Combating Product Counterfeiting Risk To Supply Chain
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Transcript of Combating Product Counterfeiting Risk To Supply Chain
Combating The Impact of Product Counterfeiting: Defining the Growing Risk to Supply Chain
Cost and Service Performance
Omar Keith Helferich PhD
September 23, 2010
© 2010 Michigan State University
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
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
Review: Counterfeit in Food Safety
Counterfeit/ Economic Fraud
Food Defense/ Bioterrorism
Food Safety
Discussion Scope
© 2010 Michigan State University
Review: Counterfeit Actions
• Adulterator
• Tamperer
• Thief
• Over-runs/ Unauthorized Production
• Diversion
• Simulation or Look-a-likes
• Counterfeiter
© 2010 Michigan State University
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
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
Review: Food Fraud Scope
• Product Substitution
• Product Up-labeling
• Product Adulteration
• Product Copy/ Unauthorized Refill
• Product “Freshening”
© 2010 Michigan State University
Review: Counterfeit Countermeasures
• Overt
• Covert
• Forensic
• Track-and-Trace
• Authentication
• Investigation
• Regulation
• …Standard Operating Procedures
© 2010 Michigan State University
Research and Field Experience: Over 25 years
Issues:
Chaos after an Incident
Public Health
Secondary Events
Communications & Infrastructure Damage
Economic and Public Services Recovery
• Safety & Environmental Health
engineering & research
• Coordinating Logistics for
• Red Cross Logistics & Mass Care
Field Volunteer during major events
• MSU Food Security Research Team
for DHS -2005-07
• Research in sustainability &
disaster planning & recovery
• Co-Developed initial white paper on
supply chain security following WTC
2001
Ground Zero
WTC 2001
© 2010 Michigan State University
Dimensions of SC Security: Incident Management Process(*)
1. Planning
2. Mitigation
3. Detection 4. Response
5. Recovery
Lessons
Learned
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
Dimensions of Supply Chain Security: Impact Matrix
Attribute Scale Measure
Severity Minor to Massive Lives, Injuries, Fear, Dollars, Performance
Duration -
Impact
Minutes to Years Time
Geographical Local to Global Square Miles and Boundaries
Detectability Easy to Difficult Warning Systems and Awareness
Frequency Low to High Historical vs. Concern
Wind, Water, Disease, Fire, Explosion, Contamination, Radiation
Other SC Disruptions - Intentional/Unintentional
© 2010 Michigan State University
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
Intentional and Accidental Food Contamination and Disease Outbreak Impacts
Year Event Impact
1984 Salad bar contaminated by religious cult 751 ill
1989 Detection of cyanide in Chilean grapes $200 M
1996 Outbreak of BSE in UK cattle $5.8 B
1997 Outbreak of FMD in Taiwan pork 3.85 M hogs
1999 Contamination of livestock feed with dioxin $850 M
2001 Outbreak of FMD in UK cattle $8.32 B
2003 Exotic Newcastle disease in US poultry $180 M
After 03 Spinach, Beef, Pet food, Toothpaste, Seafood, etc. $M to $B
Yearly Losses due to 5 major food borne pathogens in US food supply
$6.9 B
© 2010 Michigan State University
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
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
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 security
This research was supported by the U.S. Department of Homeland Security (Grant number N-00014-04-1-0659), through a
grant 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 represent
the policy or position of the Department of Homeland Security.
© 2010 Michigan State University
MSU DHS Research Supply Chain Security Impact: A State of Transition
• From – Corporate security
– Theft prevention
– Inside the company
– Vertically integrated supply chain with 1st tier suppliers
– Country or geographic
– Contingency planning
– Reactive
• To – Cross functional team
– To include anti-terrorism
– End-to-end supply chain
– Business model that includes 2nd and 3rd tier suppliers
– Global
– To include crisis management
– Proactive
© 2010 Michigan State University
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
Where is Your Firm’s Security Program Opportunity? Vital Segments Priority Tools/ Methods Improvement Tasks/COAs
1. Senior Management Input Formalize Senior Mgt
Council
2. Risk Assessment Define and Prioritize Risks
3. Benchmarking Formal Benchmarking-MSU
4. Facility Security Risk
Assessment
Utilize Formal Risk
Assessment- Carver Shock
5. Baseline Security-
Protection
Top Priority Risks
6. Enhanced Security-
Protection
CRT Process for Unique
Incidents
7. Security Program Design SC Cross Functional &
Process Design
8. Plan and Process
Implementation
Independent Audits
9. Process Monitoring &
Control
In Line Security Process with
Balanced Scorecard Metrics
10. Process Review
Ongoing Measurement &
Learning
Accumulative Continuous Improvement
© 2010 Michigan State University
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
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
Summary of Key Learning's: 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
Combating Counterfeiting & Adulteration Supply Chain Risk
Supply Chain Counterfeiting
GAPS & Opportunities
Development of Prevention &
Mitigation Guidelines
Development of Supply Chain
Anti-Counterfeiting Internal
Standards
Recommended Process for
Standards Implementation &
Enforcement
Current &
Emerging
Guidelines,
Checklists,
Standards
Proven
Standards
Development
Processes
Best Practices
Risk Based
Analysis
© 2010 Michigan State University
DISRUPTION EVENTS
Natural
Criminal/Terrorist
Public Health
Process/Equipment
Law / Regulations
Response-based Business Model*
Globalization
Supply Network
Rationalization
Lean Inventory
Management
Risk and the Response-based Business Model
*Bowersox & Lahowchic, “Start Pulling Your Chain”
© 2010 Michigan State University
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
Proactive Environment
Supply Chain Mitigation Initiatives: Physical, People, & Process
Collaborative Arrangements Process Backup
Assets Backup General Parts Catalog
Shared Committed Inventory
Mitigation Pathway to Success Process
Continuity Training & Education
Mutual Aid Agreements
Executive Commitment
Sustaining
Excellence
Reactive Environment
Vision Team Process
Supply Chain Network Design
Control
Process Redesign
Increase Parts Inventory
Systems Backup
SC Protection: Potential Mitigation Programs
Critical Parts Inventory
Human Resource Backup- Cross Training
© 2010 Michigan State University
Average Percent Improvement Reported by
Manufacturers from SCS Investments
29 30
43
48
10
20
30
40
50
60
Perc
ent
Reduced Inspections
Increased Automated Handling
Less Process Deviation
Shorter Transit Time
Efficiency
9
30
50
0
10
20
30
40
50
60
Perc
ent
Improved Asset Visibility
More Timely Shipping Information
Reduced Inaccurate Shipping Data
Visibility
Reduced Time to Identify
21 23
31
0
5
10
15
20
25
30
35
Perc
ent
Shorter Problem
Resolution Time
Quicker Response to a
Problem
a Problem
Resiliency
Perc
ent
14
26
37 38
0
10
20
30
40
Reduced Theft/Loss/Pilferage
Decreased Tampering
Less Customer Attrition
Reduced Excess Inventory
Inventory Management & Customer Relations
Source: Innovators in Supply Chain Security: Better Security Drives Business Value – Stanford University White Paper, June 2006
Thank You!
SC Security ‘Brand Protection Pays’
Discussion and Feedback
© 2010 Michigan State University
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, [email protected] – http://foodsafe.msu.edu/Packaging_for_Food_and_Product_Protection_Initiative.html
• Dr. Helferich may be reached at [email protected] or [email protected]