Manufacturing Perspective:

Supply Chain Transparency in the New Virtual World

By: Mike Finamore - CEO

Now more than before, a strong partnership between the Brand Owner and their Contract Manufacturer (CMO) is key to long term sustainability. While Industry has shown the ability to expand during even these troubled times, the Brand Owner may suffer enormous challenges to keep product in stock or obtain quality products through complications and issues facing their CMO. Without this strong partnership underscored by true transparency, the Brand Owner remains at the mercy of their CMO.
For those brand owners who had strong relationships with their contract manufacturers before March 2020, the ability to navigate through these rough waters in the current market have put you far ahead of your competition. The Brand Owner and CMO will have Quality and Supply Agreements in place, product specifications to confirm design specifications, testing issues resolved, and a history of transparency with each other. However, there are still some dangers lurking – especially in the time of Covid-19- where every part of our daily lives is upended, and the familiar routines of our business day have changed overnight.
Historically, the final piece to the relationship involved an on-site audit by the Brand Owner of the CMO. While the practical realities of Covid-19 have put a damper on that, the obligations under 21 CFR Part 111 of both the Brand Owner and CMO were never suspended. In fact, while much was made of the FDA momentarily suspending on-site audits, the Agency was still reviewing websites, literature and issuing warning letters for non-conformities.
The inability to conduct on-site audits has now opened the gap between what Brand Owners believed were “transparent” practices and the realities of the CMO relationship. This gap has brought to light some of the issues plaguing industry for years. It now offers the Brand Owner an opportunity to reassess their relationship to ensure they remain legally compliant and on a solid business footing.
The primary issue within this gap is the sharing of batch documentation with the Brand Owner. The batch record should be able to describe in detail the materials used, ensure their traceability to the raw material supplier, and the quality paperwork for the lot. The sharing of the batch record allows the Brand Owner to review the manufacturing operation and ensure that anything substituted or changed during the production process is both correctly described and in compliance with product specifications and the quality agreements. Absent that transparency, especially in a time of tremendous business interruption, the Brand Owner is putting their entire company at risk.

The next logical item would be ensuring the raw material supply chain is viable for the ingredients in the Brand Owner’s product. While most contract manufacturers do not freely share that information, it only shows the weakness of the partnership if each side doesn’t trust
each other. The raw material information is truly confidential. Additionally, if disclosed or used by the Brand Owner for something other than a verification of the ingredients used in the product, it violates a number of signed agreements between the parties. Information exchanged between the parties concerning potential supply chain interruption can lead to even a greater cooperation. The CMO should be aware of potential supply chain issues and relate those to the Brand Owner. By working closely together you can pre-empt supply issues allowing the CMO to secure critical components for key products before the market goes haywire. This level of partnership can only arise when the transparency is in place.

Ultimately, this transparency can bring us full circle to the critical regulatory gap caused by Covid-19, which is the inability to do an on-site audit the contract manufacturer. The new reality is that onsite audits may not be possible for the foreseeable future. However, technology has led to the concept of a “virtual audit,” which might remain a part of our businesses even after Covid-19 is defeated. Organizations like the Global Retail Marketing Association (GRMA) are working with auditing firms to establish policies and procedures for virtual audits. This enables the Brand Owner to contract with qualified audit groups to satisfy their need to visually inspect the CMO to ensure compliance to regulations. With all of the supply chain challenges today, this approach can also be used by the CMO to meet the requirement to audit/inspect new raw material suppliers anywhere in the world.

With the Virtual Audit platform and procedures established, this should be used by the Brand Owner’s Quality Team to do a “deeper dive” into a product or process outside of the services offered by a third party. With access to batch paperwork and the ability to visually “eyeball” documents (such as raw material test results or raw material supplier audits) which ordinarily are available during the audit but cannot leave the facility, the Brand Owner can quickly and inexpensively manage the most critical part of the relationship from afar. It also might allow additional Brand Owner Quality Staff participate in the Virtual Audit, as the expense of travel and the time away from the office has been eliminated.

With the accessibility of this technology and a strong quality relationship in place, the transparency the Brand Owner should expect in the relationship will be apparent – or the Brand Owner will realize they should be searching for an alternative partner.

While the virtual audit is a relatively new concept, it is being well received and is the way of the future. The new checklist for transparency should now include:
Having these in place will help ensure compliance to the regulations and give the Brand Owner peace of mind knowing that your contract manufacturer is invested in the success of your brand