The Future of Supply Chain Management

Joseph Pinto

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Question: What can the life sciences industry learn from the aerospace industry’s Nadcap program for supply chain management?
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Answer:

Partly as a result of the growing complexity of medical devices and partly as a result of the dual trends toward specialization and outsourcing—the length and complexity of life-sciences-industry supply chains have grown significantly in recent years. Though contracting out various functions can have obvious cost and efficiency benefits, this growth in outsourcing dependence has also been fraught with problems—mostly stemming from a lack of mutual oversight among members of the supply chain. In response to these problems—which, in the life sciences industry, can translate to fatal defects in drugs and devices—the Food and Drug Administration (FDA) has stepped up its oversight and emphasis on supply chain control. Supply-chain related enforcement actions have skyrocketed in recent years. Though this regulatory effort has been positive in requiring regulated entities to establish supplier selection criteria and maintain quality agreements with their contractors, evidence from the field indicates that this has not been enough to stem supply-chain related quality problems.

The Aerospace Industry's Solution to Supply Chain Management

Sometimes the best solutions come from industry itself. To this end, an industry which shares important commonalities with the life sciences industry can provide a good working study for observers in the life sciences industry. Like the life sciences industry, the airline and defense industries (which I will refer to here collectively as the “aerospace” industry) is a regulated industry which makes very technical and often-complex equipment, the safety and quality of which has the impact of affecting human lives. These significant commonalities make the aerospace industry ripe for comparison. The aerospace industry has developed and implemented a successful system for supply chain management, Nadcap, which may very well serve as a model to the life sciences industry.

Launched in 1990, Nadcap is the leading, worldwide, industry-managed cooperative program of major companies designed to manage a cost effective consensus approach to critical processes/products and provide continual improvement within the aerospace industry. The program is administered by the Performance Review Institute (PRI), a not-for-profit trade association focused on industry that facilitates industry-managed programs. The Federal Aviation Administration and the European Aviation Safety Agency have acknowledged Nadcap as a method for aerospace original equipment manufacturers to supplement oversight of their manufacturing process suppliers. 

The Nadcap program offers the opportunity for suppliers to gain tighter controls within their critical processes, such as the manufacture of printed circuit board assemblies (PCBA), heat treating, or welding. The program provides suppliers with the opportunity to help create the audit requirements, network with their peers and customers, and gain market recognition. Suppliers that want to receive a Nadcap accreditation must request an audit through PRI. PRI will then schedule an audit and assign an approved auditor who will conduct the audit against an industry agreed standard using an industry agreed checklist. At the end of the audit, any non-conformity issues will be raised and non-conformance reports issued. PRI will administer closeout of the non-conformance reports and upon completion will present the completed audit package to a "critical process" task group made up of technical specialists from industry that will review it and vote on its acceptability for approval. Accreditation is granted when all non-conformances are closed. Unlike traditional third-party programs, Nadcap approval is granted based upon industry consensus.

Nadcap conducts nearly 5,000 audits annually, with a focus in 18 critical manufacturing areas, including PCBA, Cable & Harness, Welding, Heat Treating and Composites.

Nadcap's Application to the Medical Device Industry

As outsourcing has become more prevalent and supply chains have been globalized, the oversight challenge for medtech manufacturers becomes more burdensome. In recent years, a large number of recalls have been attributed to supplier quality issues. The FDA’s enforcement actions certainly confirm this challenge: deficiencies in purchasing controls is one of the top ten most-cited observations for medical device firms. That area has also been the target of several recent enforcement actions, including Warning Letters and consent decrees. More evidence can be found in stated causes of recalls; in recent years more recalls have been attributed to supplier quality issues. 

Since December 2012, a number of medical devices manufacturers and suppliers have been participating in the initial stages of developing a program for the medical device industry, known as MedAccred. A Management Council has been formed and Task Groups are now active in Sterilization, PCBA, Cable & Harness, Heat Treating and Welding. Multiple proof of concept audits are currently being conducted with the results of a welding proof of concept audit, conducted in April 2013, indicating there is a 99% fit between existing Nadcap audit checklists and medical device industry requirements. The Management Council has also agreed to a development strategy which includes meetings with the FDA, the development of program documentation, and the intent to conduct initial accreditation audits in late 2014. 

Conclusion

The growing complexity of life-sciences supply chains and the related increases in quality problems, FDA enforcement actions, and products liability allegations, constitute a strong impetus for change in the device industry. Medical-device manufacturers would be wise to learn from aerospace’s example and avail themselves of this industry-wide effort led by PRI. 

 

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