Face up to the fraudsters

18 January 2007
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18 January 2007

A rise in low-cost country sourcing and pressure to purchase cheaper products can leave supply chains vulnerable to counterfeiters, warns Antony Barton

Counterfeit goods could pose a bigger problem for supply chains than many imagine.

The Medicines and Healthcare Products Regulatory Agency this month announced it was investigating twice as many cases of fake drugs as it was five years ago. Yet only 44 per cent of respondents to the latest SM 100 poll (see News) said counterfeit goods were a growing problem for buyers.

The number of seizures of fake goods, however, indicates a threat to supply chains as pressure on buyers to seek cheaper sources produces a healthy market for counterfeiters.

An estimated £30 million worth of counterfeit electrical products reaches the UK each year, according to electrical products trade body BEAMAInstallation. This includes fake fuses, sockets, cables and surge protectors - inferior quality products that could put lives at risk.

Dave Dossett, director of BEAMAInstallation, says his organisation has seen such products entering UK supply chains for big retail stores and wholesalers. "All UK buyers should be concerned as counterfeiters are infinitely innovative," he adds.

Over the past five years the organisation has worked with the Chinese authorities to seize at least 10 million circuit protection products made there. The rise in low-cost country sourcing increases the risk of such products entering supply chains, says Dossett.

"Many products from China go through the Middle East, where there are examples of genuine products being mixed with counterfeit products," he adds. "Some large brands have been caught selling fake products, mixing and matching with the original."

Tony Williams, CEO of anti-counterfeiting association React UK, says mixing and matching is a particular risk when buyers are dealing with "grey" or "parallel" imports — legitimate products created for a market in another part of the world, meaning that they might have a different specification or price.

A recent example of grey import saw one supermarket buying Levi jeans from outside the EU, where wholesale prices were cheaper than buying from the US manufacturer.

"We have come across fake goods mixed in with grey market goods, which makes detecting them harder," says Williams.

But the onus is also on manufacturers to prevent the proliferation of fakes. Clothing brand Burberry, a popular target for counterfeiters, has a team of 12 in its intellectual property office to protect its points of sale. A spokesman told SM the firm was educating local authorities in how to identify fake goods and interrupt counterfeiting operations as soon as possible.

Research firm IDTechEx says the use of radio frequency identification tags to safeguard medical supply chains could reach $2.1 billion (£1.1 billion) in 2016, up from today's figure of about $90 million (£47 million) (News, 7 September 2006).

Dossett says supply chain immunity cannot be guaranteed but supplier scrutiny and audits are imperative.

SMjan2007

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