Counting the cost of a supply chain con

What happens to brand and business value when authenticity is compromised?

Who doesn’t remember the Chinese baby formula debacle? Close to ten years ago the industry is still counting the cost of contamination within the state-owned company’s supply chain. The loss of trust was so great that it changed the behaviour of Chinese consumers, and created a cottage import industry for foreign nationals and travellers purchasing baby formula overseas.

It is just one example of how tampering with authenticity can change the dynamic of a market, result in reduced revenues, and the downfall of local and global business alike. And of course, there is always the risk to consumers when products are tampered with, at worst, and in this case resulting in fatalities.

One indefatigable fact is that when supply chains are tampered with the consequences can be catastrophic, for consumer health and business health. Sometimes a corporation tampers with the truth itself – the most recent global example being that of Volkswagen and the ‘dieselgate’ scandal, the global cost recently reported by Charles Riley from CNN Money to be $30 billion USD in total¹.

However, more often than not authenticity is compromised within a supply chain or at the end of the chain on the shop shelf through counterfeit products. And, in today’s digital media environment, what is reported across a raft of channels can ultimately change the brands relationship with its customers, whether right or wrong.

Tip of the iceberg

What we see reported is often the tip of the iceberg. Numerous studies are now showing the depth and breadth of counterfeiting globally, across a broad range of products. Some astonishing statistics include:

• There has been a nine-fold increase in counterfeit medicines globally in the last four years.³
• There are more than 340 million fake online pharmacy web addresses touting for consumer business.⁴
• According to some estimates, over $1.5 trillion of counterfeit goods will be traded in 2017.⁵
• INTERPOL’s latest Opsen V global operation across 57 countries reported the seizure of 11,131.18 tonnes, 1,449,056.40 litres and 5,549,328 units of either counterfeit or substandard food and beverages⁶
• Counterfeit car parts costthe global automotiveindustry around $45 billion each year⁷
• China is home to a $285 billion counterfeiting industry, representing 12.5% of the country’s total exports⁸

How can global brands control authenticity?

Even when a company is state-owned it doesn’t prevent poor or even criminal decisions being made that affect the viability of brands and business. Risk such as third-party counterfeit parts being introduced into manufacturing at all scales, from automotive to aeronautics, can prove to be disastrous for both brand equity and business value alike. Government intervention is limited, particularly when it comes to controlling cross border supply chains and transhipping, so the onus falls to businesses to protect their supply chains and brand authenticity. How?

DatatraceID is seeing an increase in the business of authenticating brands across a range of industries, from chocolate packaging through to pharmaceutical labelling. Through both scale and new trace technology global business now has the capability to combat counterfeit parts and products. Embedding unique identifiers in everything from plastics to paint and printing can build trust into brands through giving consumers and business a mark of authenticity.

With such prevalence of counterfeiting globally the future protection of brand authenticity is going to come down to the end purchaser, whether a manufacturer or consumer, having the ability to authenticate that brand to gain and build trust.
References:

1. http://money.cnn.com/2017/09/29/investing/volkswagen-diesel-cost-30-billion/index.html
2. https://en.wikipedia.org/wiki/Sanlu_Group
3. Alexandra Ossola, “The fake drug industry is exploding and we can’t do anything about it,” Newsweek, September 25, 2015 newsweek.com and “Therapeutic Categories,” www.psi-inc.org
4. Kirill Levchenk, et al., “Click Trajectories: End-to-End Analysis of the Spam Value Chain,” Proceedings of the 2011 IEEE Symposium on Security and Privacy, 431-446, cseweb.ucsd.edu
5. https://www.lexology.com/library/detail.aspx?g=b2d199d5-b468-45fe-8d63-15f2d9b0b190
6. https://www.interpol.int/News-and-media/News/2016/N2016-139
7. http://www.manufacturingglobal.com/technology/nissan-and-markmonitor-remove-thousands-counterfeit-auto-parts-global-marketplace
8. http://www.forbes.com/sites/ywang/2017/03/10/is-alibaba-doing-enough-to-fight-fakes/