Every year, Xavier Leadership Center hosts an international conference on Supply Chain Management for the Pharma industry. It is co-sponsored by the FDA, and is designed for the Quality, Regulatory and procurement professionals who are attempting to manage increasingly complex global supply chains while assuring compliance with emerging Federal regulations.
Pharma today is changing dramatically, and is increasingly a global sport – with some scary emerging threats in pirating, counterfeiting, cargo thefts, and outright terrorism. There are just not enough inspectors and regulators to cover it all.
The conference speakers focused many of their comments on what it takes to assure the viability of the supply chain from a quality perspective. There were calls for more metrics, more inspections, more audits, more formal Quality Agreements, etc. But it seemed an uphill battle to persuade their organizations to fork over the money for these important needs. (During one presentation the audience responded that while having a formal risk-mitigation strategy in place was important, 63% of those present did not believe their firms were providing sufficient funding to allow effective execution.) Contract suppliers spoke about how in spite of the rhetoric concerning the desire for suppliers who add value, the main criteria that drives their customers’ behaviors is the need for reduced costs.
There was a strong sentiment expressed by many of the speakers that the element too often lacking was”management commitment”. All the heads in the audience nodded affirmatively. It was true . . . without management commitment, no quality system can really work. One of the FDA speakers shared – here is the slide I always use with company executives (which stated the “business case” for quality) because it is important that they “get it”. Again, the heads throughout the attendee population nodded. The main problem, they felt, is the lack of management understanding, and commitment.
But how can you ensure that you secure management understanding and commitment? By seeing things from the eyes of a CEO.
Sure Quality is Important. . . But is it a Differentiator?
No Pharma CEO wants to have a quality problem or, God forbid, a product recall. However senior executives face the problem of making investments in MANY things including R&D, marketing and branding, safety, organizational development, IT security etc. They are ALL important, but if we have only so much investment capital, which area creates the most business success? If our quality level was 20% better than it is today, how would that impact market share, revenue growth, net income, and return on equity? Sure, Quality is important, but is it the “price of admission”, or the source of competitive advantage in our industry? I would guess most CEOs think that investment in R&D and marketing yields greater returns than does spending on more quality initiatives.
Can You Really Protect Me?
No CEO would argue to eliminate the Quality or Regulatory Affairs departments from their organizations. But, speaking from the perspective of a CEO, if I doubled our budget (or tripled it), would that guarantee we have no quality crisis in the future? Could we even guarantee that we would cut our risk by half? If the answer to either of these is NO, it becomes easier to see why getting management commitment is a challenge. We recognize that today’s global supply system is dauntingly complex. In reality, no amount of added inspections can completely eliminate risk. (In fact, quality practitioners have proved conclusively that even a 100% inspection strategy does not work. If 100% inspection doesn’t work, what leads us to believe that more audits will?)
Should we Shift from Quality System Enhancement to Risk Management?
Trying to argue internally to expend more resources on quality seems a hard challenge. I think a better way to think about it is from a risk management perspective. Accept the notion that there will never be sufficient resources to do all the things we would like. So the real question becomes, given ANY amount of budget at our disposal, what would be the BEST things to do with it that accomplishes the most good? We have lots of possible risks, but not all risks are created equal. We can categorize them according to their likelihood of occurring and their resulting severity. We need to focus on concentrating our resources on what yields the best outcome. Intuitively, this suggests that prevention is better than detection. Designing better processes is better than figuring out how to control existing (less well-designed) ones. Thoroughly screening new suppliers is probably more important than auditing existing ones.
CEOs often do get it. And they are making their own judgments (whether right or wrong) about what investments do the most good. Whatever your functional area of responsibility, that is the same mind-set we all need. If there aren’t enough resources to do it all – we have to start thinking about new ways to approach the problem.