How to Have a Strong Supplier Approval Program

Posted by Annie Wissner on March 24, 2020 at 9:53 AM

How to Have a Strong Supplier Approval Program-1

The increasingly global nature of today’s supply chain means even the most stringent quality control measures might not be enough to protect an organization from supply chain risk. Nowhere is this truer than in the food, beverage, and supplement businesses. In these industries, the safety of products produced is mainly dependent on the quality of the items and ingredients suppliers provide. The consequences of the wrong item entering a company's supply chain can be severe, resulting in wasted resources, increased costs, and reputation damage. Having a properly managed supplier approval program not only reduces these risks, but it also supports the development of strong business relationships.

In 2015, the FDA published two final rules: Hazard Analysis and Critical Control Point (HACCP) and Foreign Supplier Verification Programs (FSVP). The two regulations shift some of the responsibility for food safety from the government to food companies and importers by requiring supply chain partners to hold one another accountable. The supplier verification requirements under both regulations run parallel, requiring verification when a supplier controls a hazard that can materially affect the food's safety (as determined through a Hazard Analysis).

Supplier verification and monitoring are a big part of the Food Safety Modernization Act (FSMA) and an essential consideration if companies want to remain compliant.

The 9 Steps to a Strong Supplier Approval Program

  1. Supplier Approval Checklist: At the core of an effective supplier approval program is a standardized supplier checklist. Creating a checklist allows your team to remain organized and efficient throughout the process. And is used across departments to ensure responsible parties understand their roles, complete required tasks, and stay informed. Each company should put thought into the content of the checklist and how it's implemented and maintained. 

  2. Supplier Questionnaire: The purpose of the supplier questionnaire is to assess the supplier’s food safety and quality systems. Global Food Safety Initiative (GFSI) standards require a documented approval process for packaging, raw material, ingredient, and service suppliers. Additional requirements within the code include documenting supplier past performance and assigning a risk level to each material or service provided. In addition to these requirements, the questionnaire must include contact information for individual departments and responsible parties, QA safety parameters, third-party audits, COAs, and the vendor's returned goods policy. The supplier needs to provide all the required documentation along with the questionnaire, including specifications, claims certificates, HACCP flow charts, etc. The Quality Assurance (QA) department must review the questionnaire to determine if the supplier meets company standards and requirements. QA can reject or approve the supplier, or they can issue corrective actions that the supplier must act on to be approved. 

  3. Specification Management: A good supplier relationship begins by defining what you need from them. The first step in the process is to build precise and complete specifications. And the most efficient way to do this is to work in partnership with the supplier. Many companies don't fully utilize suppliers as collaboration partners when creating specifications, resulting in prolonged negotiations and reduced supplier performance. It's essential to create unique specifications because if you don't have them in place, chances are you'll get an industrial specification that's available to anyone in the industry. And if that's the case, how will you then differentiate your product from your competitors?

  4. Single Platform: To effectively manage the enormous amount of supplier information required, a technology solution is necessary. Ideally, companies have a single platform that can organize and digitize all supplier, item, and ingredient information and documents. It should contain information on names and codes for all items and ingredients, approved primary and alternate suppliers, the associated hazards for each ingredient or item, the methods used for approving suppliers and accepting ingredients, and a way to monitor supplier performance. Lastly, the platform should support the management of additional information and documents for allergens, claims, nutrition and labeling, lot or batch number coding, and anything else that might be necessary to maintain compliance.

  5. Risk Assessment: When conducting risk assessments, it's vital to look at things like purchase volume, and you also need to review any possible associated chemical, physical, or biological hazards that could cause contamination. Determining item risk can be facilitated by reviewing regulations and historical evidence. For example, an ingredient can be considered high risk if it's an allergen, will be used at high volumes, or has potential for bio, physical, or chemical contamination.

  6. Qualification & Acceptance: Supplier qualification requirements are situational. Using your risk assessment, you can determine the method needed for qualifying the supplier. If there's low risk associated with a particular supplier, the questionnaire might be enough. If there's a more inherent risk for a supplier, you might need to conduct an audit. For your acceptance process to be effective, it must be consistent. You can choose to have different methods at different receiving points, with tasks like visual inspection, COAs for each shipment, or testing and sampling.

  7. Test Run: After a supplier is qualified, it's crucial to conduct a test run. These test runs can include specific criteria similar to scorecard metrics such as specification compliance with each shipment and satisfactory quality inspections. During the test run, it's critical to give the supplier an ample number of shipments/loads to determine compliance patterns and how well they can meet requirements. 

  8. Approval: If the results of the test run are positive, it's time to add the supplier to the approved supplier list. Companies must create a process for building and maintaining an approved supplier list. The list should include suppliers of ingredients, food contact packaging, and services that impact food safety and quality like sanitation and pest control.  Everyone at the company must be made aware of the list, and there should be procedures in place to ensure all purchases go through approved suppliers.

  9. Monitoring (Scorecard): Each company has different behaviors they want to elicit from suppliers, but the best supplier performance scorecards are those that include metrics from purchasing, COAs, receiving, QA, plant floor feedback, certifications, and documentation compliance. Suppliers need to be made aware from the outset that their performance will be assessed and recorded. 

When selecting a new supplier for your business, your company’s reputation is on the line. Building a strong supplier approval program and enforcing established procedures will significantly reduce the risk to your organization. Make sure to download our How to Have A Strong Suppler Approval Program eBook for more information.

TraceGains Integrated Suite of Software Solutions

TraceGains delivers cloud-based supplier compliance, quality management, and new product development solutions for the food and beverage, supplement, and consumer-packaged goods industry. TraceGains is built on an advanced network platform that digitizes documentation and automates workflows. The system extracts data and transforms it into custom reports and dashboards that provide valuable business insight to drive process improvement.

TraceGains Network is where professionals in R&D, procurement, quality, and regulatory departments collaborate with suppliers globally to bring safe new products to market faster. Thousands of supplier locations are available to source and qualify new vendors, procure ingredients, build recipes, negotiate specifications, and automatically collect supporting documentation. On average, our customers find that 75 percent of their suppliers are already in TraceGains Network, allowing them to connect and collaborate immediately.

Tags: Supplier Relationship Management