Dr. Christopher Joseph Devine, President, Devine Guidance International
Devine Guidance

Purchasing Controls

By Dr. Christopher Joseph Devine
No Comments
Dr. Christopher Joseph Devine, President, Devine Guidance International

Over the past two months, Dr. D has focused on supplier management from a quality and regulatory perspective. However, the successful execution of a well-defined supplier-management system, and the overall organizational success within the medical device industry, is premised on a strong cross-functional approach to quality. It takes a collegium (may need to look it up) of dedicated professionals, in multi-functional roles, to ensure all aspects of the supplier management system function efficiently. In…

Over the past two months, Dr. D has focused on supplier management from a quality and regulatory perspective. However, the successful execution of a well-defined supplier-management system, and the overall organizational success within the medical device industry, is premised on a strong cross-functional approach to quality. It takes a collegium (may need to look it up) of dedicated professionals, in multi-functional roles, to ensure all aspects of the supplier management system function efficiently.

In this installment, Dr. D explores the importance of purchasing and the influence an effective approach to procurement exudes on supplier quality. Many of my colleagues share obverse opinions to my own in regards to what level of procurement support is required for supplier quality. I believe purchasing organizations are equal partners in the process. If you allow purchasing organizations to remain on the sidelines versus active participating in the supplier quality process, you will walk away with a compunctious (look-it up time) feeling, once you realize an opportunity for team building has been lost.
Warning letter violation

I have decided to again post two warning letter extractions retrieved from the FDA’s website. These two examples of stellar organizational performance, or not, are directly related to the documentation and execution of a functional purchasing process. Remember, the FDA, notified bodies, competent authorities, Health Canada, MHLW, etc. are on a mission to ensure medical device manufactures take control of their supplier base. Frankly, there are way too many recalls being driven by device failures rooted in supplier issues, and that makes the agency, a.k.a., the FDA, extremely unhappy.

Additionally, an organization can have the best medical device ever designed or manufactured; but that first recall, premised on a supplier problem, can result in millions of dollars of lost revenue, and it can get even worse. If these same products start hurting people, the litigation costs can push any organization to the brink, and if the onslaught of litigation is survived, rest assured, your competitor will wrestle away some of your market share.

So what is the answer here? Dr. D emphatically states, “Invest resources into developing a world-class supplier management system, as this is your first line of defense against potential supplier problems.”

Warning Letter One (January 2010): Failure to establish and maintain procedures to ensure all purchased or otherwise received product and services conform to specified requirements as required by 21 CFR 820.50. [Reference: FDA 483 Item 7] For example, your firm failed to establish purchasing control procedures and to define and implement adequate quality controls which must be met by suppliers and contractors. Additionally, there was no documentation demonstrating your firm is being notified of changes made by contract suppliers. According to a contractor’s service report, dated August 31, 2009, a new chemical product was added to the cleaning operation; it does not appear firm management was notified of the change before implementation.

Warning Letter Two (December 2009): Failure to establish and maintain procedures to ensure all purchased or otherwise received product and services conform to specified requirements, as required by 21 CFR 820.50. For example, your firm failed to establish purchasing control procedures and to define and implement adequate quality controls which must be met by suppliers and contractors. The only management official on site explained he was not aware of the written purchasing control procedures were required.

Regulations and requirements
When it comes to defining the requirements for purchasing, the QSR and ISO 13485 are again mildly prescriptive. Remember, regulators will give you just enough flexibility to make life interesting. The regulations require a purchasing system that is documented by procedure (remember Devine Guidance Rule # 3 something about placing everything in writing), encompassing supplier evaluations, roles, responsibilities, with evidence of training, records, and the maintenance of all of the associated data. Oh – yes, trust Dr. D on this one, these records will be audited, henceforth the warning letters.

1. QSR – Subpart E – Purchasing Controls

Section 820.50: Each manufacturer shall establish and maintain procedures to ensure that all purchased or otherwise received product and services conform to specified requirements.

(a) Evaluation of suppliers, contractors, and consultants. Each manufacturer shall establish and maintain the requirements, including quality requirements, that must be met by suppliers, contractors, and consultants. Each manufacturer shall:

(1) Evaluate and select potential suppliers, contractors, and consultants on the basis of their ability to meet specified requirements, including quality requirements. The evaluation shall be documented.

(2) Define the type and extent of control to be exercised over the product, services, suppliers, contractors, and consultants, based on the evaluation results.

(3) Establish and maintain records of acceptable suppliers, contractors, and consultants.

(b) Purchasing data. Each manufacturer shall establish and maintain data that clearly describe or reference the specified requirements, including quality requirements, for purchased or otherwise received product and services. Purchasing documents shall include, where possible, an agreement that the suppliers, contractors, and consultants agree to notify the manufacturer of changes in the product or service so that manufacturers may determine whether the changes may affect the quality of a finished device. Purchasing data shall be approved in accordance with 820.40.

 

2. MDD (Please note the MDD references EN ISO 13485, the Harmonized Standard for Medical Device Quality Management Systems)

Article 3 – Essential Requirements: The devices must meet the essential requirements set out in Annex I, which apply to them, taking account of the intended purpose of the devices concerned.

Where a relevant hazard exists, devices, which are also machinery within the meaning of Article 2(a) of Directive 2006/42/EC of the European Parliament and of the Council of 17 May 2006 on machinery  shall also meet the essential health and safety requirements set out in Annex I to that Directive to the extent to which those essential health and safety requirements are more specific than the essential requirements set out in Annex I to this Directive.

Annex II.3 EC Declaration of Conformity – Full Quality Assurance System: The manufacturer must ensure application of the quality system approved for the design, manufacture and final inspection of the products concerned, as specified in Section 3 and is subject to audit as laid down in Section 3.3 and 4 and to Conformity surveillance as specified in Section 5.

3. EN ISO 13485 – 7.4 Purchasing

7.4.1 The organization shall establish documented procedures to ensure that purchased product conforms to specified purchase requirements.

    • The type and extent of control applied to the supplier and the purchased product shall be dependent upon the effect of the purchased product on subsequent product realization or the final product.

    • The organization shall evaluate and select suppliers based on their ability to supply product in accordance with the organization’s requirements. Criteria for selection, evaluation, and re-evaluation shall be established. Records of the results of evaluations and any necessary actions arising from the evaluation shall be maintained.

Purchasing controls
According to Silva, in an interview by J. Schildhouse, “if procurement is not involved early in the process, you just become the person who writes the PO.” Additionally, organizational need drives the building of each business case. Furthermore, organizational buy-in allows the procurement organization to build cross-functional sourcing teams.

According to Zhang, the primary objective of purchasing management is the obtainment of purchased supplies or services while sustaining price, quality, and delivery objectives. Establishing clear objectives for the purchasing organization, understanding the impact of global sourcing, and establishing strong relationships with suppliers are mandatory. In today’s competitive global environment, traditional purchasing objectives require an upgrade to ensure continuous alignment with current strategic objectives.

According to Buffaloe, the purchase order becomes the primary contracting document with the supplier. Within the medical device industry, if contractor or supplier provides a finished medical device, they must be managed in accordance with the Quality System Regulation. The purchase order should contain critical information such as component cost, quantity, delivery requirements, and applicable quality covenants. Additionally, the component specification, procedures for special processing steps, non-disclosure agreements, no-change agreements, and similar binding legal documents are key documents, and support the purchase order as attachments. Work authorization does not commence until completing the review of applicable agreements, signed by the appropriate level of authority, as authorized by the supplier. Finally, according to Zhenjia, overall procurement objectives must be clearly defined.

To many quality professionals, interest in developing an effective procurement organization is more of a velleity than a statement of practice. However, an effective purchasing process, with competent buyers, is a supplier quality engineer’s best friend. Once a supplier has been approved and added to the approved vendors list, an organization needs a tool to obtain goods and services, and that vehicle is the purchase order (PO).

The PO should contain sufficient granularity to ensure the supplier has all of the necessary technical information, supply chain information, price, terms and conditions, specific quality requirements, etc. Dr. D, read my rules, is a strong believer of putting everything in writing and yes, I can at times sound like a broken record. For example, the PO is great; however, a well-written supplier agreement attached to the PO will be even better. The more information a supplier is provided, assuming that the information is current and accurate, the better the results.

Additionally, I cannot place enough emphasis on the NO-CHANGE AGREEMENT! If a supplier balks at or is unwilling to sign-up to one, do not walk away, do not run away, but sprint away, at God’s speed. Remember folks, we are in the medical device industry, and changes require validation, regardless how benign the changes seem; just ask the FDA. Furthermore, specifications, drawings, special processes, special requirements, SHALL always be attached to the purchase order. Every time a change is required, a change order (revised PO) needs to be issued to the supplier, without exceptions, and do not forget to attach the specification/ drawing with every change order. If you are a supplier, do not accept the order if all of the documentation is not attached to the PO.

You may wonder if Dr. D is crazy, asking you to turn away business! No, I am not asking suppliers to turn away business; however, I am asking suppliers to hold themselves accountable for their own success. I call it being at the center of your own attention.

Finally, ensure that all of your quality requirements are clearly defined. One way to accomplish this task is to insert all of the quality-specific requirements directly into the purchase order. Another way to accomplish the same task is to create a quality document that contains all of the quality requirements and assign quality codes. For example, (a) Quality Requirement Code 1A – must have an EN ISO 13485:2003 quality system approved by a recognized notified body, with a current certificate on file; (b) Quality Requirement Code 1B – Copy of FDA facility registration required; (c) Quality Requirement Code 1C – Certificate of Conformance required with each shipment; or (d) Quality Requirement Code 2A – No process changes or changes to material permitted. Remember, these are your codes so ensure all avenues are covered.

Purchasing, equal partner with supplier quality
In closing, repeat after Dr. D, “purchasing is the supplier quality organization’s best friend.” Purchasing is an often overlooked yet a critical influencer for an effective supplier-management system. In fact, purchasing should be considered an equal partner with supplier quality. I recommend that whenever possible, purchasing should be part of the initial assessment team, as their input and perspective is paramount to performing a well-rounded, 360-degree evaluation of potential suppliers.

Additionally, all requirements must find their way into the procurement documents. The success of the supplier is linked directly to the amount and accuracy of the information provided. Furthermore, put some serious effort, including input from your legal folks, into the No-Change Agreements, Supplier Agreements, and similar documents needed to indemnify your organization. Finally, in the medical device industry, all changes to be adequately evaluated and potentially validated.

In closing, thank you again for joining Dr. D and I hope you find value in the guidance provided. Until the next installment, when I discuss the role of non-conforming material, – cheers from Dr. D. and best wishes for continued professional success.

References:

  1. Buffaloe, V. (2006). Outsourcing and the quality system. Biomedical Engineering & Technology, 40(4). Retrieved January 4, 2007, from http://proquest.umi.com
  2. Code of Federal Regulation. (2008, April). Title 21 Part 820: Quality system regulation.  Washington, D.C.: U. S. Government Printing Office.
  3. Devine. C. (2009, July). Exploring the effectiveness of defensive-receiving inspection for medical device manufacturers: a mixed method study. Published doctoral dissertation. Northcentral University. Prescott Valley, AZ.
  4. FDA – U.S. Food and Drug Administration Website. (2010). Warning letters. Retrieved February 12, 2010, from http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/
  5. Medical Device Directive. (1993). Council Directive 93/42/EEC. Medical Device Safety Service. Retrieved January 11, 2010, from http://directive93-42-eec.htm
  6. Medical devices – quality management systems – requirements for regulatory purposes. (2007). EN ISO 13485:2003/AC:2007.
  7. Poor supplier control causing recalls, FDA says; contract is key to success. (2007, May). The Sheet – Medical Device Quality Control, 11(6). Danvers, MA.
  8. Schildhouse, J. (2005, summer). An interview with Sarmento Silva. Journal of Supply Chain Management, 41(3). Retrieved November 4, 2008, from http://proquest.umi.com
  9. Zhang, Z. (2008, June). Literature review of purchasing management in service industry. Management Science and Engineering, 2(2).
  10. Zhenjia, Z. (2008, June). Literature review of purchasing management in service industry. Management Science and Engineering 2(2).

Leave a Reply

Your email address will not be published. Required fields are marked *