Combating Product Counterfeiting Risk To Supply Chain


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A presentation combining research focused on counterfeiting, food safety, and food defense/bioterrorism.

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Combating Product Counterfeiting Risk To Supply Chain

  1. 1. Combating The Impact of Product Counterfeiting: Defining the Growing Risk to Supply Chain Cost and Service Performance Omar Keith Helferich PhD September 23, 2010
  2. 2. Overview• Source of Information and experience• Review of Planning and Response during major disruption events• Review of MSU National Center for Food Protection and Defense Research• Recommendations to enhance Food Supply Protection © 2010 Michigan State University
  3. 3. Research and Industry Perspective• Michigan State Anti-Counterfeiting and Product Protection Program (A-CAPPP)• National Center for Food Protection and Defense (NCFPD)-Food and Pharmaceuticals• National Environmental Health Association• Industry Sustainability Assessment © 2010 Michigan State University
  4. 4. Review: Counterfeit in Food Safety Discussion Scope Counterfeit/ Economic Fraud Food Defense/Food Safety Bioterrorism © 2010 Michigan State University
  5. 5. Review: Counterfeit Actions• Adulterator• Tamperer• Thief• Over-runs/ Unauthorized Production• Diversion• Simulation or Look-a-likes• Counterfeiter © 2010 Michigan State University
  6. 6. Review: Supply Chain Aspects of the Food Threat• The international supply chain – Overview – Diversion – Transshipment – Free Trade Zones• SCM countermeasures and deterrents – Integrated approach/ raise the stakes – Coordinated activities/ countermeasures © 2010 Michigan State University
  7. 7. Review: Food Fraud Scale• The global counterfeit food threat is estimated at $49 billion, and the UK’s Food Standards Board (FSA) estimates the UK “level of fraud” around 10 percent. (Ravilious, 2006) © 2010 Michigan State University
  8. 8. Review: Food Fraud Scope• Product Substitution• Product Up-labeling• Product Adulteration• Product Copy/ Unauthorized Refill• Product “Freshening” © 2010 Michigan State University
  9. 9. Review: Counterfeit Countermeasures• Overt• Covert• Forensic• Track-and-Trace• Authentication• Investigation• Regulation• …Standard Operating Procedures © 2010 Michigan State University
  10. 10. Research and Field Experience: Over 25 years• Safety & Environmental Health Ground Zeroengineering & research WTC 2001• Coordinating Logistics for• Red Cross Logistics & Mass CareField Volunteer during major events• MSU Food Security Research Teamfor DHS -2005-07• Research in sustainability &disaster planning & recovery• Co-Developed initial white paper onsupply chain security following WTC2001 Issues: Chaos after an Incident Public Health Secondary Events Communications & Infrastructure Damage Economic and Public Services Recovery © 2010 Michigan State University
  11. 11. Dimensions of SC Security: Incident Management Process(*) 3. Detection 4. Response 2. Mitigation Lessons Learned 5. Recovery1. Planning Supply Network Continuity Management Process *Comprehensive *Simple *Flexible *Tested *Revised for Changing Threats Minimizes Loss & Disruption * Drs. Helferich and Cook: 2002 CLM Research Results © 2010 Michigan State University
  12. 12. Dimensions of Supply Chain Security: Impact MatrixAttribute Scale MeasureSeverity Minor to Massive Lives, Injuries, Fear, Dollars, PerformanceDuration - Minutes to Years TimeImpactGeographical Local to Global Square Miles and BoundariesDetectability Easy to Difficult Warning Systems and AwarenessFrequency Low to High Historical vs. Concern Wind, Water, Disease, Fire, Explosion, Contamination, Radiation Other SC Disruptions - Intentional/Unintentional © 2010 Michigan State University
  13. 13. Dimensions of Supply Chain Security : Measures• Ability to detect security incidents• Reduction in the number of security incidents• Increased resilience in recovery• Changed risk profile –exposure vs. actual cost• Changed cost with continuity programs, insurance vs. shrink, injuries, downtime, turnover, temporary substitution• Improved security relative to competitors• Improved ability to meet security requirements• Relationships without recognition of potential risk vulnerabilities © 2010 Michigan State University
  14. 14. Intentional and Accidental Food Contamination and Disease Outbreak ImpactsYear Event Impact1984 Salad bar contaminated by religious cult 751 ill1989 Detection of cyanide in Chilean grapes $200 M1996 Outbreak of BSE in UK cattle $5.8 B1997 Outbreak of FMD in Taiwan pork 3.85 M hogs1999 Contamination of livestock feed with dioxin $850 M2001 Outbreak of FMD in UK cattle $8.32 B2003 Exotic Newcastle disease in US poultry $180 MAfter 03 Spinach, Beef, Pet food, Toothpaste, Seafood, etc. $M to $BYearly Losses due to 5 major food borne pathogens in US food $6.9 B supply © 2010 Michigan State University
  15. 15. Food Supply Vulnerability (*)• Planning completed to prepare and respond to intentional disruptions is also valuable for natural or accidental events.• The severity and impacts of the incident are dependent on the agent and scenario, ability to accomplish the event, and efficiency and effectiveness of detection and response.• Significant evidence has been found that indicates that agro terrorism is a target of terrorist groups.• World Health Organization urges “farm to fork” contingency planning due to the potential impact of attacks on national food supply sources. WHO states the following as examples, but expects it could be much worse depending on the agent used:• 1985- 170,000 sick in the US from contaminated pasteurized milk• 1991- 300,000 infected with Hepatitis A from clams sourced in China• 1994- 224,000 infected with salmonella from ice cream in US* Dept of Homeland Security: Areas of Vulnerability: People, Physical & Processes © 2010 Michigan State University
  16. 16. Introduction and Dimensions of Supply Chain Security• The application of policies, procedures, and technology to protect SC assets (product, facilities, equipment, information, and personnel) from theft, damage, or terrorism and to prevent the introduction of unauthorized contraband, people, or weapons of mass destruction. – Closs and McGarrell (2004) © 2010 Michigan State University
  17. 17. MSU R&D Initiatives: DHS Supply Chain Security Benchmarking Objectives• Define Supply Chain Security• Identify status of supply chain security initiatives• Identify competencies and capabilities that firms are using to enhance supply chain security• Discuss benchmarking tool for improving supply chain securityThis research was supported by the U.S. Department of Homeland Security (Grant number N-00014-04-1-0659), through agrant awarded to the National Center for Food Protection and Defense at the University of Minnesota. Any opinions,findings, conclusions, or recommendations expressed in this publication are those of the author (s) and do not representthe policy or position of the Department of Homeland Security. © 2010 Michigan State University
  18. 18. MSU DHS Research Supply Chain Security Impact: A State of Transition• From • To – Corporate security – Cross functional team – Theft prevention – To include anti-terrorism – Inside the company – End-to-end supply chain – Vertically integrated supply – Business model that includes 2nd chain with 1st tier suppliers and 3rd tier suppliers – Country or geographic – Global – Contingency planning – To include crisis management – Reactive – Proactive © 2010 Michigan State University
  19. 19. MSU Research Conclusions• Food supply chain firms are increasingly interested in protecting their supply chains to protect their customers and brand names.• Firms must develop a broad range of competencies to achieve supply chain protection.• Firms have seen performance improvements in detection and resiliency.• In general, firms embarking on supply chain security initiatives will, at least initially, increase firm and supply chain operating cost.• Better performance is linked to extended supply chain security efforts throughout the supply chain. © 2010 Michigan State University
  20. 20. Where is Your Firm’s Security Program Opportunity?Vital Segments Priority Tools/ Methods Improvement Tasks/COAs1. Senior Management Input Formalize Senior Mgt Council2. Risk Assessment Define and Prioritize Risks3. Benchmarking Formal Benchmarking-MSU4. Facility Security Risk Utilize Formal RiskAssessment Assessment- Carver Shock5. Baseline Security- Top Priority RisksProtection6. Enhanced Security- CRT Process for UniqueProtection Incidents7. Security Program Design SC Cross Functional & Process Design8. Plan and Process Independent AuditsImplementation9. Process Monitoring & In Line Security Process withControl Balanced Scorecard Metrics10. Process Review Ongoing Measurement & LearningAccumulative Continuous Improvement © 2010 Michigan State University
  21. 21. Assessment of Food Vulnerability: CARVER Plus Shock• Assessment method most commonly used and recommended by both USDA and FDA is the CARVER plus Shock.• This tool can be used to assess vulnerabilities within a system or infrastructure. Conducting the assessment allows focus on the most vulnerable points that pose the greatest risk. © 2010 Michigan State University
  22. 22. Assessment of Food Vulnerability: CARVER Plus Shock• CARVER plus Shock is an acronym for seven attributes used to evaluate the attractiveness of a target for attack: – Criticality- measure of public & economic impacts – Accessibility-ability to access target – Recuperability- ability for system to recover – Vulnerability- ease of accomplishing the attack – Effect- amount of direct loss from attack – Recognizability- ease of identifying the target – Shock- combined measure of the physical, health, psychological and economic effects of attack © 2010 Michigan State University
  23. 23. Summary of Key Learnings: Supply Chain & Security• . Need for a “Baseline Process” based on Risk• Recognition that Security is not a “Quick Fix”• Promoting that “Security is everyone’s responsibility• Supply Chain concerns, not only enterprise or functional specialties• Noticed/addressed based upon crises and failures, not successes• Only as robust as the weakest link• Weakened by poor communications and technology, personality and “turf” politics• Most successful when integrated into operations, not add-ons• Essential to business success with in-line process support of BU• In need of increased focus on Internal Access Control and Monitoring• In need of Increased focus on intentional incidents contaminations• Executive cross-functional security councils w/leveraged cross-functional leaders to drive agenda © 2010 Michigan State University
  24. 24. Combating Counterfeiting & Adulteration Supply Chain Risk Supply Chain Counterfeiting GAPS & Opportunities Current & EmergingBest Practices Guidelines, Development of Prevention & Mitigation Guidelines Checklists, StandardsRisk BasedAnalysis Development of Supply Chain Anti-Counterfeiting Internal Proven Standards Standards Development Processes Recommended Process for Standards Implementation & Enforcement © 2010 Michigan State University
  25. 25. Risk and the Response-based Business Model Response-based Business Model* DISRUPTION EVENTS Natural Criminal/Terrorist Public HealthSupply Network Lean Inventory Process/Equipment Rationalization Management Law / Regulations Globalization *Bowersox & Lahowchic, “Start Pulling Your Chain” © 2010 Michigan State University
  26. 26. Dimensions of SC Security: Expectations- A Changing Future• Secure supply chains – containing advanced security processes and procedures• Resilient supply chains – able to react to unexpected disruptions quickly in order to restore normal operations Rice and Caniato (2003), “Building a Secure and Resilient Supply Network,” Supply Chain Management Review, September/October. © 2010 Michigan State University
  27. 27. SC Protection: Potential Mitigation Programs Proactive SustainingEnvironment Excellence Executive Commitment Mitigation Pathway to Success Process Human Resource Backup- Cross Training Continuity Training & Education Process Redesign Mutual Aid Agreements Supply Chain Network Design Shared Committed Inventory Critical Parts Inventory Reactive Assets Backup General Parts Catalog Increase Parts InventoryEnvironment Collaborative Arrangements Process Backup Systems Backup Vision Control Team Process Supply Chain Mitigation Initiatives: Physical, People, & Process © 2010 Michigan State University
  28. 28. Average Percent Improvement Reported by Manufacturers from SCS Investments Efficiency Visibility 60 60 50 48 50 50 40 43 Reduced Inspections 40 Improved Asset VisibilityPercent Increased Automated Handling Percent 30 More Timely Shipping Information 30 29 Less Process Deviation 30 30 20 Shorter Transit Time Reduced Inaccurate Shipping Data 20 10 10 9 0 Resiliency Inventory Management & Customer Relations 35 40 30 31 38 37 25 Shorter Problem 30 Resolution Time Reduced Theft/Loss/Pilferage 23 20Percent 21 Quicker Response to a 26 Decreased Tampering Percent Problem Less Customer Attrition 15 20 Reduced Time to Identify Reduced Excess Inventory 10 a Problem 14 10 5 0 0 Source: Innovators in Supply Chain Security: Better Security Drives Business Value – Stanford University White Paper, June 2006 © 2010 Michigan State University
  29. 29. Discussion and Feedback Thank You! SC Security ‘Brand Protection Pays’
  30. 30. Review: Packaging for Food and Product Protection (P-FAPP) Initiative• The first step in the P-FAPP Product Protection Initiative is to create Teaching and Outreach Funding to develop university course content, to develop infrastructure, and to validate the long-term interest in the topic.• Teaching and Outreach Funding Deliverables: – Undergraduate/ graduate Product Protection On-line Course – June 2008 – Executive education: Offer a Product Protection ‘short course’ – September 2008 – Certificate/ degree program: In development – Continue the aggressive schedule of academic and industry presentations• For information please contact MSU/P-FAPP directly: – John Spink, Director, P-FAPP, 517.381.4491, –• Dr. Helferich may be reached at or © 2010 Michigan State University