The threat of counterfeit goods in the supply chain

Companies do a lot to safeguard their reputation. One of the most important for the continuing trust, loyalty and repeat-spend of their customers is guaranteeing the quality of their products. 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.

Counterfeits in the supply chain are a problem. Periodically their existence is revealed, often under shocking circumstances. One such occasion occurred after fifty-five people had lost their lives when Patnair 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. It’s likely the airline procured them from a trusted dealer.

There have been other examples of counterfeits causing harm when they enter the supply chain. Any industry, it seems can be susceptible to it and the outcome can be devastating to business brand value and 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 several hundred billion dollars.

What can companies do to protect their supply chain and customers? Todd Snelgrove, Global Manager of Value at Swedish bearing company SKF, said at a recent event:

“We have a full time global team where [identifying counterfeits is] all they do. We work with a bunch of other manufacturers to try to stop this. 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, ethically and economically.”

Today’s supply chains are a vast matrix of partners and suppliers scattered across the globe. A company can’t just concern itself with the components it gets directly from the supplier it works with – it also has to consider the relationships that occur further down the chain.

Companies that can observe items as they move through the whole product cycle, verify lots and serial numbers 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 businesses does not afford the holistic and complete view of the production and movement of goods from end-to-end that is now needed.

To achieve this, companies 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 they can access accurate information at any point and any location in the chain. Through such collaboration companies can have better insight into their supply chain and a better understanding of their product cycle to assist them in the quality assurance of their end product. 

Diane Palmquist is VP, Manufacturing Industry Solutions at GT Nexus, the world’s largest cloud-based business network for global trade and supply chain management.