Difficulties Controlling Foreign Suppliers

Mark Meer

Trusted Information Resource
#1
Hi Everyone,

When dealing with foreign suppliers, it's common to deal with a "middle-man" company who, in turn, deals with an actual manufacturer.
(NOTE: this situation can apply to any supplier but, in my experience, is most common with foreign suppliers due to language barriers preventing direct dealings with manufacturing facilities).

For example:
  • Company A is the manufacturing facility that manufactures widgets
  • Company B is a middle-man who brokers orders with Company A.

  • Company A has a certified quality system, but Company B does not.
  • Supplier agreements are with Company B.
  • All orders go through Company B (i.e. the name on all purchase orders is Company B), but all received items are from Company A.

So I'm curious how people deal with such situations from a quality-system/documentation perspective.
  • Is Company A necessary to include in supplier records?
  • Is it sufficient that the supplier agreement with Company B require that they notify us of any change to manufacturer, and we also verify this by confirming that shipments always come from Company A?
  • Would a Notified Body inspect the facilities of Company A, or Company B?

...hope this makes sense. :cfingers:
If you can make sense of what I'm talking about, any feedback or advice is much appreciated.

MM
 
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Ronen E

Problem Solver
Staff member
Moderator
#2
  • Is Company A necessary to include in supplier records?
  • Is it sufficient that the supplier agreement with Company B require that they notify us of any change to manufacturer, and we also verify this by confirming that shipments always come from Company A?
  • Would a Notified Body inspect the facilities of Company A, or Company B?
I would generally try to avoid purchasing ingredients / components which bear on finished device safety / performance through a company that doesn't have a formal QMS, regardless of who they actually source the goods from.

To your questions (in the same order):

* In my opinion, no. Your supplier is company B.

* It's necessary but not sufficient. The agreement with company B should include all elements expected in an ordinary quality agreement (unless they're obviously N/A), regardless of whether they're the actual producer or not.

* If what you buy from company B is essential enough and/or there are serious problems related to that supply, the NB might ask to audit company B on site. In extreme cases (death-related investigation for instance) they might ask to proceed to inspect company A's facilities (having found out that there's not much to see at company B...), but otherwise I'd say it's quite unlikely that the NB would go that far (pun intended :)).

Cheers,
Ronen.
 

Mark Meer

Trusted Information Resource
#3
I would generally try to avoid purchasing ingredients / components which bear on finished device safety / performance through a company that doesn't have a formal QMS.
....
If what you buy from company B is essential enough and/or there are serious problems related to that supply, the NB might ask to audit company B on site.
This is the problem with many of these situations: While the "middle-man" (Company B) may have a registered company name, in reality they are often just one or two individuals who broker transactions with the actual production facilities. While they may have their own management system, given the scope of their activities, it's hard to expect that these people would have systems certified to any standard....

This is why I don't know about the execution of (potential) NB audits in such cases. Their "facilities" consist of a desk, computer and phone.... They maintain transaction records (the POs we send them, and subsequent orders to the actual facility), but all the real quality activities (traceability, equip control, corrective action, etc.) is done by the actual facility (Company A) who has the certified quality system...
 

Ronen E

Problem Solver
Staff member
Moderator
#4
This is the problem with many of these situations: While the "middle-man" (Company B) may have a registered company name, in reality they are often just one or two individuals who broker transactions with the actual production facilities. While they may have their own management system, given the scope of their activities, it's hard to expect that these people would have systems certified to any standard....

This is why I don't know about the execution of (potential) NB audits in such cases. Their "facilities" consist of a desk, computer and phone.... They maintain transaction records (the POs we send them, and subsequent orders to the actual facility), but all the real quality activities (traceability, equip control, corrective action, etc.) is done by the actual facility (Company A) who has the certified quality system...
Please note that I didn't write "certified" or "standardised". I only wrote "formal QMS" to indicate that there actually is a QMS, not just a bunch of unwritten practices that might be here today and gone tomorrow. It was already shown that an ISO 9001 compliant system can be efficiently implemented in very small organisations, even down to a count of 1 person; let alone unstandardised / uncertified systems.

I would also tend to avoid relying on one-man operations for the supply of ingredients / components of significant bearing on your device. If you consider that individual ("company B") to be essential in the engagement with company A, I would try to negotiate direct engagement, with the middle man acting as an agent and receiving commission, rather than a distributor (their role in the scenario you described). It's easy to guess that "company B" wouldn't like it too much because then both you and company A would know exactly how much he makes on you, but that's up to your company's business negotiation skills... From a pure QA/regulatory perspective it would be a much healthier situation.
 

somashekar

Staff member
Super Moderator
#5
So I'm curious how people deal with such situations from a quality-system/documentation perspective.
Is Company A necessary to include in supplier records?
Is it sufficient that the supplier agreement with Company B require that they notify us of any change to manufacturer, and we also verify this by confirming that shipments always come from Company A?
Would a Notified Body inspect the facilities of Company A, or Company B?


Company A is the first inclusion in our supplier record
We ask the B to get the change notification duly signed from A., and keep doing this once every two years.
We have made supplier agreement with A through B and have included the NB audit situation to get the agreement from A's management.
 

BoardGuy

Quite Involved in Discussions
#6
One needs to understand that when purchases are made from the distribution dealer the contract should contain sufficient information detailing the product ordered, records needed and regulatory/statutory requirements that the product must meet when delivered to your organization. If the dealer in importing the product from overseas they, not their supplier, are on the contractual/regulatory hook so to speak.

What does this mean for your organization? The dealer must have sufficient resources to assure that the product they intend to deliver conforms to your contract requirements. If the product you receive from them is nonconforming, the corrective action implemented must address the failures in their system, not their suppliers system, which will be corrected. If they go down the road of “my supplier…” any response of that nature is unacceptable because they are not your supplier. The dealers system should have identified the nonconformity.
 

Ronen E

Problem Solver
Staff member
Moderator
#7
I agree with BoardGuy, the reasons listed are exactly why I'd normally try to avoid having a single individual with a desk and a phone as a significant supplier. It's not that an individual can't implement a robust QMS, it's just that on average they're much less likely to do so than a larger company (no offence to one-man-show operations, I am one too).
 

DRAMMAN

Quite Involved in Discussions
#8
my experience after 20 years is you cannot expect much from a offshore broker unless you give them a detailed list of your requirement and get them to agree up front. Even then, you have little power to enforce your requirements unless you audit them.
 

BoardGuy

Quite Involved in Discussions
#9
mEven then, you have little power to enforce your requirements unless you audit them.
[FONT=&quot]You must remember that you do have the ability. If they do not deliver conforming product to your contract requirements they are then in breach of contract and subject to return of product or recovery through the courts.[/FONT]
 
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