A Case Study in Effective C-TPAT Program Management
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A Case Study in Effective C-TPAT Program Management Supply-Chain 2007 North America Conference and Exposition (March 19-21, 2007). Session Overview.

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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 program.

Additionally, this session provides an overview of the collateral benefits and cost reduction of an effective Compliance Program.

Improving Trade Compliance and Supply Chain Security

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 accuracy

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 Responsibility:

  • 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 ?

Source; LBJ School of Public Affairs, University of Texas Austin, 2006

Develop infrastructure in emerging markets

Provide Global Real Time Visibility

Partner with customers and suppliers


Speed and Flexibility

Alcon’s Supply Chain Strategy supports our Global Vision

To be the first choice for eye care products and the most respected eye care company in the world

Alcon’s Supply Chain Strategy

Foundations of Alcon’s Strategy for Inventory Optimization:

  • Velocity = Speed

  • Reliability = Customer Service

  • Visibility = Reliable Information

Alcon’s Total Security Management Approach

Alcon’s 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 Environment”

  • 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 con’t:

  • 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 Alcon’s C-TPAT Program and receive final Certification (Hopefully Tier III)

Improving Trade Compliance and Supply Chain Security

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 process

Benefits of Total Supply Chain Security

Reduced Customs inspections by 48%

Reduced in transit time by 29%

Improves asset visibility by 50%

Improveson-time shipping to customers by 30%

Reducestime taken to identify problems by 21%

Reducestheft 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 Value

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. Increasedunderstanding 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 and

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 can’t 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 behavior

    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 resources

4. Manage by facts and data

5. Verify findings by reading the law and regulations

Lessons Learned with the Customs Compliance Program

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 Program

9. Select the right leader for the Compliance Program:

  • Self starter with internal motivation

  • Culture fit for the organization

  • Team player with a wide knowledge of the organization

  • 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 Continuity

  • The unexpected should be anticipated

Alcon Office & Warehouse

Hemel Hempstead, England – 6:05 AM, Sunday 11th December 2005

Damage to Neighbor

Sunday 12/11/05 @ 6:05 AM Explosion at Buncefield Fuel Depot

Sunday 12/11/05 @ 7.10 AM Alcon UK’s Business Recovery Plan Activated

-- Back-up Computer and Service Centre in nearby Milton Keynes

-- Corporate and Key Alcon Supply points notified

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.

Time line of Disaster and Recovery – Alcon UK Offices and Distribution

Total Security Enhances the Supply Chain Strategy

As supply chains become moreglobalwe must improve our speed, reliability, and flexibility.

We must reduce cycle time of our internal processes.

Total Security Enhances the Supply Chain Strategy

As supply chains become moreglobalwe must have real-timevisibility 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 Costs

  • Lower Warehouse Space Requirements

  • Lower Material Handling Costs

High Impact Short Term Opportunities for Your Enterprise

  • 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 Importer’s supply chain (s)

    • Business Partner requirements

    • Cargo Security, Container Security, Physical Access Controls

    • Personnel Security, Procedural Security, Physical Security

    • 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 measures

  • Complete and upload the Supply Chain Security Profile

  • Develop and implement a written and verifiable process for the selection of business partners

  • Develop and implement a periodic Self-Assessment Program

  • 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 receipt

  • 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 ofimporters

    • 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 company’s 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

Risk-Based Trading Partner Due Diligence

Investigations & Reporting

Trading Partner Transactions



Written Procedures


Single Trading Partner View Data


Independent Audit

Compliance Management Framework


Corporate Governance


CTPAT Risk Assessment

Risk-Based Trading Partner Due Diligence

Investigations & Reporting



Trading Partner Transactions




Written Procedures


Single Trading Partner View Data



Independent Audit

Enterprise Foundation

  • Enterprise Foundation determines an organization’s 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 technology.

    • 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 organization’s CTPAT program

    • CTPAT Risk Assessment. The CTPAT Risk Assessment should be an on-going, dynamic process that produces a Risk Profile based on an organization’s 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 organization’s 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 company’s risk profile.

  • Expectations vary by risk profile and organization size

    • This year’s stretch will be next year’s expectation

  • 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

Mandatory Due Diligence

High Risk Account Management Program

Dynamic EDD(risk profile based)

2ND Level EDD(risk rating based)


Regulatory Mandates (e.g. CTPAT)

Referral Management

Company Profilebased Q&A

Dynamic EDD Exception Processing

Partner / Account profile based Q&A

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 Account Profile

Dynamic Partner 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 program?

  • Because the regulators expect it.

  • In the future they will demand it!

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