Supply chain · 26 January 2016

Counterfeit goods and the threat to the supply chain

Counterfeit goods
Any industry can be susceptible to counterfeit goods, and the outcome can be devastating for brand value

Small business bosses constantly strive to safeguard their reputation, and in order to have continued trust and loyalty from customers, they must be able to guarantee the quality of their goods. However, in many situations companies don’t have complete control over components and goods that enter the supply chain – and that can wind up in their end product.

The consequences of counterfeit goods

One of the biggest problems in the supply chain is counterfeit goods. Their existence is revealed periodically, often under shocking circumstances. One such occasion occurred after 55 people lost their lives when Partnair Flight 394 crashed off the coast of Denmark in 1989.

Several bolts securing the tail section had failed mid-flight. They proved to be fake parts, investigators said, and they couldn’t hold up to the stress of flight. It’s a chilling example of what can go wrong when counterfeit parts enter the supply chain.  The investigation into Flight 394 couldn’t unearth where the faulty parts came from, but it’s likely the airline procured them from a trusted dealer.

Any industry can be susceptible to counterfeit goods, and the outcome can be devastating to a business’ brand value, reputation and, most worryingly, to the safety and wellbeing of consumers. Statistics around the counterfeiting trade are murky but many estimates indicate it is worth billions of dollars.

What can small firms do to protect supply chains and customers?

Todd Snelgrove, global manager of Value at Swedish bearing company SKF, said at an event in 2015 that his firm had a full-time global team dedicated to identifying counterfeits.  “We work with a bunch of other manufacturers to try to stop this,” he explained.

“But we’ve got some suppliers that have sub-suppliers that have other suppliers, and we need to go further into the supply chain to see where that is and make sure that these things aren’t creeping into our own supply chain because of the risk it can cause, both ethically and economically,” he added.

The modern supply chain is a complex matrix of partners and suppliers scattered across the globe. So, the issue isn’t just with the components a firm gets from a direct supplier – it’s important to also consider the relationships that occur further down the supply chain.

If business owners can observe items as they move through the whole product cycle, including verifying lots and serial numbers, then they are better placed to have a complete picture of their supply chain components.

Achieving the right level of insight into the breadth of activities and suppliers involved in such complex supply chains requires end-to-end visibility and traceability. The patchwork of portals, spreadsheets and email exchanges that exist in many small businesses do not provide the holistic and complete view of the production and movement of goods from end-to-end that is now needed.

In order to achieve this, small business owners need to view their suppliers, partners and providers as a network of collaborating companies and connect them accordingly. By integrating supply chain management systems, trading partners and the data that moves between them, owners can access accurate information at any point and any location in the chain.

Through such collaboration bosses can have better insight into their supply chain and a better understanding of their product cycle to assist in the quality assurance of their end product.

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Kurt Cavano is the vice chairman and chief strategy officer of GT Nexus, a cloud based supply chain platform provider. It helps companies to manage their logistics and trade processes. Kurt is responsible for maintaining the company’s track record of innovation and market success, and for guiding key customer, industry and partner relationships.

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