Heineken owns over 115 breweries in more than 65 countries. In May 2007 the Dutch Tax and Customs Administration (CustomsNL) informed Rob Wessels, Customs Manager at Heineken, that by mid June 2007 the new Export Control System (ECS) would become effective for part of Heineken’s export, specifically the non-excise goods (i.e., soft drinks) that Heineken exports via the port of Antwerp, Belgium. A later phase (July 2009) would make ECS compulsory for all export. ECS is a European Union (EU)-wide system. Companies must submit export declarations to ECS for customs control purposes.

The introduction of ECS threatened to have major negative effects on Heineken’s international supply chain in terms of (1) disturbed logistics (currently Heineken ships containers as soon as they have been loaded; ECS would require that containers are not shipped until the system provides a shipment Movement Reference Number); (2) costs of implementing and maintaining the system; and (3) deadline for ECS implementation. It was impossible for Heineken to implement an interface from its ERP system to ECS within one month. If Heineken could not submit its export declarations to ECS by mid June 2007, it would no longer be able to export via other ports than the Port of Rotterdam, resulting in a clear commercial disadvantage.

In his attempts to find a short-term solution, Wessels had a very important tool at his side: trust. Heineken has a history of 30 years of close collaboration with CustomsNL, based on trust backed up by a high level of functional supply chain transparency. The ability to account for every activity of the company is achieved by means of information technology and extensive internal control mechanisms throughout Heineken’s supply chain. Such trust and close collaboration go so far as a representative of CustomsNL being involved in Heineken’s design and implementation of an excise module in its ERP system. This trust and concomitant transparency facilitated a short term workaround for Heineken.

The reason for CustomsNL to allow Heineken to use a workaround is that as opposed to many other companies, Heineken provides CustomsNL full transparency to its supply chain operations, thus satisfying all CustomsNL’s control requirements even if ECS is not yet in place.
Broader perspective on Heineken’s problem

ECS was only one example. The EU-wide Customs 2013 program will add a number of new systems, the next one being the Excise Movement & Control Systems (EMCS). Although the EU strives to reduce administrative burdens, each new system in Customs 2013 introduces costly islands of automation that may introduce disturbances to supply chain logistics. An alternative approach was needed in order to achieve a real reduction of administrative burdens for businesses and government. The Beer Living Lab offered such an alternative approach.
The Beer Living Lab

The Beer Living Lab (BeerLL) is an R&D pilot project which aims to bring innovation to cross-border supply chains, reducing administrative burden while preserving government control. The key players in the BeerLL are the Vrije University Amsterdam, CustomsNL, Heineken and IBM.

BeerLL participants designed a new trade procedure, relying in two main technologies: TREC smart seals and service-oriented architecture. First, the TREC smart seal for container security has the following features: (1) sensors to monitor parameters including humidity, temperature, shock and unauthorized container openings; (2) real-time container location traceability through continuous satellite connection; (3) ability to send information and alerts in case of predefined rules (e.g., ‘container arrives at destination’). Second, open-standards based EPCIS repositories using a service-oriented architecture allow secure information sharing. Every supply chain partner will publish its data regarding a shipment in its EPCIS repositories; the data will be available for other supply chain partners and for government (during the shipment using handheld devices, and after the shipments for audit purposes).

Heineken considers the exemption from the need to implement government information systems as a key competitive advantage. Every time such a new system would be introduced, Heineken will only have to make commercial data available for government in its highly-secured EPCIS repository. Importantly, Heineken’s repository is not just for the CustomsNL. Heineken is willing to allow access to customs administrators in other countries as well, such as the United States.

The BeerLL concept is in line with the World Customs Organization’s vision to create partnerships between customs and businesses, and to rely on the control measures of companies in the fight against terrorism, because a company knows its own supply chain best. By freeing up resources that were so far used to control cargo of these secure traders, the government can better focus its efforts on controlling high-risk cargo.

A “Win-Win” For All
We argue that a different reality is possible in which businesses and government experience a win-win situation. The Beer Living Lab concept will allow Heineken not only to mitigate the negative effect that government systems can have on its supply chain performance but can also bring extra benefits as, due to the increased transparency and security Heineken can obtain an AEO status and enjoy faster customs clearance, less physical controls and other benefits.

The message for global supply managers: Be proactive with your customs authorities. Working together, you may be able to bring important advantages to both sides.

Source: SupplyChain Market Review

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