Is your supply chain leaking? No, we’re not talking about shipping containers dripping with unknown substances. We’re talking about products, raw materials, and components making their way into or out of the legitimate supply lines and marketplaces for your products.
Like a leak in your plumbing, a leak in your supply chain can be difficult to find. But over time, it can erode the trust your brand has built with buyers. Any brand protection efforts not based on a holistic view of your supply chain will only be partial measures — like locking the door to your home while leaving the window wide open.
The Black and Gray Markets: Two Threats to Your Brand
Most of us are familiar with the phenomenon of product counterfeiting, but we may not recognize its full extent.
In the Atlantic recently, a writer described how she inadvertently purchased a counterfeit luxury brand winter coat on Amazon for $925. Luckily, the writer was able to identify the false (and clearly inferior) item and get her money back. But the ordeal made her think twice about her decision to buy the coat in the first place, and she opted for a lower-cost coat from a competitor.
This is one of the ways counterfeit sales harm brands. The International Trademark Association estimates that counterfeiting and piracy will cost the global economy $4.2 trillion by 2022 and put 5.4 million jobs at risk.
Counterfeit sales are an example of black market commerce. Sales on the gray market can be just as destructive to a brand’s image.
Gray market sales occur when legitimate products are sold in illegitimate or unauthorized markets. A classic example is the “third-shift problem”; factories authorized to make a certain amount of products continue making products after fulfilling their contracts and sell the extras themselves.
Gray market sales can also happen when shipments are diverted from their intended destinations and sold into unauthorized markets. Companies may find themselves competing against their own products.
Broken Chains
If you step back and look at brand protection challenges such as black and gray market sales from a high level, you’ll see they can be considered supply chain problems. In both cases, the supply chain has sprung leaks.
In gray market sales, the leak may be at the factory, or it may occur during shipping. In black market counterfeiting, brands can lose touch with the final critical link in their supply chains — the consumer. People who buy counterfeit items are ineligible for warranties and loyalty offers. They are, in fact, essentially invisible to brands.
Companies deploy toolsets commonly called track and trace systems to protect their brands and secure their supply chains. Tracking refers to a process or technology that lets businesses follow and record the flow of components and products throughout the supply chain. Tracing involves using the data collected in tracking to trace an item found in commerce back to its source. These systems commonly capture information about:
- What items have been shipped.
- How the items are shipped.
- What ports the items have gone through.
- Whether or not the items reached their final destinations.
Track and trace data can go as far as the end user. If you’ve ever registered a product online or by mail, you may have contributed data to a track and trace program.
But there’s more to a supply chain than just the distribution process. In addition to that outbound process, there’s an equally important inbound supply chain.
- The inbound supply chain includes gathering the raw materials and components needed to make your products.
- The outbound supply chain includes transporting your products to market and into the hands of buyers.
Unfortunately, some track and trace systems focus only on the outbound side of the supply chain, not acknowledging that their inbound supply chain can leak as well.
For example, unexpected substances and subpar components can end up in your products through a leaky inbound supply chain. That’s what happened to the Chinese dairy industry in 2008 — with disastrous consequences. A similar issue with airbags recently triggered the largest safety recall in U.S. automotive history.
Harden Your Supply Chain
A robust track and trace system can help you lock down your supply chain and protect your brand. While it can have benefits when applied just to the outbound distribution process, its full benefit is realized when used throughout the supply chain — from material sourcing through the end user.
The good news is, track and trace technology is more accessible than ever before. Just a decade ago, brands would have to invest in expensive track and trace platforms to monitor their supply chains effectively. Today, a variety of specialized systems are available for supporting these initiatives with varying degrees of sophistication. It is likely that if you have a need for track and trace, a system is available that will meet your needs and help to protect your revenue streams.
If you have a leaky supply chain, a reputable label printer with expertise and experience in brand protection can be your best source of advice and affordable, practical solutions. Contact us today to talk about how we can help you harden your supply chain.
