Multinational companies have faced numerous supply-chain challenges since 9/11, including supply-chain security, import safety and an array of social compliance issues. Government agencies, including and especially Customs and Border Protection, have added numerous new hurdles for goods destined for U.S. consumers. Yet the weakest link in every supply chain continues to be the point of origin, which remains the most vulnerable and least accessible link. Importers are responsible and held accountable by government for security and safety at origin even in the absence of real guidelines for point or origin security, safety and compliance. Here are 10 tips for companies concerned about supply-chain integrity at origin.
1. Analyze risk globally.
The Oxford Analytica Risk Map analyzes global risk by country in nine categories, including supply-chain vulnerability, economic risk, terrorism and political interference. It also identifies the top 20 countries for “business partner risk” — that is, “the risk of entering into a transaction, project or other form of relationship with a foreign business partner.” The Oxford Risk map is a good starting point for consideration of new relationships and analysis of existing trading partners.
2. Assess common risks
Some risks, such as those related to supply-chain security and compliance, are common to all supply chains. Companies may apply a common methodology for analyzing these types of risk in each country in which they operate and for each trading partner.
3. Determine product-specific risks.
Some products by definition are more risky than others. These include high-cost products, food and agriculture, chemicals, pharmaceuticals and products that may pose a danger to children. Each company and industry must analyze the products in the supply chain and determine risk based on known and publicized threats as well as potential threats based on specific product knowledge.
4. Develop a risk-assessment plan
Based on the risks described above, develop a strategy and plan for assessing risk in each channel of the global supply chain and a plan for addressing each of those risks.
5. Complete an in-house or contractor assessment.
The government, including Customs, the Food and Drug Administration and the Consumer Products Safety Administration, does not have the resources or authority to perform on-site security, safety or compliance assessments in every country and for every company involved in global trade with the U.S. or even a small fraction of those involved, but does hold the importer accountable for ensuring security, safety and compliance. Importers must decide for themselves whether to perform this assessment in-house, contract to a global third-party logistics provider to audit and inspect goods at origin, or, if available, employ an industry-specific verification team such as those employed by the pharmaceutical, high-tech and forest products industries.
6. Choose the right assessment team.
Each of the three choices — in-house, 3PL inspection company or industry-specific verification — has advantages and disadvantages. The decision on which to employ should consider such issues such as cost, return on investment, complexity, expertise, sovereignty, language, culture, objectivity and credibility.
7. Know before you go.
Regardless of the team selected to perform the inspections and audits, its members must be knowledgeable about all of the risks, general and specific, pertaining to the product and the industry; understand the expectations of the company and the government agencies with oversight; have the technical knowledge to perform the evaluation; and have the necessary tools to gather the information in each threat and risk area.
8. Analyze the data.
Upon completion of the audit and inspection, the importer should receive the assessment data in automated form to facilitate analysis in terms of weaknesses, violations, immediate action required, trends indicating improvement or decline in performance, and comparison to other supply-chain channels and partners.
9. Share the data and findings.
After analysis, importers should share the data with Customs and other appropriate agencies. Customs does not officially recognize third-party or industry inspections and audits, but objective industry-provided assessments are the only real and effective analysis of supply-chain security, safety and compliance at the most vulnerable link in the global supply chain. Customs and other agencies need this information to make risk-management decisions to the benefit of government and business.
10. Implement reforms.
Review of security, safety, and compliance at origin is a relatively new process for government and industry. Effective implementation will not be a one-time affair. Priorities, risks, and threats evolve and emerge over time. Audit and inspection are part of a learning process. Effective implementation will require regular monitoring and review on a scheduled basis. Over time, the importer will have assurance that each shipment is exactly as described in commercial and entry documents in terms of products, quantity, quality, country of origin, manufacturer, labeling, security, safety and compliance — nothing more, nothing less.