Are fake goods a growing problem for procurement?

18 January 2007
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18 January 2007

Under half of buyers consider counterfeit products present a growing problem to their profession, according to the latest SM poll of 100 buyers.

The result follows this month's announcement from the UK's drug safety watchdog that it was investigating twice as many cases of fake drugs compared with five years ago. The Medicines and Healthcare Products Regulatory Agency said five incidents had been detected in the past two years and another 25 cases were being examined.

Some respondents to the poll said that stringent supplier appraisals should prevent fake products entering supply chains. Simeon Bennett, head of procurement at The Learning Trust, said a good buyer should be just as aware of any counterfeit issues in their sector as they are of market prices or EU procurement rules. "The buyer has the responsibility of investigating and reducing the risk to their company," he added. "The problems come where sub-suppliers are not as scrupulous and provide counterfeits as part of their supply."

Yet many buyers feel that the responsibility of preventing counterfeit supplies from entering the chain is too much for the buyer alone. Jamie Levy, managing director of consultancy Kontingency, said counterfeiters in some countries were producing fake goods in the same factory where genuine components were made. He added that anti-counterfeit products would become increasingly more expensive as counterfeiters became more technologically advanced. "It is, however, also an advantage for procurement," he said. "The demand for better ways to produce products that can't be counterfeited is increasing, therefore the value of procurement can be better seen."

Most buyers who claimed fake goods were a problem said increasing business competition and pressure on procurement functions presented the biggest opportunities for counterfeiters. Phillip Maraze, stores controller for Carnaud Metal Box Zimbabwe, said low-cost country sourcing had resulted in a flow of fake goods from China: "Most of the products bear reputable brand names but have poor product performance that cannot be matched with the original."

Buyers also think copyright plays a part in the production of counterfeit goods. Legitimate manufacturers ensure their products are covered by patents or design rights and do not reveal how they are made. This allows them to sell the product for a higher profit in the beginning, but others will witness this gain and replicate the products, selling them for less and enjoying a reasonable return.

In addition, some consumers prefer cheap fakes to expensive originals. David Taylor, procurement manager at outsourcing IT firm Xansa, said: "The rag trade probably suffers as much as anyone. Yet if they produced good quality at reasonable prices people would not take the cheaper, shoddier option."

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