Supply chain visibility is imperative to fight counterfeit goods

12 March 2014 | Gerard Chick

Gerard Chick, chief knowledge officer at Optimum Procurement GroupImitation is the sincerest form of flattery; however that isn’t the way brand managers necessarily see it.

It was recently reported that Aston Martin expanded a recall to cover most of its sports cars built since late 2007 after discovering a Chinese sub-contractor was using counterfeit plastic material in a part supplied to the luxury sports carmaker.

As businesses begin to expand globally, supply chains become increasingly complex and we work with our clients to help them understand that what is going on in their supply chains is a business critical issue. And yet if we consider the issues affecting procurement and supply chain management today, the focus on using resources productively and developing strong supplier relationships, then knowing the origin and authenticity of the products we buy shouldn’t be an issue.

However, thanks to the internet and globalised supply chains, and perhaps even the global economic downturn, counterfeit goods are everywhere.

The European Union has formed an anti-counterfeiting ‘observatory’ to collect better data and disseminate tips on how best to detect fake goods. The EU, US and Japan, among others, are also discussing a treaty, called the Anti-Counterfeiting Trade Agreement (ACTA) that would strengthen international controls on counterfeits and piracy. But China, (where the Aston Martin problem began), is where 80 per cent of the world's fake goods are thought to be produced; and officials are reluctant to crack down on what is clearly a thriving local business. China is not expected to sign ACTA - essentially undermining it before it has even been unveiled.

Aston Martin’s story highlights once again how important procurement’s performance in this area is. The public became very concerned about stories of horse meat in beef burgers and pork DNA in halal-certified products last year. If these seemingly innocuous issues can come to light then what about failures in automotive or aerospace supply chains, such as counterfeit parts or cheap components. These are catastrophes just waiting to happen.

It is procurement’s job as much as any other business function to deliver value to the customer. The impact of counterfeiting isn’t just about the risk of cars crashing, we must develop an anti-counterfeiting mindset and this might mean something quite radical like not choosing China as a supply base. This is more about adopting a ‘risk versus value’ mindset, rather than the traditional cost-versus-anything-else attitude of procurement.

Supply chain visibility is essential if disasters are to be averted. Most supply chains today are so complex that knowing exactly what’s happening in them is nigh on impossible. At a recent Ethical Sourcing Forum, experts were saying the average company knows about 7 per cent of what’s going on in their supply chains – or should that be that 93 per cent of your supply chain is actually invisible! Procurement’s role in delivering customer value as part of the business model is unequivocal.

☛ Gerard Chick is chief knowledge officer at Optimum Procurement Group

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