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Defining the operational cost of quality

Strategies for life sciences companies

​Life sciences companies are struggling to operate amidst increasingly complicated regulations while maintaining tighter control over operating costs. A close examination of quality processes and behaviors could yield substantial opportunities for improved compliance risk mitigation and business performance.

Quantifying compliance efforts

In our work with life sciences companies—from small start-ups to the largest, multi-national, multi-site global manufacturers—there's a common thread running through the industry: the inability to define and quantify the amount of spend needed to support quality and compliance efforts. Most life sciences executives can readily answer rigorous quantitative questions about manufacturing output, product costs, and cost of goods sold, but very few can answer similarly rigorous questions about their approach to quality management and the costs driven by that approach.

Over the past decade, we've witnessed that quality and compliance decisions are often made in a vacuum, primarily by professionals who have a natural bias toward perceived compliance or quality outcomes, with little regard to or accountability for the resulting cost or business impacts. Executives outside the quality function are often reluctant to challenge these decisions, as they're told that any other option would violate regulatory requirements.

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Three steps to improve compliance

​When organizations are focused on maintaining day-to-day operations, the prevailing question typically is not "why does this work need to be done?" but rather "how will we manage to get all this work done?" In such an environment, many operational supervisors and managers may have neither the time nor the perspective to focus on fixing the quality and compliance issues.

In our experience, behavioral and procedural root causes are often so institutionalized and operationally scattered that they require a concentrated and rigorous effort to diagnose and correct. And documented quality requirements and procedures, however complex they may be, can't simply be rewritten to make life easier for an organization. There has to be a compelling business and compliance case for change.

Here are three steps to help organizations improve compliance and business performance:

  • Conduct a comprehensive technical assessment of current quality requirements and procedures by referencing a combination of external leading practices and/or internally defined principles. The assessment should be carefully and rigorously completed and documented, with detailed observations and clear rationale for suggested improvements or changes to the quality architecture or requirements library.
  • Examine the root causes of any gaps between its current state and the desired future state. This typically involves an honest assessment, both within the quality group and cross-functionally, to uncover persistent cultural, behavioral, or leadership tendencies that collectively contribute to the status quo.
  • Commit leadership and personnel to changing entrenched behaviors and norms—beyond the paper exercise of remediating or updating procedural documentation. Everyone in the organization, from senior leaders to front-line employees, should embrace a company-wide commitment to changing affected technical processes and behaviors and be given the responsibility, accountability, and freedom to succeed—and occasionally fail—in the go-forward environment.

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Over the past decade, we've witnessed that quality and compliance decisions are often made in a vacuum, with little regard to or accountability for the resulting cost or business impacts.

A comprehensive view of the total cost of quality

Understanding the total cost of quality extends beyond the costs of clear failure such as product recalls, remediation efforts, and operational downtime. However, in our experience, it's uncommon for life sciences executives to have a rigorous and comprehensive view of the total cost of quality.

Now, more than ever, it's imperative to question operational practices and procedures that impact quality and compliance. By committing to a rigorous technical and cultural assessment and transformative quality effort, life sciences executives have an opportunity to realize huge gains in both compliance and cost savings.

Some organizations may need to make more than incremental improvements. For example, a company with a questionable compliance profile that also employs more than one quality employee for every four or five manufacturing/operations employees would likely benefit from a more comprehensive approach. In our experience, this is an indicator of a quality organization that has gotten overly complex and costly—and will likely continue down that path.

How can your organization reach its full potential? Download the full report to learn more.

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Matt Humphreys
Principal | Deloitte Consulting LLP
Greg Page
Specialist Leader | Deloitte Consulting LLP
Jim  Mitchell
Manager | Deloitte Consulting LLP


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