Updated: Jun 22
Counterfeiting is a massive economic problem that siphons off billions of dollars in lost business revenues each year, making vulnerable individuals and corporations to heightened health, safety, and even cyber security risks from fraudulent materials and defective parts. In the global pharmaceuticals sector, between $75 billion and $200 billion in counterfeit drugs are sold each year. In the electronics industry, fake parts incur a loss of about $100 billion annually cost for component manufacturers. In the European luxury goods market, about 10% of all items for sale are accounted for as counterfeited, representing approximately $28 billion in lost value. The counterfeiting of luxury goods is worth $1.2 trillion and much more complex than previously imagined.What makes the impact of counterfeiting so pernicious is the extent of its tentacles: fraudulent parts and goods affect every stage of the product life cycle—from the manufacturing floor to the point of sale, to the servicing function and beyond—driving up costs, eroding bottom lines and economy , and damaging company reputations and brands.
THE EXTENT OF COUNTERFEITING: THE BROAD CONTOURS
Companies invest significant time and money tracking parts, validating provenance, communicating with partners, and filling out copious documentation to ensure the authenticity of their products, protect customers, and satisfy regulatory and compliance demands. Yet counterfeits infiltrate every phase of the production, distribution and marketing to rob the brand owners of huge profits.
Procurement and Production Stage : Large manufacturers often lack the capability needed to verify the authenticity of parts and raw materials and trace materials back to their source. This issue is being exacerbated due to the creation of long,circuitous, complex global supply chains, varying data and reporting quality across the vendor base, and a growing list of regulatory and compliance requirements. Fake and defective parts add risk and cost not only compromise the quality but the inadvertent use of counterfeit components during the manufacturing process can compromise product quality, leading to recalls, lawsuits, attrition, and long-term reputation harm.
Sales & Marketing: Cleverly manipulated labels and reverse-engineered products is making detection very difficult and tricking consumers and barring corporations from spot counterfeit goods in their supply chains. In consumer goods, the Counterfeiting is exploding in the rapidly growing online retail channels. The online channels make it easier for fake makers to insert Counterfeit products into the market and impossible for brand owners harder to trace & track.
After-Sales and Support: Counterfeits can lead to spikes in service requests, unnecessary and costly replacements, and skewed customer satisfaction figures. Recalls have become endemic in highly sensitive sectors like Automobiles and electronics consuming not only time and budget, but bringing Brand equity to stake.
Blockchain platforms give manufacturers the long sought for solution : an effective, scalable means of combating the risks posed by counterfeit parts and goods. By pairing blockchain with IoT, stakeholders across the value chain can ascertain whether a component or a product is legitimate, where it was sourced, how it was transported and stored, and if it was previously sold.
LEVERAGE THE BLOCKCHAIN
The implementation of the blockchain system can achieve the following:
● Counterfeit prevention: A blockchain platform, combined with innovative packaging technologies, significantly improves control over the supply chain and empowers customers to verify the product prior to consumption, therefore combating counterfeiters.
● Customer retention: Customer relationships are improved and increase in value as the brand can provide a greater level of data integrity otherwise not possible.
● Enhanced Customer experience: Customer satisfaction improved as customers expect transparent, verifiable provenance information about any brand and the specific contents of the item they are considering purchasing. Quality, unique characteristics, and sustainability of a brand can be documented and optimized (i.e., evidence-based provenance) as Blockchain enables irrefutable proof of provenance.
● Building sales: Brand owners typically have only limited visibility regarding consumption and consumer data. The mobile app for consumers imparts instant feedback and answers every question about consumption and consumer information: what, where, and when.
● Supply chain collaboration: It establishes shared, secure, information flow records—a “shared version of events” across networks of the relevant supply chain transactions, processes, and partners. This shared version of events enables improved supply chain efficiencies, better multi-party collaboration, and streamlined resolution processes when exceptions or disputes occur.
● Stock control:, Blockchain technology provides additional information that enables “real time” audits thus minimizing the risk for the distributors that there is a risk that unsold items will be stockpiled, negatively impacting prices.