Today’s global marketplace offers us access to more products, through more channels, than ever before. This convenience, however, comes at a cost. It’s resulted in complex, fragmented supply chains, with less end-to-end visibility, making the origins of parts very difficult to trace – opening the door to counterfeits. Today’s blog explores some of the wide-ranging implications of counterfeiting and what organisations can do to protect their business.
What’s the problem?
The rate of counterfeiting is climbing 15% every year globally. Recent reports indicate it costs more than 2% of total global economic output or around US$1.8 trillion annually. GS1 says that for Australia this figure exceeds AUD$3 billion, and this does not include the effect of grey imports and the re-marketing of goods withdrawn by brand owners.
As an example, earlier this year police seized 33,000 fake Toyota parts in a Chinese factory worth AU$1million destined for Australia, including filters, cables and seals, through to safety-critical items such as airbags, brake cylinders and pads. Authorities also identified around 55,000 packages branded in the style of Toyota genuine parts, complete with barcodes and serial numbers.
Why is it a problem?
Counterfeiting can have dire consequences. When fake components are used in safety-critical applications such as aviation, transport, infrastructure, mining, electronics, automotive, pharma and medical, system failures can be catastrophic. At a minimum it can lead to brand, reputation and revenue loss, increases in warranty claims, and legal action.
Creating vulnerabilities in Defence and industry supply chains
A year-long study by the US DoD in 2010/2011 identified upwards of 1 million suspect parts in the military supply chain. For example, the Missile Defence Agency found that the memory chip in a high-altitude missile system was counterfeit. Fixing the problem cost US$2.7 million. Some years earlier, the FBI seized US$76 million fake Cisco routers which could have provided hackers a backdoor into US government networks. More such statistics can be read here.
OEM’s and end-users are demanding solutions to this growing problem
Whilst many industries are tightening supply chains, [E.g. This month US DoD finalised a new rule which requires defense contractors purchasing electronic parts to only buy from trusted suppliers] – this method can still be full of holes. Whilst one company might buy from a trusted or ‘authorised’ vendor, however its supplier – or its supplier’s supplier – might not be able to say the same.
Combating counterfeits with asset intelligence
So what makes an effective anti-counterfeit strategy and what authentication technologies are out there to help?
Leading organisations are looking to authentication technology solutions to improve visibility and traceability to combat counterfeiting. For example, the US Defense Advanced Research Project Agency (DARPA), is working with Northrop Grumman to create a tiny RFID chip for electronics and circuit boards to prevent counterfeit parts making their way into avionics and other systems.
However, authentication is only as strong as the intelligence behind each item as it moves through complex supply-chains. An effective solution should provide un-clonable global unique serialisation for each item, which is managed in a highly-secure database, and passed onto components via auto-ID such as barcodes or RFID [which can also be used in conjunction with covert security markers]. Stakeholders can then use mobile applications to authenticate items and detect counterfeits in-the-field.
Fortunately, Relegen’s assetDNA asset intelligence technology provides this authentication solution, offering a window into the history of any object, aiding brand protection, counterfeit prevention and warranty claims management, while also enabling secure item-level serialisation to provide complete visibility and traceability through complex lifecycles and supply chains.
Relegen’s assetDNA platform integrates the use of unique item-level serialisation, ID’s such as part marks, barcodes, NFC or RFID, and mobile applications for authentication. To learn more, or to request a free demo, please reach out to us via +61 (0)2 9998 9000 or firstname.lastname@example.org.