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cGMP Audit Benefits on Supply Chain Efficiencies

A cGMP audit or inspection by a governing health authority of an organization or one of its functions has always been met by the same attitude from management: a necessity brought upon by an outside agency or their own corporation to objectively examine the work performed against the policies and procedures that govern the organization. However, through the lens of continuous improvement, audits are welcomed and encouraged as they provide an objective view on current practices and support benchmarking against best practices.

In life sciences, one of the critical inspections that an organization has to potentially encounter on a continuous cycle is a cGMP audit by a governing health authority. For life science practitioners, particularly in quality and regulatory functions, the purpose and scope of the inspections, the accountabilities of its successful execution and responses, and the outcomes’ impact on product quality and company reputation are quite clear.

Creating Supply Chain Value from a cGMP Audit

What may not be clear to other stakeholders in the organization, specifically supply chain, is the rich, valuable data and information that’s generated, both positive and negative, from the scope and outcomes of an inspection and its impact on their current and future operations.

Quite simply, the compliance profile of an organization, its functions, and its products have high elasticity on the functionality of a supply chain’s processes. A change in compliance status has a direct correlation to a change in supply chain performance; therefore, it’s imperative for an organization to think broadly on the investments made to compliance since it would have a direct impact to a company’s financial bottom line.

To illustrate the aforementioned points, three supply chain management processes have been selected from the Supply Chain Operations Reference (SCOR) model (Source, Make, and Deliver). For each, examples will be provided on how compliance has a direct correlation on supply chain performance. It will also make the arguments for leveraging inspection results for continuous investment in compliance and enhanced collaboration between compliance and supply chain functions to appreciate the cause-and effect relationship between them.


Sourcing processes involve procuring goods and services to meet the planned or unplanned demands of your customer. For mature life sciences companies, the supplier network for Regulatory Starting Materials (RSM), APIs, excipients, and finished drug products can be quite expansive. The opposite is routinely true for a newly commercial company. As stated in 21CFR211, all lots of components must be tested before use and be within pre-determined specifications. For efficiency and cost improvement purposes, a company should eventually qualify their suppliers so their lot-for-lot testing can be substituted for a review of a supplier’s testing results via the Certificate of Compliance (CoC) only.

In order to do the latter, a significant upfront resource investment is required. Neglecting an investment in a robust supplier quality program has wide-spread implications on the supply chain, including component delays due to poor quality, longer material testing cycle times, and higher cost-of-goods (COGs).  These sub-optimal policies and processes will likely be observed and documented by a health authority inspector and in turn, require significant resources to remediate the deficiencies. As the remediation occurs reactively, the supply chain continues to be sub-optimized, resulting in delays in deploying therapeutics to patients.


Make processes include converting materials into a finished product to meet the planned or unplanned demands of your customer. life sciences companies perform the manufacturing conversion themselves, outsource it to a 3rd party (e.g., CMO), or have a hybrid approach. If a company solely has the manufacturing capabilities, a significant investment in compliance is required to maintain operations under cGMP ranging from infrastructure and utilities qualification to training of shop-floor resources to run the operational activities of the facility.

Compliance failures in one of these areas can delay or stop production, compromise product quality, and delay shipments to patients. If the manufacturing profile is one of outsourcing, a significant investment is still required in supplier quality, as mentioned previously. Absent of this investment, the same supply chain challenges could materialize, having a negative outcome to the company’s financial bottom line and their reputation.

Remediation efforts subsequent to a health authority inspection or cGMP audit will course correct the company’s operations but it’s important that supply chain has visibility and input into these actions for two primary reasons. The first being that they can be the “voice of the business” ensuring that the remediation efforts are commensurate with the quality risk and not too restrictive to the operations that impact efficiencies. The second reason is to understand the time horizons to remediate each compliance deficiency, the ad-interim corrective action, and the impact it will have on the operations.


The Deliver process includes order, transportation, and distribution management of unplanned or planned demand of finished product to customers.  Similar to the aforementioned Make process, life sciences companies either warehouse their finished products, outsource it to a 3PL, or have a hybrid profile. cGMP regulations cover warehousing and distribution activities, including, but not limited to, the quarantining of product before QA release, ensuring products are stored under appropriate environmental conditions, and distribution traceability. Deficiencies in any of these areas could lead to product cross-contamination, product quality degradation, and uncontrolled product recall actions. Supply chain symptoms include delayed customer orders, low order accuracy, high customer complaints, transportation costs, inventory write offs, resulting in bottom line impacts. These sub-optimal controls will always be observed by a health authority inspector so it’s in the best interest of a company to invest in the proper infrastructure and personnel to maintain the operation according to cGMP regulations.

Compliance deficiencies have a strong, direct impact on supply chain operations, and in turn, the financial health of an organization. Investment in robust but agile quality systems and processes will reduce supply chain impacts. Even with sustainable investments in compliance, deficiencies are generated periodically. A cGMP audit or inspection, in theory, would identify these risks and prevent quality system and process failures from reoccurring. Compliance and supply chain functions collaborating on audit or inspection remediation efforts is quite logical and simply good business practice due to the strong cause-and-effect relationship between the two.

Tags: Supply Chain Planning & Execution