Why a Robust Supplier Qualification and Onboarding Process is critical for Quality Management

Step 1 : Define your Success Criteria (and Identify Supplier-related Risks)

As a procurement leader, the first step to building a successful supplier qualification and onboarding process is to bring together key stakeholders to brainstorm and take the time to clearly define your expectations from each of your suppliers that you would like to on-board.

Documenting the success criteria clearly becomes extremely important, especially from a process design perspective. This will help optimize the supplier qualification process for both required quality metrics (which will help drive quality agreements), and risks that need to be mitigated.

Criteria for success will vary dependent on the type of component being procured. Addressing the following topics will help you determine your success criteria, with clarity.

• How many suppliers do we need for a particular product or service?
• Ideal location
• Technical and logistical capabilities
• Industry focus and expertise
• Size and depth of the company
• Financial strength
• Required delivery and cycle times
• Technology and innovation framework
• Customer service standards
• Quality and compliance requirements
• Interest level for a long-term partnership

Most organizations do not take the time to define this ‘success criteria’. This often results in having a wide range of problems with suppliers including delayed shipments, compliance issues, non-conformance of a high percentage of parts triggering quality and regulatory issues and often resulting in brand erosion.

Success criteria should also identify and capture of all key supplier-related risks – segregated by component and by criticality.

At ComplianceQuest, our supplier management solution not only automates quality and compliance processes but also helps with risk management. We notice that our clients clearly segregate their suppliers into various risk categories.

Step 2 : Convert Success Criteria Into a Set of Formal Requirements and Develop the Qualifying Steps

After you have defined the success criteria, it is important to document this into a set of formal requirements. This involves designing a structured supplier qualification checklist.

This includes creating a questionnaire for all suppliers, conducting supplier interviews, audits, and inspections. It also helps to understand the experience and expertise of your supplier in serving your company’s specific requirements. Quality, Cost, and Delivery (QCD) details of the suppliers that have to be analyzed has to be included at this stage.

Quality leaders rely on a data-driven EQMS like ComplianceQuest to automate their supplier qualification process. A cloud-based platform that is flexible and scalable will enable a collaborative approach. Without capturing data and garnering insights from a wide range of data sources, it’ll be difficult to get the supply and value chain right.

Once you have nailed down the formal requirements and qualifying steps, the obvious next step is to design a workflow. This must be automated using a supplier management solution in your EQMS.

Your qualifying steps must address the following :

• Manufacturing capabilities
• Technology and innovation
• Size of the company and past experience (successes and failures)
• Regulatory compliance
• Quality certifications and standards
• Equipment Management : Keeping all manufacturing equipment in supreme condition through periodic maintenance
• Customer experience
• Cost and delivery
• Openness to collaboration
• Flexibility and adaptability of the product development lifecycle
• Engagement experience with the team

Step 3 : Research and Compile Candidates (Shortlist)

In this phase, you evaluate various suppliers based on the inputs provided in the supplier qualification checklist. Ideally, you want to work with suppliers who are excited about partnering with your company. They need to have the required experience in serving your industry and have at their disposal the right capabilities and technology.

One area where companies often go wrong is to arrive at the shortlist, only based on whatever information the potential supplier provided. However, it is important to gather references from other customers, check the documentation, quality certifications, and other third-party data.

If you are a manufacturer, your suppliers must ideally comply with ISO 9001-2015 requirements. In healthcare and life sciences, regulations demand that your supplier is in compliance with ISO 9001-2015, ISO 13485:2016, GMP, and 21 CFR Part 11, as per their specific component.

ComplianceQuest works with one of the world’s largest auto components manufacturers that supplies rubber-based products to OEMs in the automotive industry. For their critical suppliers, the company has an elaborate documentation requirement right from the qualification stage. This includes capturing detailed information including compliance standards, quality certifications, industry-specific experience, financial stability, and manufacturing capacity by location. This information is then verified through supplier audits and interviews.

Step 4 : Vendor Assessments

Depending on the type of product and also risk, on-site and offsite supplier audits must be conducted. The audit process must be thoroughly designed to ensure all information is captured – both to understand if the supplier is in line with our ‘success criteria’ and has the ability to mitigate supplier-related risks.

In this phase, we recommend the following questions be answered by supply chain and quality leaders:

• Segregate shortlisted candidates by the success criteria you defined in Step 1
• Capture information on certifications, compliance, and quality standards
• Evaluate documentation from supplier interviews and audits
• Analyze risks for each supplier
• Finalize shortlisted suppliers
• Stack rank the shortlist, across categories
• Make sure to cover all angles listed in Step-1 of your process (success criteria)

List of suppliers shortlisted for high-risk category:

Ideally, you must have shortlisted suppliers across categories, keeping in mind the criticality of the product. This risk-based approach to shortlisting is a critical step to getting your supply chain right.

Step 5 : Supplier Selection and Onboarding

Once vendor assessments are complete, suppliers are onboarded into your supplier management system. A next-generation supplier management system will help drive continuous monitoring and improvement across all suppliers. The only way to do this right is by leveraging data in real-time. This has to be kept in mind, right at the time of onboarding. It’ll be too late to set down policies and guidelines down the line.

While you onboard suppliers, make sure you capture the following into your supplier management system in the EQMS :

• Supplier Profile : The supplier profile captures all pertinent information from supplier approval status, readiness and compliance scores, and all communication. It includes documentation from the supplier qualification process, updates from re-boarding, and all documentation related to certification and regulatory compliance.
• Supplier Portal & Document Management : A configurable supplier portal allows suppliers to receive a relevant request for information or any additional tasks, including documentation requests, i.e., safety policy, insurance certificates, and regulatory compliance. It is also designed to store reports from audits, inspections, and interviews. The supplier may also respond to communication, including any audit findings, CAPA actions, change requests, etc.
• Build a system of engagement not a system of record : This means that – while the supplier portals serve as a single source of truth for all key supplier metrics and data, it is also designed for collaboration and teamwork. Internal ops and customer dashboards need to integrate with the supply side, ensuring seamless connectivity among all internal and external stakeholders.

Step 6 : Supplier Agreements, Periodic Re-qualifications, and Continuous Improvement

Supplier qualification and on-boarding is not a one-time effort. Periodic audits, regular collaboration, and communication are part of a strategic supplier partnership. This is especially true for suppliers in the top three risk categories – critical, high risk, and medium risk.

The VP of Supply Chain of a Global Lifesciences Company that works with ComplianceQuest mentioned this to us in one of our conversations. “There is no point in finding problems in the supply chain too late and it is extremely expensive.” The key is to continuously assess, monitor and improve. This is absolutely essential to strengthen the supplier-manufacturer relationship.

During the onboarding process, one of the first steps is to develop and sign an agreement. The supplier agreement should cover the following aspects, from a quality management perspective :

• Purpose and scope of the supplier-manufacturer agreement
• Products governed by the agreement
• Terms, conditions, and expiration dates
• Regulatory compliance, including adherence to GMP requirements
• Quality Assurance including deviation handling, complaints handling, CAPA process
• Product dispatch details
• Audit and requalification schedules
• Dispute resolution
• Supplier management process design
• Program, Performance and Change Management

The Role of a Next-Generation EQMS in Supplier Qualification and On-Boarding

A next-generation EQMS with a well-designed supplier management system can make life easier for quality and supply chain leaders.

But, what do we mean by next-generation?

The most important aspect a next-generation system is that it must enable easy collaboration. This includes collaboration amongst internal stakeholders, as well as engagement with leaders on the supply side. Legacy EQMS and supplier management systems serve as a system of record, wherein all data is captured. But these are not designed for collaboration. Be it supplier interviews and audits or change management or taking corrective action – collaboration helps deliver operational excellence.

We believe the following are critical features of next generation EQMS, from a supplier management perspective :

• System of Engagement & Collaboration : The supplier management system not only serves as a single source of truth for all supplier data & information but also ensures people can work together, collaborate and close the loop on any open-ended issues.
• Embedded AI for prioritization, automatic issue categorization, risk assessment : ComplianceQuest, which is built from the ground up on the Salesforce platform, uses the capabilities of Einstein Analytics to offer several AI-driven solutions. Imagine a system that uses predictive analytics and intelligence to categories suppliers into risk categories, prioritize issues to solve, all automatically. Such capabilities save valuable time for quality and supply chain leaders. AI-driven insights are possible in a tool like ComplianceQuest because of our ability to create world-class data models to feed into Einstein Analytics.
• Ease of integration with ERP & CRM : By no means is your supplier management process a standalone effort. It has to integrate with rest of your organization’s process. You receive a complaint from your CRM. How does it feed back into the supply chain if it is related to a supplier issue? It should automatically escalate into the complaints management system of your EQMS, which in turn loops in several stakeholders – both internal and on the supplier side. Your EQMS must truly integrate with your ERP and CRM systems.
• Custom Workflows : We have seen on numerous occasions how legacy software forces your organization to modify your workflow to suit their system. Ideally, it must be the opposite. Your supplier management and EQMS software must be flexible enough to suit your organization’s workflow.
• Integrated Risk Management : Right in the first step of the supplier qualification process is defining the success criteria and identifying risks. A next-generation supply management solution is integrated with a risk management solution. This makes it easy for quality leaders to adopt a proactive approach to mitigating risk. It is at the core of building a quality culture that spreads across the supply chain.
• Data-driven, enabling continuous improvement (CI) : A next-generation supplier management solution will use data and analytics to drive CI. It will make it simple to pull up relevant data through dashboards, charts and visualizations. The process of gathering insights from data must be easy as well.
• Scalable solution, designed keeping the long-term in mind : In today’s scenario of rapid technological evolution, scalability of your digital tools is a must. Your supplier network will be dynamic. You may expand globally and open new manufacturing locations. There is no doubt that a scalable, flexible, cloud-based and mobile-ready solution is the need of the hour.

Supply chain leaders are embracing the latest digital transformation technologies to embrace Quality 4.0 and other best practices. The key is to drive a transformation that is constantly evolving and ever improving.