SOCMA ChemTrends: Preparing for Customer Audits
Senior Vice President, Industry Development and Strategic Partnerships
The pace of material sourcing and outsourcing is increasing. SOCMA members represent a unique space within the chemicals supply-chain as manufacturers of intermediates. I often ask our member company executives – do you find your company tied up with an endless schedule of customer and internal audits? Customer audits are not new, but ‘how am I being evaluated’ is a top-of-mind question for many contract manufacturers (CMOs). And, I’m sure you will not be surprised to hear that your customers start evaluating your qualifications before a project agreement is even signed.
SOCMA recently kicked-off a new peer group of ‘buyer’ chemical manufacturers to exchange views on what they’re looking for when they visit your facility and identify ways to make the process more efficient and transparent.
Why it matters:
How is your company being evaluated? The group identified 3 audit focus areas related to your business — the graphic captures audit focus areas discussed. Financial risk is evaluated as well but through a different prism.
Hurdles are high for small contract manufacturers and as batch manufacturers you probably have multiple customers. Keep in mind your customers also have challenges — audit teams typically have limited resources and pressures from business units to report on findings whether it’s for prequalification or ongoing project work.
What we’re hearing:
How long is your typical audit? Customer audits can run 1 – 3 days depending on: your customer base; the number of projects throughout the year; and if a site visit is required. It starts to add up in time and company resources dedicated to complying with your customer audit requests. ‘Show me, don’t tell me’ is what we’re hearing from your customers. What’s a reasonable time allocation goal for a customer audit — a day or maybe a 1-1/2 day audit is possible if the contract manufacturer is prepared.
What’s driving the industry:
Standardization and access to data are driving customers’ expectations, especially those with a global reach — customers of contract manufacturers are looking to streamline the audit process. Critical processes and procedures can be bucketed into industry and regulatory. How do your customers view your operations? Regulatory compliance should be straightforward depending on federal, state, and local requirements. Industry processes can vary, and procedures that customers evaluate your company on can range from management systems to batch records.
The big picture:
SOCMA started an industry dialogue around the pre-qualification and audit process to help you answer the question: ‘what’s the best way to prepare for a customer pre-qualification review or audit?’ We see a 2-pronged approach — by working with ‘buyer’ chemical manufacturers to develop a framework or checklist, and through industry education with contract manufacturers and customers working together. A framework is not a guarantee that a contract manufacturer will meet the requirements of its customers but at least it can help interpret where the goalposts are set.
Many multinational companies have adopted or are looking at audit programs and platforms. A few that are often mentioned include: Ecovadis https://www.ecovadis.com and Together for Sustainability (TFS) https://tfs-initiative.com/. Are your customers members? These programs focus on sustainable supply-chain issues that are important to companies that participate in these programs. It’s not just about your green footprint.
Are there issues that affect your company’s business that may also impact the broader specialty and fine chemicals industry? Contact me at email@example.com, and we can include them in our next SOCMA ChemTrends: Now Trending communication.
I look forward to hearing from you on issues impacting the broader industry to share with our members to gain another perspective.
Categorized in: Commercial