What The Mob Can Teach Us About Counterfeiting in Global Supply Chains
Supply chains of nearly every product sold in the world are being targeted by criminals. Case in point, earlier this year, 60 Minutes ran a special focusing on the inner workings of the Italian mob’s role in their nation’s food industry. The piece focuses primarily on the extra virgin olive oil market but also details the extent to which organized crime has infiltrated the supply chain of Italy’s most prized, exported foods. The story especially caught the eyes of the Tego team because the same inefficiencies it calls out in the food industry are at the epicenter of the problems we are trying to solve as a company. (If you have not seen it, we suggest you check it out.) As you will see, counterfeiting is a problem that transcends almost every major industry, but the extra-virgin olive oil market paints an especially clear picture how end-consumers are generally unaware of the original source or accuracy of the ingredients in their products. This is a global issue that is becoming continually worse, even in the most established and regulated industries.
Olive Oil Rakes in the Cheddar
Counterfeit Italian delicacies such as olive oil, wine and cheese have become so profitable that Mafia leaders are said to garner $16 billion per year from their exploits, and profits are only going up with innovations designed to infiltrate the entire supply chain, from the farm to the table. The mob hires its own farm workers, facilitates transportation, and can impose its own pricing since it owns the supermarkets themselves. The system has grown so large that it’s earned its own moniker: the “Agromafia.”
The larger issue is that these counterfeit foods do not simply stay within Italy’s borders. These goods make their way overseas to the United States and other first-world, consumer markets. In December of 2015, Italian authorities seized 7,000 tons of olive oil en route to the United States. In fact, it is estimated that a full 70-80 percent of extra virgin olive oil currently sitting on supermarket shelves does not stand up to U.S. standards. In April, 2016, U.S. Congress finally ordered the FDA to begin testing imported oils for labeling accuracy.
Why the focus on extra virgin olive oil? Profitability. It is said the margins on a batch of EVOO cut with canola or sunflower oil can be three times that of cocaine. Think about that next time you’re eating that healthy salad.
It may not seem like a big deal for Americans to pay for lower quality olive oil than packaging claims, but when you consider the implications of someone ingesting a food laced with allergenic or poisonous ingredients the problem becomes, quite literally, tragic. Over the last two years alone, tons of seized meat products have been found to contain solvents and pesticides.
The Big Picture
These problems serve as a great proxy to global supply chain problems that exist in many industries. Everything from children’s toys to medication to car parts is consistently pirated, to the tune of an estimated $461 billion to $1.8 trillion per year market. As mentioned, even the oldest and most regulated industries are susceptible to counterfeiting. In pharmaceutical and manufacturing supply chains, improper ingredients or materials can be even more costly and deadly. Anywhere from 100,000 to one million people die every year due to falsified drugs, where the market for counterfeits is estimated to be a $200 billion a year business. Although counterfeit drugs are still most prevalent in less developed countries with fewer federal regulations, many indeed make their way across United States’ borders without being detected.
So What?
Counterfeiting has been a common trouble spot throughout history, and the trend toward globalization has no doubt made the issue worse. But it does not mean we have to remain at the mercy of globalized blind spots.
Visibility is ultimately a matter of producers finding sustainable ways to track their assets from birth to death, and everywhere in between. In order to meet this level of clarity, global companies need to enable the assets in their supply chain to record a digital history about their journeys in real time. This means recording all of the products’ lifecycle, regulatory and integrity management information, and then, relaying this data to all stakeholders along the asset’s journey to the consumer. Products need to carry this type of authenticity data on the assets themselves and checked at each point in the supply chain if global manufacturers want to truly ensure the validity and safety of their product lines.
Only when you know exactly where an asset has been, who has handled it and when it was handed off, can a supplier ensure that no counterfeit foods, drugs or materials are making their way to the hands of the consumer. Asset Management is a process we have helped successfully implement to some of the world’s major industries such as Aerospace, Healthcare and Rail.
Ask us how, here.
