What Manufacturers Need to Know About Countering Counterfeits

Imagine buying some Windex from an online marketplace only to discover that what you were actually sold was a crude mixture of rubbing alcohol and blue dye.

Mnet 210419 Investigation Magnifying
Scott FletcherScott Fletcher

Imagine buying some Windex from an online marketplace only to discover that what you were actually sold was a crude mixture of rubbing alcohol and blue dye.

Would you buy from that marketplace again? Most likely not.

For online retailers, there are few surer ways to lose your consumers’ trust and their business than by unwittingly trafficking in fakes. But unfortunately, the problem of pirated and counterfeit goods is reaching a fever pitch in the U.S., and manufacturers face mounting pressure to evolve their methods of eliminating counterfeits from their supply. This problem highlights the need for next-gen solutions, and points to the emerging role of smart sensors.

Elevated Scrutiny for Manufacturers

On April 3, President Donald Trump signed a presidential memorandum aimed at eliminating trafficking in fake and pirated goods. It outlines the federal government’s plans to double down on its efforts curbing the spread of counterfeit products.

Additionally, the memorandum commissions the composition of a Report on the State of Counterfeit and Pirated Goods Trafficking, to be prepared and issued within the next seven months. That report could be accompanied by more stringent enforcement actions, including the implementation of regulatory and policy changes that could hold third-party intermediaries like Amazon and eBay, and the manufacturers on their supply chains, responsible for fraud.

White House National Trade Council Director Peter Navarro called the memorandum a “warning shot across the bow” for e-commerce giants like Amazon. But manufacturers should regard it the same way.

Countering Counterfeits With Strategic Solutions

Faced with increased government scrutiny and pressure from online marketplaces, today’s manufacturers need to ensure the legitimacy of their entire output.

While tracking every single item produced might not have been justifiable from a cost perspective even a few years ago, the landscape is different now. With fraud running rampant (the market for brand counterfeiting is projected to reach $1.82 trillion globally by 2020) the onus is on manufacturers to make every product provably legitimate. The alternative is potentially massive product recalls alongside the looming threat of federal regulations and fines.

With a 210-day interim before the federal report is released, it pays to be proactive.

Here are the three steps I’d suggest manufacturers take during that time to get ahead of the problem:

  • Evaluate existing quality control processes: If ever there were a time for manufacturers to take a close look at how they’re curbing fraud in their supply, it’s now, before potential enforcement actions force the point. By convening an internal team of decision makers to proactively identify weak points in existing processes, manufacturers can take a critical first step toward evolving their fraud prevention tactics.
  • Look into smart sensor technology: Fortunately for manufacturers, tech providers can offer increasingly sophisticated tools to fight the rise of counterfeiting. Specifically, intelligence-driven sensors are emerging as the manufacturing industry’s best bet at eliminating fraud. These embedded sensors have the potential to verify the legitimacy of every item of a manufacturers’ output. And because they’re being developed to be both tiny (smaller than a pencil tip) and cost-efficient, they are poised to become industry standard across manufacturers of all sizes.
  • Closely follow government actions and align with law enforcement: As President Trump’s memorandum makes clear, the federal government will establish a centralized role in monitoring for fraud, and potentially hold both marketplaces and manufacturers accountable as well. For this reason, manufacturers should seek out opportunities to work proactively with government agencies to keep fraud at bay. While not every manufacturer will be able to launch large-scale fraud prevention initiatives like Alibaba, these types of efforts will serve manufacturers well.

By approaching the problem of counterfeiting with a proactive eye, manufacturers can take a critical step toward protecting their output — and their brand identity — against an increasingly sophisticated and pervasive threat.

Scott Fletcher is president and CEO of LocatorX.

More in Operations