J&J Consolidates Suppliers By One-Third for Tighter Control

As part of ongoing quality improvements, Johnson & Johnson has consolidated its external material suppliers by roughly a third over the past three years, a company official said Tuesday.

Now J&J can “manage them much more effectively and ensure that we are reviewing their quality of their products coming into our facilities,” Sandra Peterson, group worldwide chair, said on J&J’s second-quarter earnings call. The company is thoroughly reviewing all external suppliers, she noted, and external manufacturers, which provide finished products, are being “rigorously” managed through audits.

Meanwhile, J&J recently closed out a number of warning letters and is “feeling good” about its quality management, she added.

The company recently completed its first three-year cycle of combing through all manufacturing facilities, core strategic suppliers and R&D sites to ensure compliance with regulatory and company standards. The healthcare products giant also has created 34 common quality standards for all of its companies and is working to harmonize its processes and create an early warning system to identify and correct problems.

Each of J&J’s three business segments — medical devices and diagnostics, pharmaceuticals and consumer healthcare — now has a chief quality officer to develop a quality and compliance strategy and oversee quality results for global companies in their segments, company officials said.

As the company revamps its quality management, it is also taking a look at its innovation strategy.

J&J has found that incremental innovation in devices and diagnostics, while important, “is not being rewarded with, for example increased pricing or improved pricing in the marketplace,” CEO Alex Gorsky said. The company recognizes it will need “to have more transformational innovation or more significant innovation,” requiring additional clinical development and investments.

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