Overview of Quality and Regulatory Compliance
Common business metrics such as EBITDA, ROI, and ROA only tell part of the story. Product manufacturers must also understand and be able to effectively manage how both quality compliance and regulatory compliance ultimately affect those metrics and provide an essential license to operate.
What are quality and regulatory compliance?
Quality compliance relates largely to meeting the basic expectations of customers. Regulatory compliance, in turn, relates to meeting the safety, environmental, and other requirements established by local, state, national, and regional governments and/or industry associations. Both have multiple components.
What is the difference between quality and regulatory compliance?
Quality compliance impacts purchase decisions and ultimate profitability
At a minimum industrial, commercial, and consumer products should deliver the promised functionality. In the US and elsewhere, these expectations of functionality are typically backed by clearly expressed warrantees against defects in materials or workmanship that guarantee this minimum functionality for a specific length of time. In the absence of express warrantees, implied warrantees that the product will work as expected will also sometimes come into play.
Beyond the basic functionality guaranteed by express or implied warrantees, incremental measures of quality will have a strong impact on customer preferences. These can include additional functionalities and or better ease of use, reliability, serviceability, and ultimate service life. The degree to which these incremental parameters of quality will typically vary in proportion to the purchase price. Most customers expect more expensive products to have more features or functionality, be easier to use, more reliable, serviceable, and last longer than less-expensive options. More sophisticated customers understand and are willing to accept these tradeoffs.
Regulatory compliance provides an essential license to operate
Regulatory compliance is another matter altogether. Here, there is little, if any, room for tradeoffs. Products and processes must conform to the appropriate governmental and industry regulations. Without the mandated regulatory compliance, products cannot be manufactured or sold in the regulated markets. Frequently, strict product conformance testing and certification must be performed and documented by an authorized agency before a relevant product or product family can make its way to the market. Worker safety, environmental, sustainability and other regulations must also often be met.
In high-risk industries such as food and beverages, pharmaceuticals, medical products, and nuclear, secure traceability from raw materials through finished products is often required and the manufacturing process itself must also be validated. Any significant modifications of upgrades to the manufacturing process and associated software can require costly and time-consuming revalidation. Across multiple industries, product identification regulations also frequently require product to have appropriate labels or tags identifying the composition, country of manufacture, and any relevant safety or care instructions.
Why are quality and regulatory compliance important?
Quality compliance is important for customer satisfaction and to minimize the costs of product returns due to non-compliance with express or implied warrantees. If the product quality does not meet or—ideally exceed—customer expectations, those customers are far less likely to become repeat customers, provide positive online reviews, or refer that company’s products or services to others. A company that cannot satisfy its customers quality expectations will find it extremely challenging to be profitable and succeed over the long term.
Regulatory compliance, in turn represents an essential license to operate. Without compliance with the myriad regulations often in effect, a manufacturer cannot legally produce and market its products within a given state, country, region. Serious regulatory compliance breaches typically in fines and other penalties that can have a serious impact on a manufacturer’s bottom line.
How can manufacturers manage quality and regulatory compliance?
Effective quality and regulatory compliance management begins at the top with executive leadership and support. Ideally, dedicated quality and compliance roles reporting directly to the executive leadership are assigned and empowered to manage cross-functional teams. Beyond these dedicated teams, all employees should be made aware of and receive training to better understand the impact of their individual actions and their stake in this.
Neither quality nor regulatory compliance can be achieved haphazardly. Appropriate processes and systems must be developed, supported, and improved over time and appropriate investments made in both human resources and enabling technologies. Leading manufacturers and other organizations will implement a formalized quality management system (QMS) that defines and documents the specific processes, procedures, roles, and responsibilities needed to achieve the desired quality objectives and help ensure regulatory compliance. Effective quality management helps ensure that quality is designed into both products and processes. Ideally, this will extend out to suppliers and other external partners. Effective quality management allows manufacturers to quickly identify, contain, and analyze issues and track affected items to be able to manage any voluntary or mandated recalls.
For regulatory compliance, it’s critical for manufacturers and other organizations to thoroughly understand and keep on top of the general regulatory environment and specific regulatory mandates for the region or regions in which they operate and into which they wish to market their products. Document management, change management, product data management, emissions monitoring, and other systems are often required.
How does PLM impact quality and regulatory compliance?
Leading PLM suppliers integrate quality management into the product lifecycle management process to enable manufacturers to design and produce quality products, adjust any quality issues early in the lifecycle, reduce late-stage changes, and minimize the significant costs (both monetary and in terms of customer perception) often associated with inadequate quality. Today’s top-tier PLM solutions enable a digital thread across the entire product lifecycle to streamline product development processes, provide all stakeholders with easy, yet secure access to the most accurate and up-to-date data and a single source of real-time information, and capture customer feedback. This digital thread can support both closed-loop quality control and regulatory compliance through end-to-end traceability.
In the highly regulated medical device industry, for example, all failures must be documented, tracked and analyzed for root cause, and corrected or prevented in current and future products. Here, PTC's Windchill PLM solution supports established US FDA CAPA (Corrective and Protective Actions) practices, meets CAPA standards, and helps medical device manufacturers demonstrate compliance with extensive failure reporting best practices, including ISO 9000, Six Sigma, APQP, CMMI and FDA 21 CFR Part 820.
What is the future for quality and regulatory compliance?
In the past, quality compliance relied heavily on often manually intensive, after-the-fact quality inspection, which often didn’t reveal defects until a substantial quantity of off-spec components or products were produced. Regulatory compliance tended to rely heavily on outdated data acquisition and reporting processes and technologies and inefficient paper-based documentation and reporting. Today, automated inspection and data acquisition systems and electronic reporting mechanisms have streamlined these processes and a PLM-enabled digital thread can support end-to-end traceability from basic product design and engineering and supplier qualification through finished products.
In the future, as industrial digital transformation progresses, increased use of artificial intelligence (AI) and new IIoT-connected sensors and applications will likely further simplify quality and regulatory compliance for manufacturers. IIoT-enabled predictive maintenance technologies will identify impending equipment issues, alert the appropriate personnel, and provide expert guidance to speed remediation using virtual and enhanced reality technologies. It’s also likely that machine learning, machine vision systems, and other AI technologies will enable manufacturers to develop and employ autonomous agents to oversee quality and compliance operations, provide humans with expert guidance, and – in time - autonomously resolve the issues while producing the appropriate documentation for regulatory reporting and compliance.