cross-border flow analysis - case study for consumer goods industry

strategic transportation

& tourism solutions

Cross-Border Flow Analysis Report 6:

Case Study for Company 6 (Consumer Goods

Producer)

Prepared forIndustry Canada

Prepared byInterVISTAS Consulting Inc.

8 July 2009

Cross-Border Flow Analysis Report 6: Case Study for Company 6 (Consumer Goods Producer)

8 July 2009

i

Table of Contents

1. Introduction........................................................................................................................ 1 1.1 Overview .............................................................................................................................1 1.2 Methodology........................................................................................................................2

2. Firm Profile......................................................................................................................... 3

3. Value Stream Map.............................................................................................................. 4 3.1 Value Stream Glossary .......................................................................................................5 3.2 Current State vs. Future State Maps...................................................................................5 Processes and Timing .......................................................................................................................9

4. Key Findings.................................................................................................................... 14 4.1 Summary...........................................................................................................................14 4.2 Findings.............................................................................................................................14 4.3 Quantitative Results ..........................................................................................................17

5. Border Crossing Costs ................................................................................................... 18


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1. Introduction

The purpose of this study is to determine and evaluate the experience of processing a transaction from initiation of an order to clearance at the U.S. border. This report will be followed by recommendations and alternatives to result in enhanced facilitation of trade from Canada to the United States.

The data collected from this report will help to identify the underlying causes of border challenges that may impact the competitiveness of Company 6 from a number of perspectives: regulatory, logistic and security. The study examines, measures and reports upon the various logistics, security and compliance costs for the company at the border, including more detailed examinations of the frequency of secondary inspections and the issues that trigger such incidents (i.e. regulatory compliance vs. border protection imperatives).

The following report is a case study for Company 6 - consumer goods manufacturer. This draft case study report is developed based on interviews and information received from the firm. While the findings reflect the issues faced by the individual organization, it is intended to demonstrate the challenges that other companies within the industry are faced with. The report includes the following: Value stream maps of cross border processes Descriptions of process steps for shipping goods across the border Matrix of key findings Explanations of key findings

1.1 Overview This report provides an overview of the following information:

1: Shipping Steps / Wait Time

2: Regulatory Requirements/Issues

3: Logistics Related Issues

4: Security Issues

5: Existing Programs & Initiatives to Address Issues

6: Compliance Cost Data

7: Observations/Gaps

Information included in this report will support the identification and analysis of top issues leading to significant challenges at the Canada-U.S. border. Further, it will allow for a better understanding


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of how border issues affect the competitiveness of companies, enabling an assessment of their impacts on North American supply chains. This information will lead to the development/proposal of potential options and solutions to eliminate unnecessary costs and delays at the border.

1.2 Methodology

The methodology used to develop this report is as follows:

1) Company Selection - The multi-national company was selected for its significant number and volume of consumer goods shipments from Canada to the U.S. With goods shipments that are both subject and not subject to U.S. Food and Drug Administration requirements, Company 6 is representative of other organizations in the consumer goods industry sector.

2) Data Collection - Data collection was performed at both the company’s U.S. headquarters as well as one of its Canadian manufacturing facility. Interviews were conducted with personnel responsible for setting up the ordering system as well as those who fulfill compliance requirements; an on-site operations tour was performed to trace product fulfillment and shipping; the order entry system was reviewed; and 2008 historical shipment statistics were tallied.

3) Develop Value Stream Map - With the detailed processes outlined for the products, timing data and incident rates were associated to each step to develop the “current state” value stream maps.

4) Detail and Categorize Border Issues - The challenges faced by the company in shipping consumer goods across the border as identified by the company and through the value stream mapping process were documented and categorized into one of the seven columns as outlined in the findings matrix.

This report is one of seven case studies developed. For ease of reference, the seven companies are as follows: Company 1 (Services Sector Involved in the Movement of Goods) Company 2 (Small to Medium-sized Enterprise) Company 3 (FAST Member) Company 4 (Food Processing Industry) Company 5 (Motor Vehicle Sector) Company 6 (Consumer Goods Industry) Company 7 (Chemicals Sector)

Companies provided data in confidence; as a result their names and descriptions are genericized and data collection results are provided in aggregate form only to protect commercial sensitivities.


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2. Firm Profile

Company 6 is a U.S.-headquartered company with a number of manufacturing locations in Canada from which it ships consumer goods to a number of warehouse and distribution centers in the U.S. Each Canadian manufacturing location has a number of product lines in its portfolio that are not time-sensitive in nature.

Orders for the product are generated to replenish stock at the warehouses that, in turn, are shipped to retailers. Packaged products are variable in size and weight, with a number of packages per pallet. The shipping pallets are from a pallet pool system for the company’s international supply chain network. Shipments are done on a truck or container load basis only. Logistically, Company 6 arranges its own common carrier trucking from a pre-selected list of carriers in addition to intermodal rail to ship to the U.S. A service provider performs brokerage for the company at the border.

There are two types of products that are relevant to Company 6:

Non-FDA Shipments: These products only require customs entry processes for shipments that can be made by truck or on intermodal train

FDA Shipments: Certain personal hygiene products require a U.S. Food and Drug Administration (FDA) declarations and documentation as well as customs entry data. Due to the involvement of FDA, these shipments can only be made by truck.

Company 6 holds Tier III status in the Customs-Trade Partnership Against Terrorism (C-TPAT) program. The company will only ship with carriers and drivers that are registered with the Free and Secure Trade (FAST) program when shipping to the U.S. Company 6 is also currently adopting the use of Importer Self Assessment (ISA)


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3. Value Stream Map

Value Stream Mapping (VSM) is a process analysis tool that is used to represent the interaction between processes, operations and information for bringing a product order (or request for service) through to delivery of it. The concept originated a number of years ago through the Toyota Production System and is a key technique used in Lean Manufacturing. VSM is used to determine the value added and non-value added elements of a system. It provides a high level picture of product and information flows in order to develop improvement suggestions.

Value stream maps can help visualize the process steps required to make a product or provide a service and any waste that exists in the processes. It provides a view of the entire system so that any improvements can be made to better the overall flow rather than a limited area within it.

A value stream consists of the following elements: Supplier (start of flow) Customer (end of flow) Physical flow of product being mapped Information used by process transformation steps Information flowing between process control, supplier and customer

The symbols used in the value stream maps in this report are as follows:

Customer or Supplier

Delay (non-value added)

Process (value added) Flow of Product

Decision Point or Alternative Flow of Information

Transport

Information System

Elapsed time

Touch time Timing Chart

The following section provides a glossary of terms used in the value stream maps.


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3.1 Value Stream Glossary

The following definitions are used in value stream maps and Lean principles.

Term Definition

Elapsed Time The time it takes to complete the tasks to make a product or provide the service including delays and interruptions within the process. Also known as throughput, turnaround, flow or lead time.

Non-Value-Add (NVA) Any operation or activity that consumes time and/or resources but does not add value to the service provided or product sold to the customer. (Some are necessary - i.e., regulatory requirements - while others are unnecessary.)

Queue or Delay Time Non-value added time spent waiting for a process.

Takt Time Average demand for product or service expressed in units of time. Sets the pace for the operation; all processes need to produce at rate of demand. The calculation of takt time is available work time per day / customer demand per day.

Touch Time The total time spent performing tasks to complete the product or provide the service without delays or interruptions within the process.

Transport Physical movement of goods from one place to another. If the company performs the transportation, queue time is not included in the transport time. Otherwise, delay time is included in transportation time.

Value-Add (VA) Any operation or activity the customer values (and would be willing to pay for).

Waste The elements of the process flow (or lack thereof) that add no value to the service provided.

3.2 Current State vs. Future State Maps

Current state value stream maps are typically developed to document current process flows and identify potential points of improvement. Future state maps are developed from the current state maps to design a lean flow that eliminates waste and improves the process flow. There are three basic Lean principles that are applied when designing future state value stream maps: Eliminate Unnecessary Non-Value Added Reduce Necessary Non-Value Added


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Optimize Value-Added

In general, these are targets for improvements that can be achieved six to nine months out. Some of the tactical actions that can be taken include: Eliminate steps / handoffs Merge steps Create parallel paths Implement pull if flow is not possible Reduce / eliminate batches Improve quality Create standard work Create an organized, visual workplace Eliminate unnecessary approvals / authorizations Stop performing nonessential (NVA) tasks from the customer’s point of view Co-locate functions based on flow; create teams of crossfunctional staff Balance work to meet takt time requirements

The following diagrams show the current state value stream maps for Company 6 for shipment of consumer goods from its Canadian locations to its U.S. warehouse and distribution facilities. Future state value stream maps are outside of the scope of this study and were not developed. Company 6 is C-TPAT Tier III certified and a member of the Free and Secure Trade (FAST) program. It transports product by truck and intermodal rail across the border. The firm has a highly automated set of information systems to deal with trade and border compliance issues and this was used to generate the following maps.

WAREHOUSEPRODUCE

ORDERI PICK & LOAD SECURITY GATE

CHECK & SEAL

To Terminal

To Border

CBP RAIL PROCESS

CBP TRUCK PROCESS

DISTRIBUTION CENTRE

DROP YARD CHECK

MRP

TRUCK LOAD PLAN

- 16 hrs to produce- Check product- Scan pallets out

of warehouse location

- 90 min.- Scan product on

to truck- Leave paperwork

on trailer- Leave seal on

trailer

- Match load, trailer and seal

- Hook up to long-haul tractor


- Attach high security bolt seal

- Sign out

ABI/ACS

ACE

BROKER

CARRIER

LOAD PLAN

PICK LIST CREATION

- Pallet locations- Order #- Carrier & Trailer ID- Seal #- Bay door

- Proforma- B/L- ACE Cover sheet- IIT pallet

management

3RD PARTY DROP YARD

PRODUCT D/B

By Fax

FAST Manifest

Truck: Entry DataBroker notification

0 – 8 hrs

Truck

Intermodal RailTRUCK COMPLETION

- Final load data

TRAILER DROP

SECURITY GATE SIGN IN

COMPANY 6

Consumer Goods (Non-FDA)

March 5, 2009

TRAVEL TIME2 - 4 hrs.

- 1 – 2 min.- CBP truck

processes mapped elsewhere

- 30 min.- CBP rail

processes mapped elsewhere

TRAVEL TIME4 – 6 days

To Crossing

Touch time: 1,052 min.

Queue time: 0 – 8 hrs.

Transport time (truck): 7 – 9 hrs.Transport time (rail): 4 – 6 days

To Drop Yard To Gate

Determine long-haul

option

TERMINAL

5 hrs. +Rail: 4 – 6 days

Truck: 2 – 4hours

16 hrs.

0 – 8 hrs

90 min. 2 min.

- Product requirements

Carrier notification

Trailer delivered to assigned bay

Rail AMSRail AMS 4 hrs. prior

Carrier

Importer of Record

Ultimate ConsigneeACE

Broker

Impending shipment

I Primary Processing

99% of shipments are releasedafter primary processing

Depart

30 min

3 min.

I Open Doors(1%)

1 hr3 – 4 hrs

I VACIS

30 min90 sec

IVACIS

A. RandomB. BlitzC. Directed

1 hr90 sec

Finding

NOI

Hold for Compliance

(at CBP compound)

30 min6 – 24 hrs

IDetain

(Must be exported if no decision has been made after

30 days)Detain up to a max. of 30

days 0 min

I Refuse and Return

1 – 2 hrs0 min

I Seize Shipment

1 hr.0 min

YES

CBP disposesOn-site or off-site

- destroy- donate- auction

I Hold for Compliance

(At CFS – space constraint at CBP)30 min

1 – 2 days

I De-van(at CES)

24 hrs8 – 12 hrs.

I

Conditional Release

(may lead to Request for Redelivery)

30 min.0 min

IDemand for Redelivery to CBP

1 – 2 days0 min

Finding

NO

Return to Canada

July 8, 2009

YES

eManifest- 1 hr prior to

arrival- ½ hr for FAST

OR

Entry DataCF3461

Submit prior to arrival

ReleaseResult

To Secondary Processing

When directed to VACIS

To Secondary Processing

Initial Determination

I

1 hr15 min.

On-site MitigationReturn Property

- pay fine

YESFinding

PORT LIMITS – within 25 miles of border crossing

Arrive at border

ABI/ACS

NO

Return to Canada

Redeliver

LTL(FAST & C-TPAT)

I15 min.

(C-TPAT) 30 min.

COMPANY 6Customs and Border

Protection Truck Process


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Processes and Timing

3.2.1 Non-FDA Shipment

The following processes trace a consumer product shipment by dedicated truck or on intermodal train that is not subject to FDA requirements.

# Step Observations Timing

Product Flow

1 Produce order Shipping needs are reviewed at 8am. If the warehouse does not have sufficient product, schedule production. Any product produced before midnight may be loaded, assuming it approved by QA.

960 min.

2 Wait Product may wait up to eight hours, depending on when a trailer is dropped.

0 – 8 hrs.

3 Pick and load If a trailer is available, and product is ready, a trailer can be loaded, pulled to the drop yard within the company security gate, and sealed at the gate in 90 minutes. As each pallet is picked up, it is scanned. On loading, a scan is made of the bay door bar code, to ensure that the correct material is loaded on the designated truck. The load plan calls for a specific position in the trailer for each pallet. When complete, the paperwork and seal are placed on the trailer. Checks are made at the drop yard and the gate, to ensure that the load, the paperwork, and the seal match. The trailer is sealed at the gate.

90 min.

4 Transport to terminal.

Trailers are hauled to a logistics yard. Here, some are hauled to the selected port, and others are transferred to an intermodal train, depending on which US warehouse they are destined for. The mode of transport is selected to minimize cost.

5 hrs.

5 Transport to border

Trucks arrive at the border in 2 to 4 hours; trains can take from 4 to 6 days, due to distance and railway schedules.

Truck: 2 – 4 hrs

Rail: 4 – 6 days


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6 CBP process Truck: With FAST drivers, and C-TPAT Validated producers and carriers, the border crossing takes 1 to 2 minutes.

Rail: All trains have their loads cleared electronically. The actual crossing time is about 30 minutes, as the train slows down (5 mph/8 km/h) for VACIS scanning.

Truck: 2 min.

Rail: 30 min.

Information Flow

1 Truck load plan

The MRP system shows product requirements for the various US warehouses. Through a load planning application, available product, and production schedules, are used to line up individual shipments, and pallet locations (for the purpose of load distribution and trailer cube-out). The broker and carrier are informed of the impending shipment.

< 10 min.

2 Pick list creation

Pick lists are created, and issued to lift truck drivers when the product is ready to be loaded on a specific trailer at a designated bay door. The lift truck driver is also provided with the appropriate paperwork and seal.

< 10 min.

3 Truck completion

When loaded, the 3rd party drop yard is provided with the final load data. This information is in turn faxed to the carrier, who files the FAST manifest. The broker is similarly informed, and files the entry data.

< 10 min.

Timing Summary

1 Touch-time 1052 min. This includes 16 hrs. (960 min.) for production, if required.

2 Queue time Up to 8 hrs. waiting for a trailer, but it can be 0 hrs. if the trailer is already available.

3 Transport time Truck: 7 – 9 hrs. Trucking is done in two stages, first to the terminal (5 hrs) and then to the border, 2 – 4 hrs.

Rail: 4 – 6 days: The trailer is first trucked to the terminal, and then loaded on an intermodal train. With railway schedules, it can take 4 – 6 days before the train crosses the border.

4 Delay There are no delays, except as noted above, for rail scheduling.

WAREHOUSEPRODUCE &

STAGEI PICK & LOAD SECURITY GATE

CHECK & SEAL

CBP + FDA TRUCK

PROCESS

DISTRIBUTION CENTRE

DROP YARD CHECK

MRP

TRUCK LOAD PLAN

- 16 hrs.- Stage according

to FDA regulations (batch control)

- 90 min.- Scan product out

of staging and on to truck

- Leave paperwork on trailer

- Leave seal on trailer


- Hook up to long-haul tractor


- Attach high security bolt seal

- Sign out

ABI/ACS

ACE

FDABROKER

CARRIER

LOAD PLAN

PRODUCTION PLAN OR

ALLOCATION

- Proforma- B/L- ACE Cover sheet- IIT pallet

management

3RD PARTY DROP YARD

PRODUCT D/B

By FaxFAST Manifest

Entry data

FDA Data:Medical devices- Product Code- Medical Device Number- Medical Registration NumberDrugs- National Drug Code

Broker notification

18 hrsQA

review

TRAVEL TIME20 min. - 6 hrs.

CBP and FDA processes mapped

elsewhere

TRUCK COMPLETION

- Final load data

TRAILER DROP

SECURITY GATE SIGN IN

COMPANY 6

Consumer Goods (FDA)

March 5, 2009

16 hrs. 90 min. 120 min.

20 min – 6 hrs18 hrs

Touch time: 1,170 min.

Queue time: 18 hrs.

Transport time: 0.33 – 6 hrs.

- Product requirements

Carrier notification

Trailer delivered to assigned bay

Final shipmentinformation

FDA sends release,usually next day

To Border

To GateTo Drop Yard

- Product with “Hold Intact” letter issued at border may proceed to distribution centre, but cannot be used until released by the FDA

- 1 – 10 days for release by FDA

To DC


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3.2.2 FDA Shipment

The following describes a consumer product shipment by dedicated truck that is subject to FDA requirements.


Product Flow

1 Produce order and stage

Shipping needs are reviewed at 8am. Product required is produced and staged, in accordance with FDA regulations covering batch control.

960 min.

2 Wait for QA release

Product waits up to 18 hours for release by QA. 18 hrs.

3 Pick and load When a trailer is available, the product is picked and loaded, pulled to the drop yard within the company security gate, and sealed at the gate in 90 minutes. As each pallet is picked up, it is scanned. On loading, a scan is made of the bay door bar code, to ensure that the correct material is loaded on the designated truck. The load plan calls for a specific position in the trailer for each pallet. When complete, the paperwork and seal are placed on the trailer. Checks are made at the drop yard and the gate, to ensure that the load, the paperwork, and the seal match. The trailer is sealed at the gate.

90 min.

4 Transport to border

Trailers are hauled directly to the US border. 0.33 – 6 hrs.

5 CBP and FDA process

At the border, delays are rare. When crossing during FDA inspection hours, trucks cross without delay. When crossing after hours, the usual procedure is to obtain a “Hold Intact” letter from the broker, and then proceed. Generally, the FDA releases the shipment for use within a day.

120 min.

Information Flow

1 Truck load plan

The MRP system shows product requirements for the various US warehouses. Broker and carrier are notofied of impending shipment

< 10 min.


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2 Production plan

Depending on warehouse stock levels, product will be allocated or produced. Batch control is required for FDA traceability in case of a recall. When production is complete, data can be supplied to the broker for entry data filing.

< 10 min.

3 Truck completion

When the truck has been loaded, the load data is transmitted through the 3rd party drop lot operator to the carrier, who files the FAST manifest. The FDA requires pre-arrival data 1 hour in advance of arrival (2 hour PNSI not required as this is not a food shipment).

4 FDA release When shipment is allowed to proceed without FDA release, the warehouse must hold the shipment intact until the FDA reviews and releases the shipment. A release notice is received the next day in most cases, but it can take up to 10 days.

Timing Summary

1 Touch-time 1170 min. This includes 960 minutes for production, and an allowance of 120 minutes to cross the border.

2 Queue time 18 hrs. Quality assurance holds the product for review for up to 18 hours.

3 Transport time 20 min. up to 6 hrs. Shipments usually go direct to the border, but can go via the carrier’s terminal for a change of driver (short-haul to long-haul).

4 Delay There are two delays. The first is for staging until the entire day’s production has been completed, so the production lot quantity and other data has been determined (new lot starts at midnight). The second occurs when the FDA is not present to clear the shipment at the border, and the shipment must be held intact at the U.S. warehouse until released by the FDA. This can take from 1 to 10 days. About 60% of shipments are delayed this way.


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4. Key Findings

The following are the categorized key findings from interviews and other data collected from Company 6.

4.1 Summary

1) Shipping Steps / Wait Time

2) Regulatory Requirements/ Issues

3) Logistics Related Issues

4) Security Issues

5) Existing Programs & Initiatives to Address Issues

6) Compliance Cost Data

7) Observations / Gaps

FDA Hours of Operation

FDA Port Inconsistency

Re-instate CBP/FDA Co-Release

C-TPAT Green Lane

FDA Cross-Designation of CBP

Lacey Act Requirements

Maritime 10 Plus 2 Preclearance Status

FDA Shipments Restricted from Changing Ports

None noted C-TPAT and FAST are Excellent Programs

Universal Port Code is Not Working

C-TPAT Certification Costs

Canada Needs to Implement a Universal Port Code

4.2 Findings

4.2.1 Shipping Steps / Wait Time

FDA Hours of Operations The stringent requirements for FDA inspection involvement at the border results in shipments having “hold intact” being applied resulting in product having to be held until release is received if trucks arrive at the border outside of FDA’s limited hours of operation (typically 9:00am to late afternoon, Monday through Friday). Trucks are not delayed if the driver receives a “may proceed” letter from the broker.

FDA Port Inconsistency Company 6 advised that consistently the Buffalo port FDA insisted on manually checking shipments as opposed to the normal practice that do not require this protracted process.


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Re-instate CBP/FDA Co-Release Prior to 9/11, the standard practice at the border was the ability for CBP upon inspection to co-release shipments on behalf of FDA. Post 9/11 requires the “hold intact” status for the release of shipments arriving at the border outside of normal FDA hours of operation, which are extremely limited.

C-TPAT Green Lane Companies achieving status of C-TPAT Tier II and above have undertaken extensive costs and measures to comply with the requirements of the program. When this voluntary program in partnership with CBP was created, both parties envisioned a “green lane” process that would result in a “primary inspection in motion” that has not yet been achieved and needs to have priority attention attached to implement.

FDA Cross-Designation of CBP Several years ago, because of the substantially greater number of CBP officer personnel, FDA cross designated authority to inspect Bioterrorism Act shipments during hours that FDA inspection personnel were not on-site. This cross-designation should be expanded to include authority to inspect other FDA-regulated shipments that are currently delayed at the border because of the limited hours of operation of FDA inspectors (typically 9:00am to late afternoon, Monday through Friday).

4.2.2 Regulatory Requirements/Issues

Lacey Act Requirements The Lacey Act (part of U.S. Farm Act) requires labeling of genus, species, and country of origin of every wood product. This goes in effect April 1, 2009 for Lumber and Furniture; July 1, 2009 for Pulp, Paper, Paper Products, Musical Instruments; September 30, 2009 for Oil Seeds, Cork, Toys, Games, Sports Equipment.

Introduction of Maritime 10 Plus 2 Should Result in Pre-clearance Status Company 6 asserted that with the advent of the Maritime 10+2 rule that CSI container shipments passing targeting as low risk should be accorded “green lane” status for direct unloading at the port of entry for trans-shipment by truck or rail without a secondary inspection. They understand that a conveyance security device (CSD) technology needs to be developed to ensure no tampering occurred during ocean transport.


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4.2.3 Logistics Related Issues

FDA Shipments Restricted from Changing Ports FDA shipments are limited to arrive at the CBP Port of Entry specifically submitted in eManifest. In situations of weather, accidents or extensive queues at a particular port, a carrier may want to divert to an alternative port but cannot do so if carrying an FDA shipment.

4.2.4 Security Issues

No significant security issues were noted at the Canada/U.S. border.

4.2.5 Existing Programs & Initiatives to Address Issues

C-TPAT and FAST are excellent programs C-TPAT and FAST are excellent programs that have resulted in essentially a three minute primary process to cross the border on virtually all non-FDA shipments.

4.2.6 Compliance Cost Data

Universal Port Code is Not Working Under the ACE initiative, the intended outcome was that once a trip code was inputted into the system, it could arrive at essentially any commercial U.S. port of entry (Universal Port Code). This was a top priority of border users, was highly anticipated and extremely cost effective

C-TPAT Certification Costs Company 6 had approximately 1.5 FTEs for a year to prepare the application for C-TPAT certification. It subsequently spent another 0.5 FTEs for the actual validation process and will do so in the future. Company 6 acknowledged that it has been very cost-effective to be C-TPAT certified to avoid delays and penalties.

4.2.7 Observations

Canada Needs to Implement a Universal Port Code Company 6 indicated that implementation of a universal port code by CBSA for entry into Canada would eliminate extensive problems and re-work. This would result in a much improved ability to efficiently move goods.


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4.3 Quantitative Results

Description Frequency per Year

Shipments to the U.S. 24,000

Shipments subject to FDA requirements 10,000

Shipments subject to FDA during FDA hours and no delays

4,000

Shipments subject to FDA outside FDA hours with little to no delays

6,000

Shipments subject to FDA outside FDA hours with delays (i.e., non-timely “May Proceed” notification)

40


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5. Border Crossing Costs

Border-related costs, which are quantified on an annual basis for Company 6, can be categorized into one of two groups: compliance costs and other costs (i.e., participation in facilitation programs, etc.).

Compliance costs consist of the number of full-time equivalents (FTEs) employed by Company 6 to prepare the necessary documentation for the transportation of consumer goods across the border. A significant amount of time has been invested in developing the order system that automates much of the process, but is not included in this cost as it was incurred a number of years ago.

Other costs have been incurred for dealing with U.S. Food and Drug Administration approval delays (i.e., untimely “May Proceed” signals) and maintaining program certifications. The lack of “May Proceed” notifications result in delays since these shipments/trucks cannot be unpacked and product cannot be distributed until the signal is received. As a Tier III member of the C-TPAT programs, personnel must prepare documentation and ensure the appropriate requirements are met to maintain program certification. Company 6 has noted that over 97% of its shipments proceed through the border with no delay whatsoever as a result C-TPAT membership.

Category Cost Drivers FTEs Cost*

Compliance Company 6 has a number of employees to complete border crossing documentation.

2 $160,000

Other - Goods held for FDA approval

One fifth an employee’s time is spent resolving issues in which goods are held for FDA approval before a "May Proceed" signal is sent back.

0.2 $16,000

Other - Maintaining program certifications

Half of one employee’s time is spent ensuring that the appropriate C-TPAT program requirements are maintained.

0.5 $40,000

Annual Total 2.7 $216,000

* The assumed cost of an FTE for Company 6 is $80,000.

Prepared by InterVISTAS Consulting Inc.

Airport Square – Suite 550 1200 West 73rd Avenue

Vancouver, BC Canada V6P 6G5

Telephone: 604-717-1800 Facsimile: 604-717-1818

www.intervistas.com

cross-border flow analysis - case study for consumer goods industry

Documents

draft case study report

following report

border crossing costs

competitiveness of company

border protection imperatives

consumer goods manufacturer

regulatory compliance

compliance costs