In the early stages of medical device development, it is usually sufficient to secure pre- production quantities through a simplified procurement cycle. A specification, a quote, a purchase order and a certificate of conformance —what other paperwork is needed? Why clutter up a simple, well defined process with other documents and paperwork?
If it is important to secure long term supply and maintain the current configuration of any component that is critical to the design of your medical device– the process may need to get a little bit more complex. Typical components that may be subject to controls are those that are sole sourced or critical to the performance or safety of your medical device. A Supplier Quality Agreement or a Supply Agreement may be necessary.
So which one should you use and when should you use it?
The first step is to understand the unique differences of each document, and then recognize how they together form a foundation for all aspects of a business relationship with a supplier.
The Supplier Quality Agreement is a comprehensive written agreement (usually augmented with a checklist) that defines and establishes the quality and Good Manufacturing Practice (GMP) obligations of the owner of the design and the supplier. A Quality Agreement is a major element of a Supplier Qualification Program but it is not a substitute for the Supplier Qualification Processes (including audits as necessary), or for understanding the supplier, their processes and capabilities. A Quality Agreement must not contain any commercial or liability related terms, which should exclusively be dealt with in a Supply Agreement.
A Supplier Quality Agreement should contain:
- No change clauses– what changes will require permission before implementation or are there changes that require only notification?
- Communication and notification rules, including key contacts
- Quality and regulatory requirements relevant for material supply and the suppliers obligations
Conversely, a Supply Agreement details how the supplier promises to supply all of the specified goods or services over a specified time and at what cost. It also includes the buyer’s obligations on when and how the goods will be purchased. The supply agreement helps facilitate the management of companies working together, it removes ambiguity, and it creates the framework of how goods and services will be ordered and delivered.
A Supply Agreement should cover:
- General business terms and conditions – These include key contacts, business names, agreement period, etc.
- Address Confidentiality and Intellectual Property Concerns – Clearly indicate if the supplier or their suppliers can work with other customers in a competing field (and the duration of such non-compete period).
- Detail on Pricing or Cost issues – A detailed Bill of Materials should be included which forms the basis of the negotiated cost model. Identify all options available to the supplier- fixed price for the next two years? A volume discount? Or a specific cost reduction plan over time?
- Ownership of Tooling – Be clear in the supply agreement that you own the mold/tooling. Include a detailed mold/tooling opening inventory list and define the mechanisms of control and maintenance schedules. Consider what would happen if the tool was lost? Who owns the replacement costs?
- Limits on Liability/Disputes. – Good common sense and a few lawyers will tell you that you should try to anticipate the most likely and damaging dispute under the supply agreement and determine which dispute resolution approach is best for you.
Knowing the differences can help guide us on which document to use, but as to when?
I recommend that a Supplier Quality Agreement be launched even in the early stage development process. Maintaining the quality in your supply chain early in the game can certainly not hurt. If you sensitize your suppliers early and work with them productively in this phase it will avoid surprises later on the development cycle -when it may be too late to change a key component or supplier.
Laura Meyer is Supply Chain manager at StarFish Medical. A Lean facilitator, Laura helps optimize supply chains for client prototypes and manufacturing. She happily shares her expertise with colleagues and clients.