News

Reducing Counterfeits in Legitimate Supply Chains

October 22, 2015
Categories: Counterfeit, Global Supply Chains, Intellectual Property, Intellectual Property Protection, IP Protection

In 2012, FBI agents entered the home of Rudy Kurniawan and found inside everything needed to produce counterfeit wine: corks, dozens of empty bottles and 18,000 labels of the world’s rarest wines. For years, Kurniawan ran a wine counterfeiting factory from his kitchen in the Los Angeles suburb of Arcadia, selling at least $50 million worth of counterfeit wine to unsuspecting collectors.

In Kurniawan’s case, collectors lost their investment. In other instances, counterfeits have the potential to increase health and safety risks. A few cases in point:

  • In 2012, the U.S. Food and Drug Administration (FDA) warned doctors that a fake version of the cancer drug Avastin was being distributed in the United States.
  • A U.S. Senate committee report described 1,800 known cases of suspect counterfeit electronic parts in the defense supply chain, originating from more than 650 companies.
  • The U.S. Federal Aviation Administration has estimated that more than 520,000 counterfeit parts are installed on planes each year.

The increases in global expansion have given companies and consumers unprecedented flexibility, reach and opportunities. The globalization of trade has allowed companies to source products quickly and efficiently, reduced production costs and raised living standards everywhere. For all its benefits, however, the globalization of trade has exposed numerous points of vulnerabilities where counterfeits can infiltrate the products of even responsible companies.

Counterfeits have infiltrated the supply chains of even reputable, well-respected multinationals—sometimes with tragic consequences for consumers. By taking steps to responsibly manage their own practices and supply chains, companies can help eliminate the bad actors that prey on supply-chain vulnerabilities, forestall unnecessarily burdensome regulations, and mitigate risks to public health and safety.

What can a company do? A CREATe.org whitepaper outlines 10 practices that companies can implement to reduce counterfeits in their legitimate supply chains:

  1. Ensure greater traceability in the supply chain
  2. Foster greater cooperation, coordination and accountability among all participants
  3. Increase information sharing to strengthen the supply chain integrity
  4. Include provisions in supplier contracts that facilitate and improve oversight
  5. Calibrate supplier assessments to the risk level
  6. Engage proactively with suppliers on an ongoing basis
  7. Ensure that supplier requirements flow down to subcontractors
  8. Develop procedures for reporting on and ensuring destruction of counterfeit parts
  9. Work collaboratively with government authorities to support product safety and quality
  10. Increase awareness among consumers and end users about the hazards of counterfeits

The complex and distributed nature of supply chains has created vulnerabilities for companies and organizations. Governments and regulations can only go so far. As such, industry can benefit from taking a more proactive approach to protecting the supply chain from counterfeit products and pirated materials.

To learn more about counterfeits in the supply chain, click here to download CREATe.org’s Health and Safety Risks from Counterfeits in the Supply Chain whitepaper.

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