Report: Blockchain can tackle counterfeits, recoup revenue

Dive Brief:

Internet of Things (IoT) and blockchain technologies could help companies get back revenue lost from fraudulent sales, according to a new report by the Boston Consulting Group (BCG) titled "Stamping Out Counterfeit Goods with Blockchain and IoT."
One hypothetical scenario outlined by the report suggests a $1 billion electronics equipment company could recoup 3.85% in revenue. "The average net impact for our $1 billion electronics company translates to $33 million," the report reads. Highly-counterfeited categories like pharmaceuticals and luxury goods could benefit even more.
The use of smart tags and blockchain allow supply chain partners to quickly verify the authenticity of a product. Even if a smart tag is able to be copied, the information on the blockchain will go unchanged and a scan of the item will show the location of manufacturing and sale "thus revealing the duplicate item as a fake," the report said.

Dive Insight:

When manufacturers and suppliers join a shared blockchain platform, items are able to be traced throughout the supply chain using RFID, QR codes or other scannable "smart tag" technologies. The blockchain network then ensures nothing can be changed without the permission of all parties.

"Although no solution can be fully foolproof, smart tags capture the complete genealogy of a product and are hard to replicate," the report said.

Counterfeit goods are one of the main reasons companies are increasingly interested in this kind of traceability, according to Institute for Supply Management CEO Tom Derry.

This is especially an issue for long life-cycle products like spare parts for an aircraft that need to be available for 40 or 50 years. If buyers aren't vigilant, counterfeits can begin to creep in, he said.

"And they may not be up to the specifications of the original manufacturer," Derry told Supply Chain Dive in an interview earlier this year. "So, these kinds of concerns have been around in supply chain for quite a long time."

Counterfeit goods entering the supply chain for aerospace or other industrial machinery can lead to " significant downtime" as the source of the counterfeit good is tracked down, according to BCG.

These are issues a number of industries worry about, including pharmaceuticals, golf equipment and clothing. BCG said more than 385,000 pairs of counterfeit Nike Air Jordan sneakers entered the U.S. between 2016 and 2018.

Being able to scan an item and automatically see where it was made, shipped and sold very well could cut down on these struggles. Though, some do suggest companies should tread lightly into the emerging blockchain technology. A recent Gartner report said many pilots are suffering from "fatigue" as the immature technology is not living up to the promise.

BCG is clear about the fact that not every company will benefit from blockchain and IoT equally. Those with large and diverse supplier networks are more likely to be impacted by counterfeits and could see greater returns from having this kind of visibility.

"In many cases, knowing that you have the 'real deal' in terms of product authenticity will be a real deal in economic terms, but businesses need to run the numbers on the tangible and intangible value that blockchain-enabled counterfeit prevention can deliver and compare that to the cost of implementation," BCG suggested.