My colleague Janice Abel recently wrote an ARC Strategic Report called “Best Practices for Anti-Counterfeiting and Brand Protection” (available to ARC clients only). Achieving excellence in anti-counterfeiting and brand protection (ABP) is a multipronged, cross functional effort that requires the use of various technologies. But Janice makes the case that the supply chain organization has a role to play in these efforts.
First of all, counterfeiting is a significant problem. The US Department of Commerce estimates that 5 to 7 percent of world trade involves counterfeit products, costing the global economy $650 billion per year. As Janice states in the report, “Illegitimate products present risks to the manufacturer’s intellectual property, reputation and brand, warranties, and returns.”
The top four channels where counterfeit products enter the market are independent distributors, the Internet, contract manufacturers, and OEMs. In other words, key supply chain partners are often the culprits.
Before you can trace counterfeits back to the source, you need to detect them. The first step is to employ ABP technologies. ABP technologies fall into two main categories: overt and covert technologies. Overt technologies, such as holograms, bar codes, and RFID, are clearly visible or human readable. Barcodes and RFID work better when item-level serialization and supply chain visibility allow companies to track items through the supply chain.
The use of item-level serialization will increase the detection of counterfeits and serve as a deterrent, but it will also improve supply chain operations. Improvements are based on better tracking of lead times and variability of supply chain operations, which provides data for continuous improvement. It will also increase the speed of recalls and allow for improvements to that process. However, full supply chain visibility requires the cooperation of downstream partners, who need to scan and make those scans visible. It is also expensive. Major life sciences companies have told ARC they don’t intend to do this until regulators mandate it.
Companies can also use covert technologies, which include machine readable optical holograms, micro text, or encrypted RFID. A number of newer technologies are also being utilized on the product itself, such as DNA and other in-product taggants or markers.
ABP technologies can be installed on the production line, at the end of the line, or in the warehouse. The reverse logistics process is often where counterfeits are first detected. Obviously, adding an anti-counterfeiting testing and scanning step at receipt will maximize the effectiveness of this process. Some of these counterfeit goods may need to be saved to track down the source and for prosecution; the rest should be disposed of (none should be refurbished and shipped out again).
Janice concludes by saying “The first step toward an effective ABP program is to change the corporate culture and organizational structure. Next, the company needs to recognize common best practices for ABP across the global organization.”