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Optimising pharma supply chains: customs digitisation and integration
By Iqubal Pannu, Senior Solutions Consultant, AEB (International) Ltd
In the digital age, the pressure is on for pharma businesses to modernise their international supply chains. Cutting costs, keeping up with competitors, and meeting rising customer demands are key objectives. What’s the best strategy?
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Shippers in the pharmaceutical sector are striving to drive down supply chain costs, improve visibility, and accelerate processes through automation. As part of this effort, the area of customs management forms a natural launchpad for digitisation initiatives – with its regulatory foundation, many standard processes and administrative tasks.
But while the fruits of digitisation are already conspicuous in various areas across the pharma business, many companies still hesitate to welcome the digital revolution across global trade. And as the digitisation pressure increases and the pace of globalisation picks up, businesses are struggling to find the right customs strategy.
This challenge has been amplified by dynamic developments in the global trade environment – including trade wars between the US and China escalating in 2018 and uncertainty under Brexit for the past three years.
But change is inherent in global trade and it’s crucial for pharma business leaders to realise that the right digital set-up in global trade delivers ROI and value to the business – especially when change is underway.
Status quo insourced customs management: self-filing
With today’s supply chains spanning the entire globe and the global marketplace becoming increasingly competitive, pharma supply chain performance depends on efficient border crossings. Customs delays at any point from procurement to distribution cannot be afforded.
But once goods cross British borders, things can get complicated. Different countries use different IT systems: the UK uses CHIEF/CDS, for example, Germany works with ATLAS, and in Switzerland it’s e-dec. And depending on a company’s client and supplier base, customs authorities and their systems in the US or China, for example, come into play, too.
Many companies that manage their own customs clearance processes (self-filing) still operate and maintain separate customs teams with specialists for each area, each using a standalone local customs system at each location. This fragmentation leads to a lack of transparency, non-uniform processes and standards – and ultimately, to inefficiency and increased risks.
It’s high time to harmonise customs system landscapes, connect relevant systems, or simply move to a central customs platform. This will significantly streamline customs processes, deliver the right foundations to manage future changes, and provide the option to add additional customs procedures with economic value – such as automated product classification or licence management – if and when the need arises.
Status quo outsourced customs management: broker services
As customs management can get complicated, many companies opt for working with experts and outsource all or some of it to customs brokers. But on the ground, the actual handling of outsourced customs processes is often not so digital in the digital age:
For an export, typically, the exporting company sends their customs broker an email with instructions for the customs clearance and attaches the necessary documents, such as a pro forma invoice. Most brokers employ a small army of data entry clerks to then manually input the necessary data into their own system so that they can generate the export declaration.
Once goods are exported, some required documents for archiving (e.g. the export accompanying documents and endorsements of exit) are often returned to the exporter by e-mail, and others may be sent back by courier. Overall, it’s an inefficient, labour-intensive, and error-prone process. It leads to data silos and paper archives, making it difficult to get the big picture.
It’s costly, too, because manual data entry efforts by brokers must be reflected in their costs, often reflecting a difference of up to 50 percent between data transmission by e-mail and using an integrated solution. Clearly, linking brokers directly to their customers’ IT systems would help to streamline and speed up the process, while lowering transactional cost and eliminating errors.
Cutting costs, accelerating processes and minimising risk: IT integration
The lack of integration between involved parties in customs management creates operational inefficiencies and unnecessary risks in pharma supply chains. Ideally, customs-related data should be available on one centralised platform wherever possible.
Data silos spread across various countries and sites, or held by brokers, must be consolidated. This requires an IT solution that works seamlessly in both directions, providing standard interfaces, transparency, and easy access for participating parties from all sides.
Global trade and customs regulations change frequently and dynamically – possible changes under Brexit are just one example. The good thing about integrated customs platforms is that they allow for changing strategies and processes, and adding new procedures as needed:
Expanding or sourcing from new markets, for example, or moving from self-filing to customs brokers, applying new customs tariffs, or managing new trade agreements for existing trade lanes. Once all relevant customs workflows, data, and partners are fully integrated into a company’s end-to-end supply chain processes, they can deliver added-value.
This directly translates to faster, safer, and more cost-effective pharma supply chains. And it provides a flexible framework for managing future changes, adapting to new requirements, and growing the business.
Iqubal Pannu, Senior Solutions Consultant, AEB (International)
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