In our 2013 Predictions for Global Supply Chains (available for no-cost download in our Research Center), Prediction Nine declared that higher and more expensive incidents of counterfeit products appearing in multiple industry supply chains will motivate step-up mitigation efforts.

Thus, we were not terribly surprised to review a published article appearing on The Wall Street Journal which noted that dealing with fake goods is as profitable as illicit drugs. (Paid subscription required or free metered view)

This article summarizes a report from the United Nations Office on Drugs and Crime which concludes that counterfeit goods, mainly from China, have become as profitable as illegal drug trafficking for Asia’s criminal gangs.  The UN report reviewed 2008-2010 data and concluded that $24.4 billion was earned from fake drugs and goods originating from the East Asia and Pacific region. This UN report further notes that much of the trade in counterfeit goods is traced to China which the report estimated to be a direct source of about two-thirds of the world’s counterfeit goods.

While government agencies in China have been stepping up efforts to identify and provide harsher penalties to people convicted of breaking China’s laws on counterfeiting, the producers themselves are much more sophisticated.  Not alone to drugs and goods appear more identical to their original counterparts, sophisticated distribution methods disperse these goods through a layer of various global distribution networks which mask the original origin of these goods.  These facts were brought to light in last year’s episodes of fake cancer medicines entering the U.S. and other countries.

Supply chain risk identification and mitigation teams need to continue with the assumption that the volume of counterfeit goods is increasing and that mitigation plans, processes and tools to identify potential sources of fakes must be vigilant and active.  This would include testing and traceability mechanisms.

Bob Ferrari