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Forging the Future Strategies for Success


Effective Program Management assures your C-TPAT (Customs Trade Partnership ... Strong Business acumen (understands your business and the industry) ... – PowerPoint PPT presentation

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Title: Forging the Future Strategies for Success

A Case Study in Effective C-TPAT Program
Management Supply-Chain 2007 North America
Conference and Exposition (March 19-21, 2007)
Session Overview
  • Effective Program Management assures your C-TPAT
    (Customs Trade Partnership Against Terrorism)
    Security Program enhances the Total Supply Chain
    Strategy by improving
  • speed,
  • reliability and
  • visibility
  • while reducing total cost

Session Methodology Benefits
  • This session uses the experience of Alcon
    Laboratories Inc. as a case study for managing
    international business trade and their security
  • Additionally, this session provides an overview
    of the collateral benefits and cost reduction of
    an effective Compliance Program.

Improving Trade Compliance and Supply Chain
  • Key Project Management Principles
  • The proper Context Global Trade Environment,
    Total Supply Chain Strategy, Trade Compliance and
    Risk Management
  • Your program needs the proper Content Crisis
    Management and Business Continuity Planning
    Effective Service Provider Management and Import
    Event Management for in-transit visibility and

Why is Supply Chain Security Important?
Never forget Our supply chain can be used as a
weapon in a deadly war. C-TPAT has two primary
goals secure the supply chain while keeping
commerce moving.
What is the Government doing?
  • Government agencies with Transportation Security
  • U.S. Customs and Border Protection (CBP)
  • U.S. Coast Guard
  • Maritime Administration (MARAD)
  • Transportation Security Administration (TSA)
  • National Targeting Center (NTC)
  • Bureau of Industry and Security (BIS)

Source LBJ School of Public Affairs, University
of Texas Austin, 2006
What does Supply Chain Security Cost ?
Regulation Estimated Cost to Private Sector
Maritime Transportation Security Act of 2002 833 million/year, 7.244 billion Total (2003-2012)
24 hour rule (U.S.) 282 million/year
International Ship and Port Facility Security Code (ISPS) 1.28 billion up front, 730 million/year
Required Advanced Electronic Presentation of Cargo Information 91 million
Source LBJ School of Public Affairs, University
of Texas Austin, 2006
Alcons Supply Chain Strategy supports our Global
To be the first choice for eye care products and
the most respected eye care company in the world
Alcons Supply Chain Strategy
  • Foundations of Alcons Strategy for Inventory
  • Velocity Speed
  • Reliability Customer Service
  • Visibility Reliable Information

Alcons Total Security Management Approach
  • Alcons Total Security Program is a layered
    security program that is designed to Deter,
    Detect, Impede and Identify Potential Intruders.
    The program incorporates physical security
    controls, procedural controls and an employee
    awareness and incident response initiative.
  • Improving Total Supply Chain Security meets or
    exceeds the requirements of the C-TPAT program
    and the Supply Chain Strategy because a secure
    supply chain anticipates shipments which
    increases reliability, provides total in-transit
    visibility and reduces cycle-time.
  • .

What steps did Alcon take to complete the C-TPAT
Security Process ?
  • Alcon C-TPAT, Chronology of Key Events
  • April 2004, Initial Application and Security
    Profile sent to US Customs and Homeland Security
  • June 2004, Alcon Granted Membership as a
    Certified Business Partner
  • March 2006, Alcon Participated in the CBP annual
    Meeting Supply Chain Security in a New
  • April 2006, Initial Validation meeting at Alcon
    Fort Worth
  • June 2006, All activities in the initial
    Validation meeting Complete
  • September 2006, Foreign Validation Meeting
    Completed at Alcon Belgium
  • December 2006, CBP advised our Validation Report
    is complete and we are receiving Tier II benefits

What is Alcon doing to continue improving Supply
Chain Security ?
  • Alcon C-TPAT Next Steps
  • Our Supply Chain Security Specialist has
    indicated that we will have only two
    Recommendations in our final report
  • 1. Continued Senior Management Support and
  • 2. Continued Self Assessment
  • We will participate in the 2007 Annual CBP
    Meeting in April Meeting in New Orleans to
    determine new program requirements

What is Alcon doing to continue improving Supply
Chain Security ?
  • Alcon C-TPAT Next Steps cont
  • Working with Supplier Quality Assurance and
    Purchasing to complete Supplier Surveys
  • Will continue to provide Training through-out the
    Supply Chain Purchasing Meeting, GSL Annual
    Meeting, other Manufacturing Meetings
  • TBD, Final Review of Alcons C-TPAT Program and
    receive final Certification (Hopefully Tier III)

Improving Trade Compliance and Supply Chain
  • Senior Management Support is needed
  • The C-TPAT program is part of the Distribution
    and Transportation function with reporting up
    through Corporate Finance. This Cooperative
    Management structure allows the Trade Compliance
    function to benefit from the cross-functional
    support areas of the company and gives Senior
    Management support to the Import process

Improving Supply Chain Security Enhances the
Supply Chain Strategy
  • Fundamentals of a Secure Supply Chain
  • Velocity Inventory in transit should be moving
  • Reliability Anticipate in-transit milestones
  • Visibility Monitor In-transit, quickly identify
    delays, reduce loss and damage, decrease recovery
    of lost merchandise, and improve the claims

Benefits of Total Supply Chain Security
  • Reduced Customs inspections by 48
  • Reduced in transit time by 29
  • Improves asset visibility by 50
  • Improves on-time shipping to customers by 30
  • Reduces time taken to identify problems by 21
  • Reduces theft in inventory management by 38
  • Reduces excess inventory by 14
  • Reduces customer attrition by 26
  • Source Stanford University Global Supply Chain
    Forum titled Innovators in Supply Chain
    Security Better Security Drives Better Business

Benefits Alcon Identified by Improving Supply
Chain Security and Compliance
  • 1. Improved communication with the Forwarders
    and Brokers
  • 2. Reduced Refrigerated shipping cost by 325.00
    per Container
  • 3. Increased understanding of the Supply Chain
    Strategy, Inventory reduction and cycle-time
    management as well as total cost impact of
    sourcing decisions
  • 4. Reduced Import transactional cost by 12
  • 5. Increased in transit visibility for Imports
    to 100

Benefits Alcon Identified by Improving Supply
Chain Security and Compliance
  • 6. Increased Records Management compliance for
    Import Documentation (electronic storage)
  • 7. Reduced Transit time for Ocean Freight by 20
  • 8. Increased door-to-door shipping compliance
  • Consolidated all imports to one broker
  • 9. Increased benefits from Special Trade
    Programs and reduced duty payments (saving 3.5
    on an average transaction)
  • 10.Generated Cost Savings in excess of the
    Payroll for budget for the Compliance Organization

Benefits Alcon Identified by Improving Supply
Chain Security and Compliance
  • 11. Demonstrated Reasonable Care in management of
    the Import Process- This will mitigate
    potential fines and penalties for the Import
    Focused Assessment (FA) program. (you cant be
    negligent or grossly negligent and exercise
    reasonable care at the same time)
  • Potential FA penalty and fines
  • 20 of Imported Value for Negligent Behavior
  • 40 of the Imported Value for Gross Negligent
  • 12. Prevent Threats and avoid negative Brand
    Image impact

Lessons Learned when Implementing a Customs
Compliance Program
  • 1. Performance gets worse before it gets better
  • 2. When selecting out-side consulting
    resources choose wisely
  • 3. Challenge what you are told by out-side
  • 4. Manage by facts and data
  • 5. Verify findings by reading the law and

Lessons Learned with the Customs Compliance
  • 6. Check Customs Rulings
  • 7. Establish a Steering Committee for proper
    over site and management of the Import Process
  • 8. Take every opportunity to communicate the
    strategy Purchasing Council Meetings, Traffic
    Council Meetings, Manufacturing Strategy
    Meetings, Distribution Strategy Meetings, Global
    Supply Chain Meetings

Lessons Learned with the Customs Compliance
  • 9. Select the right leader for the Compliance
  • Self starter with internal motivation
  • Culture fit for the organization
  • Team player with a wide knowledge of the
  • Resourceful, Creative and Intuitive
  • Strong Business acumen (understands your business
    and the industry)
  • Diligent Persistent with ability to Multi-task
  • Determination and commitment to total quality and
    continuous improvement

Compelling Reasons for Crisis Management Response
  • Be ready for unexpected events and have a
    strategy for Crisis Management and Business
  • The unexpected should be anticipated

Hemel Hempstead, England 605 AM, Sunday 11th
December 2005
Damage to Neighbor
Time line of Disaster and Recovery Alcon UK
Offices and Distribution
  • Sunday 12/11/05 _at_ 605 AM Explosion at Buncefield
    Fuel Depot
  • Sunday 12/11/05 _at_ 7.10 AM Alcon UKs Business
    Recovery Plan Activated
  • -- Back-up Computer and Service Centre in nearby
    Milton Keynes
  • -- Corporate and Key Alcon Supply points
  • Monday 12/12/05 Skeleton Crew assembled in
    Back-up location
  • -- AM - begin notifying customers
  • -- PM - begin accepting customer orders
    (manually) and answering inquiries
  • Wednesday 12/14/05 First shipments to
    end-customers, direct from Alcon Belgium, Alcon
    France, Alcon Spain, Alcon USA
  • Friday 12/16/05 First opportunity to see
    premises first-hand. Offices and warehouse
    considered unsafe. Loss of all Inventory.

Total Security Enhances the Supply Chain Strategy
  • As supply chains become more global we must
    improve our speed, reliability, and flexibility.
  • We must reduce cycle time of our internal

Total Security Enhances the Supply Chain Strategy
  • As supply chains become more global we must have
    real-time visibility to our products wherever
    there may be, anywhere in the world.

Compelling Reasons for Lower Inventory
  • Reduce Working Capital
  • Lower Inventory Carrying Costs
  • Lower Finished Goods Obsolescence and Scrap
  • Lower Warehouse Space Requirements
  • Lower Material Handling Costs

High Impact Short Term Opportunities for Your
  • Take Time out of the process
  • Take Variability out of the process
  • Improve the Visibility of the process
  • Improve Total Security
  • Improve Trade Compliance and take advantage of
    special duty programs
  • Reduce Transportation cost
  • Reduce Transaction cost
  • Implement a cost reduction program in conjunction
    with your compliance and security initiatives

The Importer Is Obligated to
  • Conduct a comprehensive assessment of the
    Importers supply chain (s)
  • Business Partner requirements
  • Cargo Security, Container Security, Physical
    Access Controls
  • Personnel Security, Procedural Security, Physical
  • Security Training/Threat Awareness
  • Information Technology Security
  • Develop a written and verifiable process for
    determining risk throughout the supply chain
  • Implement and maintain appropriate security
  • Complete and upload the Supply Chain Security
  • Develop and implement a written and verifiable
    process for the selection of business partners
  • Develop and implement a periodic Self-Assessment
  • Notify the CBP of all changes in the importers
    information on file

The CBP is obligated to
  • Provide feedback and guidance within 60 days of
  • Provide technical assistance and recommendations
  • Provide incentives and benefits including
    expedited processing of C-TPAT shipments
  • Assign a Supply Chain Security Specialist to
    server as a CBP liaison
  • Ensure all information remains confidential
  • This agreement does not relieve the Importer of
    any responsibilities with respect to the United
    States law, including CBP regulations.

C-TPAT Compliance Management
  • Compliance Management is a framework designed
    tomodel the full spectrum of components needed
    to fulfill therequirements of a comprehensive
    C-TPAT program
  • It is based on the real-world leading practices
  • It is scalable, from small business to the
    largestdiversified companies
  • C-TPAT Compliance Management is valuable in
    structuring a common nomenclature for
    communicating within an organization and to
    external parties
  • A companys action plan is guided by where the
    organization considers the maturity of each
    component of the framework

Compliance Management Framework
Corporate Governance
CTPAT Risk Assessment
Investigations Reporting
Risk-Based Trading Partner Due Diligence
Trading Partner Transactions
Program Management
Written Procedures
Project Planning/Execution
Single Trading Partner View Data
Independent Audit
Compliance Management Framework
Corporate Governance
CTPAT Risk Assessment
Investigations Reporting
Risk-Based Trading Partner Due Diligence
Trading Partner Transactions
Program Management
Written Procedures
Project Planning/Execution
Single Trading Partner View Data
Independent Audit
Enterprise Foundation
  • Enterprise Foundation determines an
    organizations ability to respond to changes in
    both the business and regulatory environment.
  • Corporate Governance. Effective risk management
    requires top down direction, so the tone at the
    top is critical to ensure that a CTPAT mindset
    permeates the organization.
  • Program Management. An on-going initiative
    across business units and partners to achieve a
    common goal though processes, standards and
  • Independent Audit. Provides independent testing
    of and organizations ability to execute on
    established CTPAT policies and procedures.
  • Policies. The board of directors is actively
    involved in reviewing and approving policies
    related to CTPAT.

Principal Capabilities
  • Four Principal Capabilities serve as the backbone
    of an organizations CTPAT program
  • CTPAT Risk Assessment. The CTPAT Risk
    Assessment should be an on-going, dynamic process
    that produces a Risk Profile based on an
    organizations products, geography and trading
    partner characteristics.
  • Project Planning / Execution. A demonstrated
    ability to plan and execute on CTPAT projects
    through a program office if needed
  • Training / Self-Testing. Training at all levels
    from the boardroom to the stevedores effective
    self-testing of CTPAT controls
  • Written Procedures that reflect the
    organizations current CTPAT program and are
    known and practiced by individuals in all areas
    of the organization.

Risk Based Trading Partner Due Diligence
  • Regulators are stressing the importance of a Risk
    Based Approach to compliance in all areas and at
    all levels.
  • Complete an organizational risk assessment and
    document your risk profile
  • Your risk profile is the starting point for
    negotiation of what is required
  • Companies are expected to have an Enterprise-wide
    CTPAT Program.
  • Enterprise-wide includes subsidiaries
  • A program is on-going initiative across business
    units and subsidiaries to achieve a common goal
    through the application of structure, processes,
    standards and technology
  • Technology and procedures must line up with your
    documented policies and must be adequate for the
    companys risk profile.
  • Expectations vary by risk profile and
    organization size
  • This years stretch will be next years
  • Old polices, procedures, training and technology
    are rarely adequate in this new environment.
  • While not specifically required by regulation,
    expectations are increasing that each trading
    partner and account must be risk rated with
    specific review policies in place based on the
    level of risk.

Risk Based Trading Partner Due Diligence
Trading Partner Account
High Risk Account Management Program
Mandatory Due Diligence
Dynamic EDD(risk profile based)
2ND Level EDD(risk rating based)
Regulatory Mandates (e.g. CTPAT)
Company Profilebased QA
Dynamic EDD Exception Processing
Referral Management
Partner / Account profile based QA
Reputational Research
Corporate Policy Requirements (e.g. Current
Government ID)
Identity Verification
Periodic Account Reviews
Suspect List Checking
Transaction Risk Rating Prioritization
Trading Partner Risk Rating
KYTP Information
Dynamic Partner Profile
Dynamic Account Profile
Customer Vetting
Mandated Record Retention
Document Storage Retention
Due Diligence Audit Trail
Trading Partner Transaction Analysis
Investigations and Reporting
Single Trading Partner View
In Summary
  • Why implement an Enterprise-wide compliance
  • Because the regulators expect it.
  • In the future they will demand it!