Regulatory compliance is a good business practice
Market leaders use government, customer mandates to fine-tune business processes
By Dann Anthony Maurno, contributing editor -- Manufacturing Business Technology, 8/1/2005 6:00:00 AM
Cambrex Corp., East Rutherford, N.J., has a very interesting business model. While its mainstay is developing technology that helps pharmaceutical companies discover and test new drugs, sometimes it takes over the process of manufacturing the drugs its customers create.
In all of its endeavors, Cambrex must comply with myriad regulations, ranging from Title 21 of the Code of Federal Regulations (CFR)—which covers, among other things, processes for documenting how food and drugs are manufactured—to the financial reporting requirements of the Sarbanes-Oxley Act. Cambrex appears to have the job of complying with all these regulations down to a science—something industry experts say makes good business sense.
"Regulations exist whether you like them or not," says John Fontanella, senior VP of supply chain services with Boston-based Aberdeen Group. "The best-in-class companies—the ones that are differentiating themselves in the market—don't see regulation as an impediment. They use regulations as an opportunity to fine-tune business processes, while they work to stay in compliance."
Companies that don't share that view—the "laggards," in Fontanella's words—will have a difficult time surviving in a world in which both governments and customers are slapping manufacturers with more new regulations and mandates.
"Today, the need for compliance programs goes beyond government," Fontanella says, pointing to things like the advent of RFID, which has caused major retailers to insist that suppliers place information-bearing radio-frequency tags on products before shipping them to the retailers' warehouses.
Damage control
In a recent study of some of the most heavily regulated industries—e.g., food & beverage, pharmaceutical, and medical device—60 percent of market-leading companies surveyed say avoiding potential damage associated with a product recall or noncompliance with government standards is a primary reason for developing strict compliance programs.
According to AberdeenGroup, these companies know that complying with most government and customer mandates requires two things: 1) limiting the amount of variability that can creep into manufacturing processes; and 2) developing a way of tracing exactly what happened at each step in the supply chain.
Variability refers to inconsistency in production, which can be particularly dangerous in food and pharmaceuticals, both to consumers and to a manufacturer's reputation. Traceability extends beyond keeping records of lots and batches during production; it also requires knowing where those lots and batches travel—and who touches them—before they reach the consumer.
The CFR includes a set of Current Good Manufacturing Practices (cGMP) manufacturers in certain industries are expected to follow. Some companies say doing so has saved them considerable trouble.
For example, in August 2004, a Mansfield, Mass.-based division of Tyco Healthcare voluntarily recalled a sublingual sensor—a device placed under a patient's tongue to measure the carbon dioxide level in tissue—after hospitals reported a rise in infections among patients exposed to the device.
By all reports, Tyco was able to trace individual boxes down to the hospitals that had purchased them. A month later, Plano, Texas-based Frito Lay voluntarily recalled batches of its Tostitos Monterey Jack Queso Dip due to possible undercooking, which could cause bacterial contamination.
By comparison, this past June, the FDA cited cGMP in recalling all drugs manufactured by Able Laboratories, Cranbury, N.J. This recall involved primarily generic prescription drugs due to what the FDA cited as "serious concerns that they were not produced according to quality assurance standards." Since both Frito Lay and Tyco had good compliance programs in place, they were able to get potentially bad product off the market quickly and resume production and sales of good products with no damage to their reputations. Able Laboratories has yet to resume production.
Solution choices
As Fontanella points out, putting a good compliance program in place isn't exactly easy, and software vendors have not yet developed any real out-of-the-box solution for this problem. As a result, most manufacturers have to use existing systems—such as manufacturing executions systems (MES); ERP packages; and others—to create strategies for minimizing variability in processes and tracing sources of potential problems. Often, manufacturers find themselves using applications from multiple vendors and relying on those vendors—or outside consultants—to forge the links necessary for a proper compliance trail.
Fontanella adds that quality solutions, such as statistical process control applications, can play a role in limiting variability, but advises companies to look at MES, as well as the broad range of process control solutions from companies like Rockwell and Honeywell. MES and process control systems offer the advantage of being able to collect a wider range of data than the typical quality solution, in addition to being better equipped to pass that data onto an ERP application, or documentation and reporting system.
"There's no question that the more data you can gather, the more knowledge you have," says Fontanella. "But aggregating that data is what challenges most companies. As a rule, companies aren't that integrated."
Cambrex simplified this task by adopting the iRenaissance ERP suite from Ross Systems, a specialist in enterprise and supply chain solutions for process manufacturers. Cambrex improved iRenaissance's ability to support its compliance efforts by adding functionality for electronic recordkeeping and electronic signatures, in addition to linking the package to a set of third-party laboratory information management systems.
Enterprise-to-shop-floor link
"The value of going to your ERP vendor for compliance solutions is that you have fewer steps in a given process that will require validation," says Michael Webster, director of life sciences at Ross Systems. "Customers get their best value from having one company provide all the regulatory components that meet their business needs."
Fontanella concurs, adding, "That's what every CIO wants, given their druthers. Multiple validations are more costly and inefficient. For example, if you are managing a process in an enterprise system, and using two systems on top of it for traceability and CFR compliance, then you must perform three validations. You're also supposed to audit your systems vendors. Your validation costs explode if you have to audit five vendors versus one."
That said, enterprise solution vendors might disappoint. "It's a very tentative connection between ERP and the shop floor," notes Fontanella. "The data model of most ERP systems captures information sufficient to file a transaction, but not detailed enough to collect data for a regulatory body, or even for company management."
Typically with best-of-breed solutions, the best integration comes from working with two vendors with strong partnerships. That was the impetus behind the June announcement that SAP plans to acquire longtime partner Lighthammer, a supplier of manufacturing intelligence and collaborative manufacturing solutions. SAP says it will deliver "enhanced connectivity between the plant floor and the enterprise," by putting Lighthammer capabilities on the SAP backbone.
More deals of this type could be forthcoming, as the vendor community seeks to give manufacturers a one-stop option for both managing their processes and ensuring those processes comply with required regulations and mandates.
"Currently, there are no turnkey solutions; no 'from-the-box' compliance," says James Keane Murphy, manufacturing solution manager for itelligence, a German midmarket consulting and systems integration firm that works primarily with SAP users. While there don't seem to be any turnkey compliance solutions on the horizon, Keane Murphy says enterprise vendors are learning about—and responding well to—their customers' compliance needs.
Clearing up content
Fontanella maintains that content management solutions—which are needed to document compliance procedures and publish compliance reports—end up being the most glaring weakness in most enterprise vendors' product portfolios. "Enterprise vendors historically have not wanted to get involved in the content business," he says, "but now they are being forced to."
Ross Systems' Webster says Ross helps customers separate content—which Ross refers to as process knowledge—into separate "boxes." There typically is a white box that includes everything the company needs to know to comply with various regulations, such as the government's cGMP, or the financial reporting requirements associated with Sarbanes-Oxley. Then there is a black box that contains information on sound business practices for the customer's particular industry, even though those practices are not required by a government agency, and therefore aren't subject to detailed testing or tracing.
"The idea is to make that white box as small as possible—not so small that you've left gaps between execution and regulations, but not so big that you encumber the validation process with non-cGMP-related functions," says Webster.
Sizing that "box" requires keen up-front analysis of existing processes and objectives. One of Cambrex's objectives was an overall validation program to proactively comply with FDA 21 CFR Part 11 for electronic signatures, cGMP, and other quality-related regulations. Consultants were involved to identify regulations that apply to Cambrex's business, and create a traceability matrix that maps regulations to business processes.
The power of data collection and integration is unmistakable: Cambrex streamlined operations by recording inventory movements, job counts, process data, and quality test results. Individual plants now process up to 400 jobs and 1,000 orders per week. Cambrex was pleased enough with the results to implement iRenaissance across the board at 16 plants.
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