The first time I wrote about trade security was in late 2002 (“Trade Security: A Wildcard in Supply Chain Management”). This was about a year after 9/11, when various security initiatives were first launched, including Customs-Trade Partnership Against Terrorism (C-TPAT), the Container Security Initiative (CSI), Operation Safe Commerce (OSC), and Smart and Secure Trade Lanes (SST). A couple of years later, I wrote “Linking Supply Chain Security with Sarbanes-Oxley and The Bottom Line” where I stated the following:
“One thing is clear: security cannot be viewed as a standalone initiative. It must be embedded within supply chain processes-across the entire ‘Source, Make, Deliver’ spectrum. As this report highlights, implementing process controls improves both the security and the financial integrity of supply chains. Unfortunately, most companies address these areas independently. Trade Compliance focuses on security, while the Audit Group or the CFO focuses on Sarbanes-Oxley. Companies that recognize the link between these efforts will undoubtedly create a more efficient and effective process.”
Yesterday, the U.S. Food and Drug Administration (FDA) announced the “Secure Supply Chain” pilot program to promote “the safety of drugs and active drug ingredients produced outside the United States.” The FDA plans to select 100 applicants to participate in this voluntary program. For more details, you can read the press release and the federal register notice, and companies interested in participating can download the application.
I downloaded it and here’s the section that caught my attention because it underscores the comments I made back in 2004:
“Please provide a detailed narrative of the process by which the active pharmaceutical ingredient (API) and/or finished drug product will be brought into the United States, from the point of product manufacture to delivery to the ultimate consignee. This narrative must include, at a minimum, the following information:
A. API source;
B. Source of finished drug product;
C. Master file number (if applicable);
D. Overview of the supply chain including facilities where manufacturing, packaging, labeling and storage occur;
E. Transport from packager to port of lading;
F. Port of lading process from delivery to un-lading of vessel;
G. Transport process to the United States, including stops before arrival in the United States; and
H. Transport from port of arrival to ultimate consignee.”
In other words, pharmaceutical companies must have timely, accurate, and complete visibility of their supply chain, from the point of origin all the way to the ultimate consignee. Sound familiar? The information the FDA is requesting is almost the same as the info all importers must submit to Customs and Border Protection (CBP) to comply with its “10+2″ regulation which goes into effect January 26 (see “10+2″: A Beacon of Hope for Software Vendors and Freight Forwarders“). In fact, the FDA program was developed with input from CBP.
Simply stated, “visibility” is the common link between trade security, product safety, and achieving operational excellence in supply chain management.
As with 10+2 compliance, the real challenge pharmaceutical companies will face in providing the FDA with a “detailed narrative” of their end-to-end logistics process is that the information is spread out across multiple entities and systems. As I wrote in my 10+2 piece, “This is really a data collection and connectivity challenge, and freight forwarders and network-based solution providers are in the best position to address it. What you do with the data is less important (and easier) than getting the data (timely, accurate, and complete) in the first place.”
And as with 10+2, this FDA program presents a business opportunity to logistics service providers that serve the pharmaceutical industry, especially those with freight forwarding and customs brokerage operations. LSPs are arguably in the best position to collect the required information (they have a lot of it already) and manage the filing and reporting process. But data collection and filing would just be an extension of what they already do. The smart LSPs, however, will leverage this program to position themselves more strategically to clients. Specifically, they will take the initiative to propose more streamlined and innovative logistics processes by applying, for example, Lean/Six Sigma principles and business intelligence and analytics tools.
I will touch base with the FDA about this program later this year. If your company plans to participate in this program and you’re willing to share your thoughts about the program’s benefits and challenges (confidentially, of course), let me know.
