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Technology has been the leading weapon in brand owners’ arsenal for fighting counterfeit components and products. Big data and analytics, automated monitoring and removal services, blockchain, modular customization and intra-component communication are currently generating interest among industry leaders and their supply-chain partners, according to the Alliance for Gray Market and Counterfeit Abatement (AGMA).
Counterfeit components are everywhere, according to Dr. Eyal Weiss, founder of Cybord, a developer of AI-based visual inspection systems. “It is estimated that a few percent (some experts even say ~5%) of the components circulating in the market are counterfeit,” he writes in EMSNow. “For example, a board with 200 components may contain one to 10 counterfeit components on average.”
AGMA research found technology as it relates to big data and the use of advanced analytics were highlighted as the “top priorities for investment and desired budget allocation across all participants, regardless of organization size or brand protection program maturity.” The study, conducted by De La Rue Plc and FiveBy Solutions, said industry leaders are looking to big data to better inform their strategies, identify trends, understand where there are pockets of illicit activity and quantify the scale of counterfeiting.
Urgency
Counterfeiters are better prepared than ever to fake and distribute products, AGMA reports. Bad actors are demonstrating advanced skillsets and agility as evidenced by their rapid response to the landscape. In many cases, mitigation efforts such as physical security and visual identification are being effectively simulated in a few months.
Additionally, e-commerce has been on a rapid growth trajectory, providing a large conduit for fraud. Fraudsters are savvier, sharing information with each other and producing counterfeits at an accelerated pace. The study found Covid-19 and trade regulations play a role as well:
- The pandemic has expanded market vulnerabilities. Covid-19 has introduced both direct and indirect impacts on the way the global market purchases and sells goods, and the scale at which counterfeit and illicit trade is propagated.
- Trade has gotten a lot more complicated. GDPR and geopolitical issues involving trade conflict are contributing to increased complexity and adding more obstacles to the distribution of legitimate products into certain regions. At the same time, these issues are limiting investigation capabilities and global brand protection program effectiveness.
Trends that impact brand owners, with 1 as low impact and 5 as high impact.
Source: AGMA
Brand protection programs are being impacted with increasing scope and scale. Corporate responsibility initiatives, IoT, refurbished devices and right-to-repair legislation were also identified as trends affecting brand owners.
Top technologies
Study participants said that while tech is a valuable tool, aligning the technology’s fit with their strategy was more important. Some technologies are considered front runners in their evaluations for adoption. Brand leaders were most excited about what big data, advanced analytics, machine learning and AI could do for their business.
Big data is seen as pertaining to trends and patterns of activities that could support counterfeiting investigations or identify potential vulnerabilities that could then be mitigated. Respondents were less concerned with micro-level tracking of products and more interested in macro-level analytics pertaining to bigger trends.
Advanced analytics provides leaders the data they need to build a business case for budget and resources. It also illustrates issues in a compelling, data-driven way that supports arguments for why other groups in their company ought to better align with the brand protection team.
No specific examples were given regarding how these technologies could improve their brand protection efforts, according to the report. References were made to the data potentially available at each node in the value chain that they have no access or visibility to, whether from a reluctance or inability to share data.
Technology that enables automated monitoring of online activity and the corresponding removal of bad actors was universally highlighted as a successful tool. The study noted the average selling prices of online transactions are increasing, indicating more consumer confidence in spending larger amounts through internet purchasing exchanges. Brands rely more heavily on e-commerce to sell their products, making it attractive for counterfeiters to exploit.
Blockchain has been discussed and evaluated for several years, said the study, but is not yet mature enough to match its potential. Leaders saw blockchain’s greatest area of opportunity as its ability to track the provenance of a product and its components from supply chain through the distribution channel and throughout a circular economy.
Brand owners seem least prepared for the trends that most impact their business.
Source: AGMA
Trends such as refurbished devices and right to repair are contributing to the opportunities for blockchain to be a game changer. These markets need to ability to track replacement components and verify their authenticity.
Modular customization is a strategic approach to combine, layer, and interchange technologies. The overarching benefit of modular customization is in its agility, which results in an ability to rapidly respond to counterfeit threats by ripping-and-replacing technology components in a planful way. Technology layers could include a hybrid of overt and covert anti-counterfeiting features, or an interchangeable mix of digital and physical solutions.
Intra-component communication enables parts within a device to take a self-inventory and validate their presence and authenticity. Intra-component communication technologies could enable enhanced digital verification to identify, and even prevent, warranty fraud.
Study participants noted this could improve the end-customer experience. Other scenarios where this technology could apply include refurbished devices, right to repair, IoT, and supply chain security.
An example where this technology could be amplified includes big data and advanced analytics, where brand protection teams could look at outputs from intra-component communication at a macro level.
Experts mentioned area- and near-sensory capabilities, such as RFID and NFC, as the methods most evaluated for digital verification. These technologies tend to come at a higher cost and have some limitations around use cases, and most participants did not see an immediate practical application due to unacceptable ROI.
Of course, technology is not a standalone solution. Supply chain and data security are also necessary for a robust brand-protection solution, according to AGMA.
