Pharmco Product, Inc. SOP # : 7-4-1-B Rev 2.

1 1/27/03 PD

Subject: Qualifying New and Existing Vendors
- 1 -
SOP 7-4-1-B

Created by Paul DiMarco Approval/Effective Date: 01/01/2002


1.) Scope:
Qualification and Validation of new vendors or new products from old vendors.

2.) Normative References:
SOP 4-2-2 Quality Manual
SOP 8-5-2-B Corrective Action, Vendor Complaints
SOP 8-3-0-A Control of Non-Conforming Product
Form PU002: Supplier Approval/Rejection Form
Form PU004: Vendor Checklist Form
Form PU005: Vendor Survey

3.) Terms and Definitions:
Vendor: Any company supplying Pharmco Products with Chemical Raw
materials, packaging or manufacturing services.

4.) Application
All new sources of Chemical Raw Material, packaging and manufacturing
services

5.) Text:

New Suppliers
Suppliers must be evaluated and approved for purchases of chemicals, product
packaging, equipment servicing and capital expenditures. Supplier evaluation
will be documented on Form PU002, Supplier Approval / Rejection Form."
These forms are given to the Vice President of Finance for processing.
Approved suppliers will be asked to complete the Vendor Survey, Form Pu005;
which will be kept on file in the QA&DC department. It is the responsibility of
each manager to find out if his or her intended supplier is on the approved
supplier list. If not, that manager is responsible for getting the supplier approved.
Approved suppliers will be listed in the computer system and can be traced by
name. VP F&A can print a list of approved suppliers when requested. Poor
service may result in delayed or partial payment for services or products
rendered or return of product. Suppliers are constantly monitored and poor
performers are dropped from the approved supplier list. This is done through the
ISO Sub committee.


Pharmco Product, Inc. SOP # : 7-4-1-B Rev 2.1 1/27/03 PD

Subject: Qualifying New and Existing Vendors
- 2 -
SOP 7-4-1-B

Created by Paul DiMarco Approval/Effective Date: 01/01/2002


For purchases that are general operating expenditures (not chemicals, product
packaging, equipment servicing or capital expenditures), it is the department
managers responsibility to evaluate any potential supplier according to the
above qualifications. If the department manager believes that a supplier will
meet the qualifications, he/she may approve that supplier. Suppliers for this
group of purchases may be, but do not need to be on the Approved Supplier List,
and are not required to complete the Vendor Survey Form Pu005.

All approved sources of Ethanol raw material and denaturants are held in
confidence and can be found in the Validation file in the QC office. The
information remains on file in the Lab but the list can only be issued with the
approval from the President. All Ethanol and Ethanol denaturants must be
approved for quality by the quality control dept. according to the intended grade
and BATF regulations as detailed in the Code of Federal Regulations (CFR) 27
parts 1 to 199.

The approval and testing of a pre-shipment sample can circumvent the
need for the forms PU004 & PU005. In this case, each shipment of material
will be tested for approval. Furthermore, the President of Pharmco has the
authority to have any Ethanol Supplier approved without the forms being
issued.

Preshipment samples will be required for all new vendors of chemicals.

Pharmcos supplies are ordered from approved vendors. Approved vendors are
those active vendors in the general accounting system and are eligible to sell
Pharmco goods and services. Only approved vendors are in the computer
system. If a vendor becomes ineligible after they are in the system, accounting
will put that vendor on payment hold. If the problems with the vendor cannot be
resolved in a timely manner, that vendor may be dropped off the approved list. A
notation will go into the file to indicate this.


Supplier Requirements
A department manager must determine that the supplier has the ability to meet
the following requirements before any order can be placed with that supplier.
-The supplier has the ability to meet the job/order requirements.
-The supplier can comply with Pharmcos quality system.
-The supplier will be cost efficient.

Pharmco Product, Inc. SOP # : 7-4-1-B Rev 2.1 1/27/03 PD

Subject: Qualifying New and Existing Vendors
- 3 -
SOP 7-4-1-B

Created by Paul DiMarco Approval/Effective Date: 01/01/2002


-The supplier can complete the job/order in a timely fashion.
-The supplier has an adequate quality system.
-The supplier must submit material for qualification.

Supplier Approval
All of the following requirements must be met before the supplier can
be approved.

Type of Supplier Qualifications For Approved Supplier
Bulk Chemicals
Bulk Supplies
Pre-shipment sample with COA
and
Good industrial reputation based on the discretion
of senior management.
Non-bulk
chemicals not
exclusively used
for denaturants.
Pre-shipment sample with COA and
Good industrial reputation based on the discretion
of senior management. Samples may be
submitted for qualification prior to shipment. All
shipments must have certificates of analysis and
will undergo quality review as detailed in SOP 7-5-
1-A Product Files.
Non-bulk
Chemicals used
exclusively as
Denaturants
Good industrial reputation based on the discretion
of senior management. Material will be tested
after it arrives but not used beforehand. These
companies do not generally send pre-shipment
samples because of the high expense of the
denaturant. Examples: Peppermint Oil etc.
Trucking / Delivery
Companies approved by Transportation Cost
Management Consultant or based upon the
discretion of senior management.
Lab Supplies
Good industrial reputation based on the quality
control managers discretion

Pharmco Product, Inc. SOP # : 7-4-1-B Rev 2.1 1/27/03 PD

Subject: Qualifying New and Existing Vendors
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SOP 7-4-1-B

Created by Paul DiMarco Approval/Effective Date: 01/01/2002


Type of Supplier Qualifications For Approved Supplier
Production
Equipment
Servicing
Good industry reputation, selected by VP of
Operations
Laboratory
Equipment
Servicing
Good industry reputation, selected by Quality
Control Manager
Financial Auditing
Service
Good industry reputation, selected by President
and VP of Finance
Uniforms
Good industry reputation selected by VP of
Operations

Vendor Approval
As requirements are met, they are documented on Form PU002, Supplier
Approval / Rejection Form. The vendor checklist (Form PU004) must be
completed for the initial approval of a new vendor. These completed forms are
given to the Vice President of Finance.

The Vice President of Finance then forwards a copy of these forms to the
Manager of Quality Assurance/Document Control/ISO, who will send the vendor
Form PU005 Vendor Survey. Returned surveys are evaluated by the QA
Manager or VP Quality. Specifically, the Manager of Quality
Assurance/Document Control/ISO verifies that the vendor has lot traceability and
the ability to address non-conformities. If the vendor does not have lot
traceability or non-conformity systems, then QA/DC makes recommendations to
the ISO subcommittee as to which additional QA/DC steps must be put in place
to ensure vendor reliability.

If a vendor does not complete the vendor survey, the Manager of Quality
Assurance/Document Control/ISO will attempt to follow up with the vendor. If the
vendor still does not complete the survey, the QA Manager may call the vendor
and complete the survey over the telephone. If the vendor will not complete the
survey, the vendor may be deleted from the approved vendor list or approval will
be granted based upon the pre-shipment sample, but subsequent samples must
receive a full quality review. The Manager of Quality Assurance/Document

Pharmco Product, Inc. SOP # : 7-4-1-B Rev 2.1 1/27/03 PD

Subject: Qualifying New and Existing Vendors
- 5 -
SOP 7-4-1-B

Created by Paul DiMarco Approval/Effective Date: 01/01/2002


Control/ISO will submit such a request in writing to the VP of
Finance/Administration. This issue will also be brought up to the individual
requesting the products or services from that vendor. It will also be discussed at
the ISO sub-committee meeting.

The Vice President of Finance maintains the approved vendors in the general
accounting system, Traverse. The approved vendor list is available through the
accounting software. If so requested, the VP of Finance/Administration will
distribute a hard copy of the list.

For purchases that are general operating expenditures (not chemicals, product
packaging, equipment servicing or capital expenditures), it is the department
managers responsibility to evaluate any potential supplier according to the
above qualifications. If the department manager believes that a supplier will
meet the qualifications, he/she may approve that supplier. Suppliers for this
group of purchases may be, but do not need to be on the Approved Supplier List,
and are not required to complete the Vendor Survey Form Pu005.

Monitoring Vendor Performance
Vendor performance is constantly monitored in the following high dollar
expenditure areas: bulk chemicals; bulk supplies; non-bulk chemicals; and
trucking/delivery vendors. Non-conformities are noted and submitted to the ISO
sub committee. Non-conformities are monitored as outlined in SOP 8-5-2-B .
Vendor performance will be discussed during the ISO Sub-Committee meetings,
and Main Committee meetings if necessary. Each department head or Senior
Manager over a particular department is responsible for the vendor assessments
for those areas. Vendors who have a record or history of non-conformities and
service issues will be assessed for a period of time. That particular manager will
issue an e-mail putting the vendor on alert with the other departments. In the
ISO sub-committee meeting, the situation will be discussed. All parties coming in
contact with the material from the vendor will be notified to pay special attention
to that vendor. If the products or services from that vendor do not improve in a
reasonable period of time, that vendor may be taken off the computer system
and the file is marked: inactive; credit problem; do not use, etc as appropriate. If
necessary, the Committees will make appropriate written recommendations to
delete a particular vendor from the approved list. These written
recommendations will be given to the Vice-president of Finance who will delete
the vendor from the approved vendor list.

Pharmco Product, Inc. SOP # : 7-4-1-B Rev 2.1 1/27/03 PD

Subject: Qualifying New and Existing Vendors
- 6 -
SOP 7-4-1-B

Created by Paul DiMarco Approval/Effective Date: 01/01/2002


Vendors will also be assessed by tracking non-conforming product occurrences
and Vendor Action Reports (VARs)

Vendor Audits vs. Quality Testing
Since all chemical products sold to Pharmco must meet our internal quality
control and assurance standards which requires validation and quality control
testing, the need to audit customers on site is reduced.
Furthermore, since many of our suppliers are world class producers such as Dow
(Union Carbide), Exxon, Methanex etc., it is also not necessary to perform a
vendor audit. In fact the emphasis is placed on the in-bound bulk shipment
coming from a regional storage facility rather than the place of production. In
addition to this, many of Pharmcos suppliers are located in other countries.
Auditing these sites is not an option. The real test for vendor performance is
therefore based upon the quality of the raw material received at Pharmco.

Due to the nature of the chemical business, Pharmco cannot be limited in the
scope of its vendors. Almost all chemical products are purchased based upon
the vendors ability to sell at spec. This is indicated on the purchase order (see
Form Pu300) and each product is evaluated according to SOP 7-5-1-A Product
Files, or evaluated according to bulk chemical testing procedures. Pharmco
could theoretically have thousands of vendors covering the entire globe.
Therefore on-site evaluation is impractical for evaluating vendor performance.

Ultimately it is the product performance that becomes the true test of vendor
reliability. Vendors sell product on spec to Pharmco. If these specifications fail
our internal QC evaluation or those of the customer, a non-conformity is
immediately generated. This will result in immediate vendor review and a quality
investigation. Vendor evaluation is therefore on-site and a function of our QC
evaluation and those of our customers.


6.) Revision History: This document was revised on 1/27/03 in
accordance with Q9001:2000 by PD

This printed document was printed on: 3/12/2007.
This printed document is valid for 5 days after the print date. All
obsolete documents must be appropriately marked or discarded.

Pharmco Product, Inc. SOP # : 7-4-1-B Rev 2.1 1/27/03 PD

Subject: Qualifying New and Existing Vendors
- 7 -
SOP 7-4-1-B

Created by Paul DiMarco Approval/Effective Date: 01/01/2002