Global supply chains are facing unprecedented disruption, with factors like COVID-19 and geopolitical conflict placing untold strain on commercial logistics. And aside from rising prices, soaring demand and a shortage of raw materials, this disruption has led to an unexpected consequence within the supply chain sector: a sharp rise in counterfeit and fraudulent products.
Amid the disruption of the past two years, consumer demand hasn’t abated. On the contrary, for e-retailers in particular, demand has risen astronomically, placing additional stress on an already laboured supply infrastructure.
The consequence of rising demand and a shortage of raw materials has created a perfect storm for the health and security of global supply chains. Gaps have emerged in almost every industry, and it’s here where criminal organisations have been able to exploit weakened supply systems to circulate counterfeit goods that are cheaply made and of sub-standard quality.
But just how big is the problem of fraudulent products? And what can businesses do to protect their supply chain and customer base from the threat of counterfeit goods and materials?
Here, we’re taking an in-depth look at the issue of product fraud within global supply chains, with guidance for businesses on how to protect themselves. We’ve also included data and statistics from a recent Intact survey, which set out to uncover how able customers are to identify counterfeit goods from the real article.
- Why Are Disrupted Supply Chains Vulnerable to Fraudulent Products?
- How Businesses Can Mitigate the Risks of Fraudulent Products
- Fraudulent Products Survey: How Easy is to Spot Counterfeit Goods Sold Online?
- What is the Impact of Fraudulent and Counterfeit Goods?
Disruption within supply chains always has a consequence. For example, businesses who rely on the timely delivery of materials and products to fulfil customer orders may need to look elsewhere when their usual suppliers are unable to deliver – and it’s in these sorts of scenarios where fraudulent products can creep into the picture.
Typically, supply chain issues are often connected to a lack of visibility, disrupted global supply networks, large volumes of financial activity, or complexity of digital systems. And when you add external factors like global conflict and energy crises into the mix, the problems only worsen.
So, why might your supply chain be vulnerable to the circulation of fraudulent products? Take a look at our guide below, which covers some of the key issues to be mindful of.
Trade in counterfeit goods equates to 3.3% of all global trade, with the OECD predicting that the value of fraudulent items will reach $3 trillion (€2.7 trillion) in 2022. As such, it’s imperative that businesses strengthen their processes in order to sidestep and overcome the challenges caused by counterfeit goods on the market.
This, of course, is easier said than done. Amid a period of economic and geopolitical uncertainty, businesses big and small are seeking ways to adapt to changing market conditions whilst also looking to strengthen their profit margins and stay afloat – this leaves many companies open to encountering fraudulent goods and materials as they look to alternative ways to deliver for their customers.
Businesses in all sectors are vulnerable to the risk of fraudulent products proliferating within their supply infrastructure. Avoiding fake goods and materials is becoming ever trickier, but it’s vital to take a proactive approach to avoid the negative consequences – which include things like reputational damage and a sizeable drop in revenue – that can come as a result of purchasing or trading in counterfeit goods.
When bottom-line profit and business continuity are at stake, businesses can’t afford to be complacent about the strength and transparency of their supply chain infrastructure. Below, we look at some of the ways you can mitigate supply chain vulnerabilities, including actionable tips on utilising business management solutions to prevent any attempt of fraudulent activity.
Having the appropriate business management software in place to manage your supply chain, inventory, and eCommerce systems is essential to staying one step ahead of becoming a target for fraudulent goods and materials. A fully integrated suite of tools and applications provides greater visibility into each component of the chain, helping you to detect and address issues immediately so appropriate action can be taken.
Below, we’ve outlined some essential tips and advice to help you to mitigate the risk of being a target for fraudulent products within your supply infrastructure:
- Performing the appropriate due diligence is, of course, absolutely critical when dealing with new and existing suppliers. Businesses should always do their homework on partners and suppliers before agreeing to work with them, validating their offering and ensuring that they’re operating within the law.
- One way to mitigate and spread the risk of supply chain fraud is to diversify your product range. By buying products from multiple credible suppliers, you’re effectively reducing the risk of falling victim to product fraud, while ensuring your business isn’t overly reliant on a single point of supply.
- Access to real-time data, across a fully integrated business management or ERP system, plays a huge role in helping you to understand where your business is currently positioned. It can also highlight areas where supply chain vulnerabilities may lie so you can take action to protect the integrity of your supply chain.
- Purchasing and Stock Management go hand in hand. Modern ERP and smart stock management can help you ensure your products are legitimate, authentic, and verifiable. With advanced batch tracking capabilities, you can trace the origins of a product, so both you and your customers can trust that it’s the genuine article.
As part of our exploration of a rise in counterfeit goods related to supply chain disruption, we launched a survey to uncover just how easy it is for online customers to be duped by fake and fraudulent products. With items ranging from footwear and games consoles to sunglasses, jackets and watches; we tasked respondents to differentiate genuine products from their fraudulent counterparts – with some interesting results.
Overall, tech devices such as an Apple TV fooled people the most, with 68% of people believing that a fake product was the real deal. Counterfeit clothes and footwear also proved difficult to distinguish from genuine items, with some people believing that genuine products were fake, and vice versa.
In testing people’s ability to identify authentic products from fakes, we set out to highlight just how difficult it now is to distinguish between genuine and counterfeit goods. For businesses, it’s never been more important to take a robust approach to supply chain management, with tight controls and advanced tracking capabilities to maintain the authenticity and quality of goods and services.
From lost revenue to reputational damage, the impact of fraudulent and counterfeit goods on a business can be detrimental and widespread. But the ill effects don’t end there, and you need only look at recent examples of counterfeit criminality to recognise how damaging such practices can be.
One such example occurred in 2021, when officers from the NWROCU (North West Regional and Organised Crime Unit) seized over £3 million in counterfeit goods during a crackdown operation. With items including clothing, perfume, bags, jewellery, and accessories; the seizure demonstrates the scale of the problem of counterfeit goods, and how many different industries are affected.
It’s important to remember that the sale and distribution of counterfeit and fraudulent goods isn’t a victimless crime. Commenting on this particular case, Inspector William Jennings-Wharton said: “Counterfeit goods are not a victimless crime. They are funding a wider picture that involves money laundering, organised crime, and cheap labour. The profits from such businesses can be used to fund other serious crime, and often with that comes violence which can have a devastating ripple effect on communities and nearby legitimate businesses.”
Given the harmful ‘ripple effects’ that can result from the continued sale and distribution of fraudulent goods, every business has a duty to validate their supply chain – performing due diligence on suppliers while leveraging data to spot vulnerabilities in their system. With a proactive approach, you can mitigate risk and maintain tight control of your supply chain.
At Intact, we offer ERP and business management solutions that can simplify and strengthen your supply chain management. We can help you tighten control of your business processes and systems to deal with every type of problem that could affect your long-term performance and growth.