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Fighting High-Tech Counterfeit Goods

by APICS staff | N/A 2013 | 13 | 17

While counterfeit goods have been a global issue for years, technology is making the problem even worse, especially for electronics, Fortune reports. New manufacturing techniques mean fakes are quicker and cheaper to make and are more convincing to boot, and the internet enables purchasing with easy-to-build websites that look trustworthy and can even pass themselves off as the real thing.

Counterfeiting goods is a very profitable business, says Alan Zimmerman, professor of marketing at The City University of New York. “You can get into business at very low cost, and the penalties if you get caught are very small compared to other illegal activities.” It’s also very difficult for customs agents to stop the problem, with an estimated worldwide seizure of only about one-tenth of total imports.

The speed of counterfeiting also means brands cannot rely as strongly on releasing newer products as they have in the past, says Louis Feuchtbaum, a branding attorney. As older models also frequently remain in the supply chain at a discount, fakes can create long-lasting damage to brands. They also can put consumers in physical danger when batteries explode or products catch fire.

It remains difficult to stop factories that produce fake goods, the majority of which are located in emerging economies. Manufacturers spread production between several facilities, much in the way illegal drugs manufacturing is performed, says Adrian Punderson, vice president at Oakley Brand Protection. It is wholesalers that take on much of the risk of storage and distribution, which consequently offers them a larger share of reward and power.

There are likely more fake clothes and accessories reaching the United States than electronics, which could be due to the costs and difficulty of manufacturing. “It still takes more skill to craft a cellphone than to craft a handbag,” says Susan Scafidi, professor of fashion law and intellectual property at Fordham University.

Uncovering the Complex Production of Tennis Balls  

In today’s increasingly global production environment, even a product as seemingly simple as a tennis ball can have an origin covering great distances and be sourced from several countries spanning the globe. That’s what Benjamin Snyder discovered while blogging for the New York Times tennis blog, Straight Sets. He spoke with Mark Johnson, associate professor of operations management at Warwick Business School to learn about just what it takes to produce the tennis balls used at Wimbledon. Johnson’s research indicates that the balls go through 11 countries, traveling a total of 50,000 miles before finally becoming saleable.

Materials come from locations including the United States for clay, China for petroleum naphthalene, South Korea for sulphur, Thailand for zinc oxide, New Zealand for wool, and Greece for silica. Manufacturing occurs in the Philippines, where the glue and rubber also originate, and packaging happens in Indonesia.

Tennis balls constitute one of the longest journeys Johnson has ever seen for a product. T-shirts, by contrast, travel only one-fifth of the miles of tennis balls. The complexity is in the nature of the materials, Johnson says, as well as the global nature of production in the 21st century.

Samsung’s Supply Chain Leads Asia-Pacific Region

Samsung’s supply chain is the best-performing in the Asia-Pacific region, Gartner announces as the global research and advisory firm releases its Supply Chain Top 25 list for the area. Samsung retains its top position in the Asia-Pacific list, earning strong marks for its mobile phone sales as well as its highly integrated supply chain that incorporates products, processes, and people.

“Mixed economic performance, volatility of demand, rising costs, a tighter labor market, a shortage of talent, and regulatory pressures continue to weigh on Asia-Pacific supply chains in 2013,” says Debashis Tarafdar, research director at Gartner, adding that applying best practices from the list’s leaders can enable supply chain executives to improve operations in the region. Committing to a demand-driven approach, reevaluating supply networks, strengthening lean manufacturing, and boosting multi-tier supply chain visibility are ways to improve long-term supply chain stability, Tarafdar says.

Samsung is followed by Lenovo, another electronics manufacturer, which moves up two slots from 2012. Gartner highlights its revenue growth, high inventory turns, and a hybrid supply chain model with advanced segmentation and supply chain analytics, which reduce costs and improve delivery performance.

The goal of Gartner’s research initiative is to raise awareness of the supply chain discipline and how it impacts businesses. At APICS 2013 in Orlando, Florida, managing vice president Dana Stiffler will discuss the rankings and outline how successful companies demonstrate business leadership and use supply chains to integrate demand, supply, and product into value networks. Learn more at apicsconference.org.

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