The Growing Importance of Supply Chain Traceability

A refined traceability program can secure the authenticity of products, preserve the value of the brand reputation, and above all, ensure the safety of consumers. © leowolfert – stock.adobe.com

How proactive traceability programs to future-proof supply chains.

By Jim Waters, Senior Director of Marketing at Systech

As counterfeiters become more advanced, the future of supply chains requires a coordinated view of inputs, outputs, events and processes. Capturing, recording and owning relevant information — such as the origin, manufacturing processes, transportation, storage conditions, and distribution details of each product or supply item at each change of ownership and movement through the supply chain — is the foundation for future-proof supply chains. By understanding the current state of risks, leveraging robust traceability technology, and adopting a disciplined methodology, companies can protect their brands, help ensure consumer safety, and secure their supply chains against the ever-evolving threat of counterfeiting.

The growing importance of a resilient and transparent supply chain, especially in industries where consumers’ lives are at stake, has become blatantly evident. The healthcare products industry, for instance, has been plagued by counterfeits, which pose significant health risks and erode patient trust. The ability to track and trace the entire journey of critical items like medical supplies and pharmaceuticals, is vital not only for combating counterfeit products and optimizing distribution efficiency but also for ensuring quality and safety.

Combatting Counterfeit and Diverted Products

Counterfeiting is the largest criminal enterprise in the world today, totaling between an estimated $1.7 trillion and $4.5 trillion a year — a higher amount than either illegal drugs or human trafficking, according to the U.S. Patent and Trademark Office. Powered by the growing popularity in e-commerce, counterfeiting continues to threaten supply chains with a major impact on the global economy. However, the true costs go far beyond economic implications — counterfeit products in the food, beverage and pharmaceutical spaces can impose health risks to consumers and affect brand reputation of manufacturers and retailers.

Product diversion — or the unauthorized distribution of products to unintended markets or unauthorized retailers — is another ongoing challenge across industries. Diversion and counterfeiting go hand in hand. Even if it is an authentic product that was diverted, it is likely that the product was neglected, and that it was tainted or diluted somehow. Unfortunately, the ultimate victims of diversion and counterfeiting activities are the end-users. Responding reactively means that problems are addressed only after they have been revealed or, worse, caused damage.

The negative influence on business and reputation leads to reduced faith in product safety, loss of sales, recalls and a heightened threat of legal action. In fact,  studies reveal that 94% of consumers are more likely to be loyal to a brand that offers complete supply-chain transparency, and 39% say they’re willing to switch to a more transparent brand. By taking preventive measures like implementing advanced traceability solutions into supply chain operations, ensure that counterfeits don’t enter the market in the first place and consumer trust is restored.

Vital critical processes to successfully and proactively track and trace products include:

• Lot-level Management: This preliminary phase involves tracking products at the batch or lot level, ensuring the first layer of traceability and verification in the distribution process.
• Item Serialization: This phase mandates that manufacturers, re-packagers and wholesalers uniquely mark individual product units, establishing a synchronous connection with each item and enhancing the traceability and authentication processes.
• Serialized Traceability: This phase creates a secure and interoperable electronic system that facilitates the seamless sharing of product information with trading partners and the verification of product information. This comprehensive network is designed to strengthen transparency and accountability across the entire pharmaceutical supply chain.
• Product Authentication: This step assures customers that the products they are using are genuine, while also instilling confidence in sellers that they won’t lose customers or face warranty issues — or worse, lawsuits. Effective supply chain management includes ensuring products cross borders smoothly. Manufacturers have trained border patrol to identify counterfeit products, but shipments can be delayed in customs if there’s no straightforward way to authenticate them.

A Daunting Challenge in the Pharmaceutical Space

Although counterfeiting and diversion plague almost all industries, the issue is becoming increasingly pertinent in the pharmaceutical sector. In the fast-paced world of healthcare, ensuring the uninterrupted delivery of medications to patients to improve their health, manage chronic conditions, and enhance their quality of life is paramount. When counterfeit drugs infiltrate the supply chain, patient safety is threatened and trust is breached, leading to a negative impact on brand reputation and customer loyalty.

According to a report by United Nations Office on Drugs and Crime (UNODC), counterfeiters of pharmaceutical drugs profit more than illegal narcotics traffickers. To accelerate action against counterfeits, policymakers and international organizations have established relevant national and international guidelines and ensure compliance to curb the rising cases of drug falsification. For example, the U.S. Congress enacted the Drug Supply Chain Security Act (DSCSA) in 2013 to protect consumers from fraudulent prescription drugs that are contaminated, adulterated or otherwise unfit for U.S. distribution.

While regulations like DSCSA are a positive step in the right direction, drug manufacturers are seeking additional layers of protection with greater security for their products, and technological advancements to supply chains are blazing the trail. The development and adoption of innovative technologies promise a future where traceability, transparency, and accountability are real solutions that can help secure a resilient drug supply chain.

Solutions to Protect Brands Against Counterfeits

As criminals get more sophisticated and leverage the popularity of e-commerce, companies are seeking new strategies to overcome supply chain threats. Online marketplaces play an unfortunate and sometimes unintentional role in the proliferation of counterfeit items and diverted products. With their extensive influence and lack of control, the rise of e-commerce sites like online pharmacies, have become hotbeds for unauthorized practices. The sale of counterfeit and diverted drug products can jeopardize end-user safety and undermine brand credibility.

For instance, the World Health Organization (WHO) issued a global alert about fake versions of Ozempic, a prescription drug which has seen its popularity surge in recent months due to its promotion as a means for quick weight loss. This popularity has resulted in shortages, creating an opportunity for counterfeiters to introduce fake Ozempic into the market. Though the pharmaceutical manufacturer can report counterfeits sold online, these reactive efforts have not ceased the prevalence of illicit drug sales to consumers on the Internet.

To overcome these challenges, companies must utilize track and trace technology. One key solution available to combat the counterfeit epidemic includes serialization, which enables brands to assign a unique identifier to each product. This approach allows for real-time tracking and monitoring, making it challenging for diverted products to go unnoticed. Additionally, with traceability solutions, manufacturers offer greater visibility of products throughout the supply chain, helping users to identify and address fake products.

Digital product authentication solutions offer an additional layer of security that can be deployed to protect brands through AI-based technologies. These work with existing 1D and 2D barcodes and packaging to deliver immediate counterfeit detection. Using a smartphone app, brands and their trading partners can instantly verify product authenticity—anywhere in the supply chain.

All in all, a programmatic approach utilizing transparent product data, digital connectivity, and real-time insights can ensure consumer safety and loyalty and safeguard brands and revenues.

The Comprehensive Benefits of Embracing Traceability

Adopting traceability technologies provides more than just enhanced safety. A cohesive and inter-connected supply chain network provides manufacturers with valuable data that helps optimize operations and gain a competitive edge. Enhanced visibility and sophisticated analytics reveal pivotal information about distribution trends, sales patterns, and consumer behavior. It can be difficult to root out bad actors, particularly with the growth of online pharmacies, but by instituting a refined traceability program, manufacturers can secure the authenticity of their products, preserve the value of the brand reputation, and above all, ensure the safety of consumers.

About the Author

Jim Waters is Sr. Director of Marketing at Systech. Waters is a highly respected and experienced sales and marketing executive who most recently served as Head of Global Marketing for Tive, a leading SaaS visibility provider for shippers, carriers, and logistics service providers. Systech provides digital traceability and serialization solutions that establish essential product data, ensure digital connectivity and enable real-time insights on the packaging line and throughout the supply chain: https://www.systechone.com/.