As a way of protecting their brand image businesses must invest in eliminating counterfeits in the supply chain. By making sure that there is legitimacy and transparency throughout the supply chain, retailers and manufacturers can, at least to somewhat, eliminate the risks associated with fake products.
By controlling product flow and the chain of custody, brands are better able to provide quality assurance to their customers. They are also able to make a case for their legitimacy in the marketplace. Fail to do this and the risk of original products being switched with fakes at any point in the supply chain increases exponentially.
False product labeling, misappropriation of other businesses’ trademarks, and inferior or fake components and materials, are good examples of the way intellectual property and counterfeit products hurt companies, and by extension, consumers.
These problems become even more unmanageable when the assets of a business are spread out the world over and fed by an array of logistics services and supply chains. These brands have no choice but to develop and deploy risk management protocols throughout their enterprise footprint, especially in their chains of supply, to stop the counterfeit business from wreaking havoc on their reputation as well as their revenues.
Few developments in the marketplace have helped grow the counterfeits business as much as the internet has. Before the emergence of the internet, counterfeiters still existed, but their reach was limited. It was harder for them to distribute counterfeits through channels that the product creators had not authorized.
What is perhaps now of greater concern to brands today is the fact that counterfeits are finding their way into legitimate chains of supply. The reputation of a brand suffers a great deal when illegitimate goods are distributed undetected by official resellers. The business, off course, loses revenue, but consumers also get shortchanged and the product experience they could have had is replaced with another whose quality, is anyone’s guess.
Counterfeits enter the supply chain in a number of ways. In Asia for instance, where many European and American brands have established relationships with many factories, a factory owner could purchase be the entry point. He could decide to buy an unauthorized component material, not necessarily to cut corners or reduce costs, but perhaps just in an effort to meet a deadline or maintain long-standing business relationships.
Imagine a scenario where a factory owner decides to buy shoelaces from an acquaintance or a friend, though he knows that the shoelaces are not authentic. He could do this because the friend or acquaintance is within the area and can supply the shoelaces in time to meet a looming deadline.
It could also be that the process of purchase is simpler with this unauthorized dealer than using the official channels of supply. After the first time the factory owner successfully makes this supply, a new working relationship emerges and the possibility of leveraging this new relationship in future lingers.
But the factories are just one of several places within the supply chain that counterfeits can be introduced. One other point in the supply chain where many counterfeits are introduced is at the port, especially in countries where ports are not secured, giving counterfeiters relatively easy access to goods on transit.
The retailer could also be the culprit, particularly if they have several stores that they can leverage to maximize their ill-gotten gains. Individual consumers can sometimes be in on it, buying from sources they know are not authentic yet pass them on to other consumers as the real thing on used market platforms like Craigslist and eBay.
There are at least four reasons why the counterfeits business has been growing almost entirely unabated in the last decade or so:
- The high cost of the original product
- The ease of counterfeiting these products
- The relatively low risk that counterfeiting presents to the counterfeiter
- The globalization of the supply chain
These problems are further confounded by the fact that there have been few new and effective measures that have been introduced to deal with fakes in the supply chain. In countries where law enforcement is weak, counterfeiters can set up shop and create a distribution chain of these fakes to the rest of the world.
Parts of The Supply Chain Most Vulnerable to The Introduction of Fakes
Unscrupulous traders find a way to sneak in fakes into the supply chains at different points, based on whether it’s in a developed country or a developing country. In Europe, the U.S., and other developed regions of the world, the supply chain is somewhat secure. In the U.S., the fault lines in the supply chain are at the wholesalers’ level while in Europe, it’s often at the re-packagers level.
In developing countries, the weak points are at practically every step of the chain of supply. In these countries, regulatory authorities offer insufficient oversight, almost guaranteeing that while local manufacturers might not be producing counterfeits, they are manufacturing substandard products. In these countries, the inspection of goods at the ports is often resource-constrained. Therefore, goods are inspected only visually.
It is also not uncommon to find that regulatory agencies in these countries do not have proper information about all the brands and products that are distributed to consumers locally. To make matters worse, the products are often sold in smaller packages outside the original packaging, and the retail transactions take place at market stands or other such unauthorized points of sale.
It is the combination of all these factors that creates an environment where consumers regularly get raw deals as unscrupulous counterfeiters do everything in their power to create money-making opportunities at the expense of legitimate business entities throughout the supply chain.
The Impact of Counterfeits on Profits and Revenue Growth in Business Enterprises
Today, the counterfeiting business is a trillion dollar industry and a seemingly unending threat to genuine brands worldwide. The growth of the tech industry has also helped counterfeiters develop sophisticated methods of replicating genuine goods.
Counterfeits often have devastating effects on a business, especially if they continue making their way to the consumer unabated. Some of the ways this devastation manifests itself include:
- Overproduction costs
- Increasing claims of product liability
- Loss of profit margins and sales revenue
- Product and brand reputation damage
If this continues for a long time, it has the potential to run the genuine brands out of business.
The counterfeiting lifecycle
There are four stages in the lifecycle of the counterfeiting business:
Existing Technologies That Protect the Supply Chain
To understand the best anti-counterfeiting solution for a given company, a proper evaluation of the projected risk in its supply chain must be carried out. Such an evaluation should be based on these three components: the brand profile, its active channels of trade, and its target market.
As you would expect, brands with high-demand products are at a much greater risk of global counterfeiting. Typically, anti-counterfeiting technologies fall into these three categories:
Holographic images, UV inks, and color-shifting inks are often used as an anti-counterfeit measure in currencies; while smart cards are often used to replace cardboard passes and paper tickets, which are quite susceptible to forgery; and an RFID tag is embedded in a product for secure identification.
Many companies today use track-and-trace systems that streamline the process of tracking packages at the saleable package level. For instance, instead of simply tracking a caseload of packages with many bottles of pills, the track-and-trace system tracks the individual bottles. This way, the manufacturer gets to know when this saleable package is delivered to a retail shop or sold to a consumer.
Technologies of The Future in The Fight Against Counterfeit Products
The majority of business executives agree that keeping brands safe is becoming increasingly difficult. Indeed, according to recent research findings, many company decision makers expect that keeping their brands safe from counterfeits will become even more difficult in the near future.
The new challenges in this space will primarily come augmented reality, the dark web, and artificial intelligence. A recent MarkMonitor report indicates that while 41% of brands are already seeing a notable increase in brand infringement, 38% of brands expect to experience loss of sales as a consequence of counterfeit products in the next half a decade.
To deal with these challenges, businesses are allocating resources to technological initiatives designed to fight counterfeits. Brands hope that advancements in fields of track-and-trace, blockchain, and holography will help minimize the effects of counterfeit goods on brand reputation and sales revenue.
“Many brand owners have started using barcode or QR code with a digital camera and create an e-Fingerprint (a unique digital signature) on product packaging that streamlines product authentication.
Blockchain technology has also started playing an important role in product packaging with the help of QR code in order to track and trace products as a part of the supply chain. Some solution providers have been also using private blockchain system to fight counterfeit products in the pharmaceutical industry.
All these solutions are built on the cloud-based platform with provision for mobile authentication.
Conclusion
Since 2004, NanoMatrix has initiated a journey to fight against counterfeit products by providing secured identification, traceability and authentication solutions and other integrated services to help brand holders. Our products are relevant to multiple industries such as FMCG, Retail, jewelry, consumer electronic goods, optical and photographic devices, and more. With our expertise of fighting counterfeit products and using power of latest technologies such as AI, blockchain, and IoT, and those mentioned above, we will provide end to end solution to address contemporary challenges related with product and brand protection. Our aim is to give a ‘one stop’ solution to our customers by utilising advanced techniques providing end to end solutions to fight against counterfeit products.
About NanoMatriX
NanoMatriX International Limited has been a proficient innovator and supplier of document and product protection systems and web-based, on-demand verification solutions to customers located in more than 50 countries.
BUSINESS OBJECTIVE: DIFFERENTIATE ORIGINAL FROM FAKES
Our business objective is to enable our government and brand owner customers to differentiate between original and fake product and/or document.
NanoMatriX is specialized to help companies to enhance:
- BRAND VALUE
Fight counterfeits, parallel trading and warranty fraud
- SUPPLY CHAIN CONTROL
Design & deliver secure labels and NFC tags for track & trace
- DATA DRIVEN DECISIONS:
Access to data rich reporting portal on product track & trace and consumer engagement
For more information visit our company website below:
https://www.nanomatrixsecure.com/