January 10, 2023

Are your internal teams talking to one another during the supply chain process?

Have you ever experienced a disconnect between purchasing, transportation, distribution, and trade compliance teams within an organization? The first few questions I ask when training a procurement team is “How comfortable are you when you are issuing that purchase order to your manufacturer?” and “Do you think your transportation and compliance teams talk to each other on a regular basis?”

There is no need for hands to be raised in response, everyone knows there are gaps. Let’s look at a specific example where both distribution and compliance functions play a large role in the supply chain process.

Good Distribution Practices (GDP) and Trade Compliance processes

Within the Life Sciences industry, these are two departments that come to mind when dealing with internal disconnects considering the delicate nature of the products that are imported and stored in an importer’s warehouse. 

A Life Science importer's marketing authorization holder is usually responsible for establishing GDP within their organization to comply with quality and government requirements, but that person or department is probably not responsible for ensuring compliance with the required information FDA mandates when entering those goods into the United Sates.

Most of the time Distribution and Compliance are two different departments or groups within a company

• one responsible for complying with US Customs Regulations,
• and, the other responsible for ensuring the goods are successfully and safely delivered to the end customer on time. Both functions require compliance with certain controls, just in different areas.

In short, there are types of medical devices and drugs that cannot be distributed in the U.S. market without an approved market authorization from the FDA and an FDA release at the moment of importation.

Taking this specific type of medical device into consideration as an example, if the authorization holder is responsible for dictating GDP and addressing the safe storage and transportation of their product, then the distribution department should naturally be aware of what to do if their shipments are on hold by FDA on site at their distribution hub. This is almost always NOT the case.

The same applies for when a procurement team places an order for controlled medical device - their Trade Compliance team does not always have visibility to that internal communication. Best practice sharing, interdepartmental collaboration, and defined responsibilities are key areas that should be an importer’s focus when addressing issues that affect their supply chain. 

To enter an FDA flagged device into the US, the importer needs to comply with product and affirmation of compliance codes, as well as other required supporting documentation that may accompany the Customs entry. If the entry is released by US Customs, but held by FDA, the shipment can most of the time be held at the importer's facility or warehouse within a 50-mile radius of the port of entry.

An importer's GDP practices should state what to do (or better yet, what NOT to do) in any given circumstance that the actual shipment is affected inside the distribution location. 

To show due diligence and reasonable care with all government agencies involved, companies should take proper care in ensuring that their compliance processes address situations such as the one above.

Internal disconnects between companies are common, and if not addressed, these disconnects can lead to monetary penalties arising from what could seem like negligent behavior to US Customs and other government agencies. A focused import and security assessment is the first step to a bird’s eye view of a company’s process health and creating synergy across departments- addressing items that affect the security and legality of a product are key areas in ensuring a company’s success to delivering satisfaction to their ultimate client. 

Crane Worldwide can help you get there via our Trade Advisory and Contract Logistics teams - a focused needs assessment can help you get where you need or highlight the areas that require improvements by addressing key items that include entry requirements for your goods, shipment security and safety protocols, parts database management, and ultimately increasing shipping, quality, safety, and compliance awareness to different departments within an organization. 

Alexandra Kleinschmidt 

Alexandra Kleinschmidt is Crane Worldwide Logistics' Regional Vice President of Sales and Corporate License Holder.

Alexandra is a licensed customs broker, certified customs specialist, and has experience in leadership roles covering customs brokerage, compliance, ocean product and sales.  

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