If an observation is made during a vendor compliance audit, the manufacturer should provide details, including what the noncompliance was, where it occurred, and when it was observed.
• If a vendor qualification standard operating procedure (SOP) or policy was violated, the manufacturer should reference the document when making the observation.
• Make sure the vendor understands the level of importance of the observation (minor, major, or critical) and provides an action plan to resolve it.
• Follow through with established purchasing controls, supplier corrective action requests (SCARs), etc.

Strategies for Supplier/Vendor Compliance Audits

Getting back to the Oklahoma reference, a good strategy to approach supplier audits is to build really good fences, but ones with revolving gates and secure latches. Why didn’t the farmers and ranchers think of this? In manufacturer-speak, this could look like adhering strictly to GMP standards on both sides of the fence and being very direct with observations, but also opening communication channels and offering suppliers a view into your findings and ways to address them directly. If that doesn’t happen, it’s time to lock the gate. Purpose-built audit management software can go a long way to automate these processes, give manufacturers adequate oversight, and give suppliers an avenue of redress.

The foundational strategy for functional partnership is to specify all quality-related activities between the two parties in a written agreement per the FDA’s guidance on regulated supplier qualification and quality management.³ Additional strategies include the following.

1. Conduct pre-supplier quality audit research.
2. Review the supplier's reputation online.
3. Take a hard look at customer complaints.
4. Know if a supplier is outsourcing.
5. Keep the supplier quality audit on track.

You can learn more about the five strategies for successful supplier/vendor compliance audits here. Keep in mind that if additional controls are deemed necessary to ensure product safety and quality following an audit, this implies additional costs that often fall to the supplier/vendor. This is where a revolving gate is useful. Make sure your initial agreements make provisions to renegotiate when necessary. Be willing to consider cost sharing where mutual responsibility and benefit is indicated.

Tools to Manage Supplier/Vendor Quality

Supplier/vendor compliance audits can be important tools for manufacturing organizations to ensure their suppliers and vendors aren’t the source of major issues in product parts or materials. However, the medium that a manufacturer uses to perform the audit dictates the efficiency, speed, scope, and effectiveness of the audit.

Many companies continue to use paper-based or manual systems to conduct and manage their audits. They are missing out on some key advantages that digital solutions can offer. The level of digital maturity that manufacturers are willing to assume correlates directly with how successful their audit strategy can be. Audit management software can dramatically simplify and enhance supplier/vendor audits, including qualification audits. Supplier quality management software can simplify related supplier quality management responsibilities in the following ways.

• Managing all qualification documents, checklists, direct supplier communication capture, workflow processes, and risk-based notifications.
• Integrating all audit process with the rest of the quality system, connecting all audit data and actions.
• Keeping track of audit planning and scheduling, including recurring vendor compliance audits.
• Directly linking supplier corrective action requests (SCARs) to observations. Automating actions including routing, notification, follow-up, escalation, and approval.
• Storing findings, including approval status and analytics reports, in a single place.
• Involving external suppliers/vendors directly in the internal process.
• Ensuring that supplier quality management processes are measurable and repeatable.

As high of an ideal friendship is, the ultimate objective of supplier/vendor audits is to evaluate a supplier/vendor’s quality management to maintain your own product quality standards. Identifying and resolving supplier problems before they negatively impact your products requires effective audit strategies and real-time visibility into the supplier’s quality management processes. Real-time visibility is just what good audit management software can provide, along with real-time operational interventions. We all know that good fences make good neighbors. Just make sure you peek over from time to time.

References:

1. "Risk Management Plans to Mitigate The Potential for Drug Shortages,” FDA, May 20, 2022.
2. "Factors to Consider Regarding Benefit-Risk in Medical Device Product Availability, Compliance, and Enforcement Decisions,” FDA, current as of February 2, 2018.
3. "A Quick Guide to FDA’s Expectations for Supplier Quality,” The FDA Group, February 25, 2020.