A Strategy for Supplier Quality Integration in Mergers & Acquisitions

The supply chain is an essential factor in the success of a company, regardless of industry. It becomes vital in the medical device industry, as potential unknown nonconformances related to suppliers could put patients at incremental risk. Consistent and reliable supplier quality is essential. It is worth noting that the quality of a medical device doesn’t just tie to the finished device manufacturing; instead, it is a combination of a structured system of procedures and processes. These include but are not limited to design controls such as design inputs and outputs, persistent supplier quality, and material selection built into the product design from feasibility to the product’s commercial release. Moreover, suppliers play a critical role in ensuring the ongoing quality of a medical device. The quality focus doesn’t just apply during qualification, but also forever; thus, keeping a close relationship with them is of utmost importance.

As per purchasing controls by FDA regulations 21 CFR Part 820.50, each manufacturer shall establish and maintain procedures to ensure that all purchased or otherwise received products and services conform to specified requirements. In addition, ISO 13485:2016 requirements state that processes applicable to the organization that it doesn’t perform are still the organization’s responsibility and are to be accounted for in its quality management system monitoring, maintaining, and controlling the processes.

Supplier quality integration has always remained a supreme topic during a merger and acquisition, given the change in quality system requirements, risk analysis architecture, and different inspection methods. To sum up, there could be higher quality standards to meet. There may also be warning letters issued by regulatory bodies related to suppliers consistently not meeting quality requirements and putting patients at higher risks. Thus, it becomes imperative for medical device manufacturers to pay close attention when deciding the fate of merged party suppliers. Let me introduce you to a comprehensive framework to follow when integrating your supplier quality.

Introduction

It is vital for an organization to identify how to combine the synergies of two companies so that the merger and acquisition deal lives up to its predicted value. Supplier quality plays an equally important role, and the process should begin during the assessment of post-acquisition activities. It is worth noting that most mergers fail to hold their predicted value owing to various reasons. It is not a surprise that one of the factors involves realizing the scope of work needed to merge two companies’ production or potentially bringing suppliers of acquired firms on board with the parent quality system organization. Let’s dive into a comprehensive framework that will help ensure the successful merger of suppliers and maintain the quality of the product.

1. Supplier Discovery and Due Diligence

An important step but one that is mostly overlooked is the relationship with your supplier and maintaining it. The first step revolves around assessing the current performance of all suppliers regardless of component features, volume, criticality, or non-conformances. This step involves understanding your suppliers and performing a discovery visit to their manufacturing location. It is mainly to understand their technical and non-technical capabilities, their efforts to ensure quality requirements, the continuous improvement steps they have taken, and their leadership capabilities. It is an opportunity to identify how the current supplier qualifies and whether the department uses just first-article inspection or lot-to-lot release. Depending upon the stage the acquired company was at, it may not have done a full qualification of the supplier.

Also, you would want to identify a supplier that has the potential for a long-term partnership and will help grow your business. You will want to know whether this supplier could actively support you during field corrective action. Finally, you can assess whether there is an opportunity for supplier harmonization and whether an internal or current established supplier could manufacture the component in scope.

Risk Assessment

Analyzing the supplier’s risk is of utmost importance to identify how to stratify the risk present within the supply pool. The risk architecture used by the merged organization could undoubtedly be different from the parent organization. It is imperative to utilize the risk assessment tool correctly based on the quality system. Depending on their risk stratification, some suppliers could naturally be critical given the nature of components they supply, such as implantable components, sole suppliers, etc. This exercise aims to identify the gaps in the current versus the future category of supplier risk and define activities to bridge the gap.

The overall aim of supplier discovery and due diligence is to identify:

2. Quality Plan, Diligent Team Members

A quality plan is a governing document in a project that defines the strategies to execute project requirements and establish expectations. A formal plan is required to identify detailed requirements, quality standards, sequence of activities, governing leadership, and stakeholders. It is pertinent to identify the right cross-functional team members needed to execute the work packages. Typical teams include members from project management, supplier quality engineering, design quality assurance, research & development, regulatory affairs, etc. It is imperative to select the members who possess the skills required based on the scope of work. This step should also determine the acceptable requirements needed to monitor the outcomes. Obtain supplier consensus before releasing the quality plan in the respective quality system.

The aim of this step is to:

Additional activities may be added as a placeholder in the quality plan, which is as follows:

3. Execution, Integration, and Harmonization

It’s no surprise that most supplier qualifications fail because of either inefficient exchange of product technical knowledge, ad governance, or incomplete identification of product characteristics. Providing proper technical support is the key to success. Harmonization of suppliers should also begin at this step; it enables multiple components of a global enterprise to align processes and remain consistent with the quality expectation.

The aim of this step is to:

4. Quality Control

The ongoing need for quality control is equally important as qualification of a supplier. Companies must ensure that ongoing quality control requirements are intact and personnel are adequately trained to perform incoming inspections on the component in scope or retrained as needed. Also, sampling plans such as AQL 1.0, 2.5, and the relative standard used for the incoming inspection must be identified.

Define a specific set of activities expected from a supplier such as labeling requirements, Certificate of Conformance, and Certificate of Analysis for component material composition. Identify what elements are expected for conformance certificates, such as part number, quantity, and primary component inspection data completed by a supplier etc. 

The aim of this step is to identify: