Cooperation Counts

Securing Supply Chains

Businesses and industry organizations are working together to secure supply chains.

By Janice Meraglia

Counterfeiting represents a tremendous, growing threat to the integrity of global supply chains. Within multiple verticals – from defense to industrial parts to textiles and beyond – counterfeit goods pose serious safety risks and jeopardize consumers. The automobile industry, for instance, considers each car part a safety part – from microprocessors to bearings.

Although each sector is aiming to stem the tide of fake products from entering supply chains, one trend transcends sectors: the realization that cooperation is essential. Manufacturers are banding together with government initiatives to establish traceability, realizing that fake goods pose as much, or more, of a threat to supply chains than actual known competitors. By working together, legitimate manufacturers will reclaim the market from counterfeiters (shadow competitors) and will be rewarded for their diligence in driving out fakes. By taking a proactive approach such as molecular tagging, proving the positive becomes the quality standard – versus finding the fakes, which is reactive and allows counterfeiters to call the shots.

The Scope of the Threat

The scope of the threat is reflected in the Organization for Economic Co-operation and Development’s (OECD) global counterfeiting studies. In 2008, the OECD estimated that global trade of counterfeit goods accounted for 1.9 percent of world trade in 2007, or $250 billion. In 2016, the OECD estimated that global trade-related counterfeiting accounted for 2.5 percent of world trade, or $461 billion. The problem is expected to remain. The International Chamber of Commerce projects the negative impacts of counterfeiting and piracy will reach $4.2 trillion from the global economy and put 5.4 million jobs at risk by 2022. Separately, the U.S. Chamber of Commerce reports that physical counterfeiting accounts for the equivalent of 12.5 percent of China’s exports and more than 1.5 percent of its GDP.

Additional insights come from specific verticals. For example, the National Intellectual Property Rights (IPR) Coordination Center tracks counterfeiting case studies in various sectors. Recent instances have included the seizure of counterfeit Chinese airbags headed to Tennessee; the seizure of 218 websites selling counterfeit holiday merchandise, along with proceeds of approximately $179,000; and the seizure of nearly 200,000 items of fake NFL merchandise valued at $17.3 million. Meanwhile, research and consulting firm Frost & Sullivan estimates auto suppliers lost $45 billion to counterfeiting worldwide in 2011.

Cooperative Ventures

To battle such losses, manufacturers and government agencies are working in tandem. For example, the Operation Joint Venture initiative of the IPR targets manufacturers, importers and others to combat illegal importation and distribution of counterfeit, substandard and tainted goods. The IPR’s Operation Pangea was organized to target the sale of counterfeit and illicit medicines and medical devices.

The IPR’s Operation Chain Reaction is a comprehensive initiative targeting counterfeit goods entering supply chains within the Department of Defense and other U.S. government agencies. This initiative is focused on microelectronics because they are used in virtually every system and are easy to counterfeit. Counterfeit microelectronics poses a significant safety threat, potentially having catastrophic outcomes. They potentially delay Department of Defense missions, affect the reliability of weapon systems, imperil the safety of servicemen or women, and endanger the integrity of sensitive data and secure networks.

A further example of cooperative ventures in this area is the Automotive Anti-Counterfeiting Council, composed of representatives from 25 North American vehicle manufacturers, working to promote consumer awareness of safety and other concerns surrounding counterfeit automotive components.

Technology as a Countermeasure Tool

While manufacturers are increasingly appreciating the power of cooperation in battling counterfeits, they are also recognizing how cutting-edge technology can aid the fight. For example, an initiative is operating within the $32 billion global bearings market, where there have been numerous reports of counterfeit parts that can lead to design failures, damage and injuries. Several companies have taken steps to prevent fake bearings from being used. One leading global bearings manufacturer is commencing production-scale molecular tagging of these components under a Rapid Innovation Fund contract issued by the Office of the Secretary of Defense on behalf of the Defense Logistics Agency. The molecular tags are being blended into preservative lubricants used in the manufacturing of the bearings and have no impact on the overall bearing manufacturing process.

A separate initiative is occurring within the leather goods market. A leather traceability project facilitated by the BLC Leather Technology Centre, and sponsored by seven global brands to date, is focusing on the potential of one specific technology: unique molecular tagging. The technology has shown potential as a tool to provide comprehensive, verifiable leather traceability, from farm to finished products. This initiative builds off the success that molecular tagging has shown in other related sectors including cotton, wool and synthetic textiles.

Given the ever-present danger of counterfeit goods, the cooperation among manufacturers within various sectors – and their harnessing of new technologies – represents a bright development in the war to minimize this problem. Defeating counterfeiters will help all to create a safer environment while gaining back truly earned market share.

Janice Meraglia is vice president of government and military programs at Applied DNA Sciences, a provider of molecular technologies that enable supply chain security, anti-counterfeiting and anti-theft technology, product genotyping and DNA mass production for diagnostics and therapeutics. Email her at janice.meraglia@adnas.com.

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