The world is a greedy one, and it seems like everybody’s out to make an extra dime on the side, whether it is via shady dealings or not. The one area where you would think that you are pretty safe is the food industry, but we have all read about how companies take shortcuts every now and then to cut on production costs.
The news has been plastered with scandals involving horse meat, fake olive oil and honey and many other fraudulent products. However, companies that have a good name are fighting to keep their good names by implementing tangible strategies to mitigate food fraud.
Food fraud is widespread and is estimated to cost the global food industry between $10 -$15 billion each year. Recently, the World Customs Organization revealed that over 7% of global trade consist of fake products and the numbers are increasing every year. The US-based non-profit organization, International Anti-Counterfeiting Coalition (IACC) stated that counterfeit product production has increased by 10 000% over the last 20 years.
Digitization of businesses is the norm. Companies who do not adapt to a digitizing philosophy are quickly falling by the wayside. Fortunately, most companies are quickly moving over to digitized processes where they can track every phase in their supply chain. They have increasingly more data knowledge and can track their products from farm to fork. This digital reform is commonly known as product-based digital traceability.
Food fraud has made it imperative to trace raw material, packaging and end products in real time. To mitigate food fraud, it is not enough to track your products alone. Unfortunately, physical tracking has become the norm due to the different processes that food production is involved in. When each phase of production isn’t traced, the opportunity to commit fraud increases.
To illustrate the how and when food fraud can occur here is an example. It has come to the attention of a wine farm that its product is the subject of food fraud. To combat the fraud, the company is already tracking product lots and every transaction that is made within the supply chain. They monitor the chronology of documentation and make regular audits
One would think that they have all their basis covered and that there isn’t much room for fraud. However, given the scenario, there are still typical fraudulent activities that can occur.
- Counterfeiting and product piracy – This is the most common form of fraud and is mostly seen in non-consumable products. This is where products are produced by a counterfeiter.
- Theft of original products – Typically, mass-produced products and large companies are at risk, and anything from small quantities, to large truckloads of products, get stolen.
- Grey markets – products are diverted to other markets for upsell opportunities.
- Unauthorized production – Products that are overproduced needs to be outsourced to still make a profit. However, when a product is overproduced without the consent of the brand, the outsourcing is merely a cover for selling on the black market.
- Falsified raw materials in the end product – fake raw material can slip into the production chain without being detected and end up in the end product that is believed to be 100% authentic.
The unfortunate truth is that food fraud is on the rise and companies have to come up with increasingly more secure and thorough countermeasures to ensure that both brands and consumers alike are protected. Effective solutions need to be implemented to mitigate the risk of food fraud and curb the corruption.
Modern technology has provided companies with cost-effective solutions to food fraud. One such innovation is product-based digital traceability, also known as next-generation serialization. The principle behind the innovation is simple and involves hawk eye tracking of every single product.
In short, every product, from raw material to packaging to end products receive a unique identifier that is known by the brand owner. However, placing this unique identifier on each product is not going to stop the fraud in itself. The identifier needs to be used in conjunction with the supply chain, from beginning to end. The identifiers merely provide the brand owner a means by which he can connect the dots of the supply chain and consequently make the whole process intelligent.
When we consider the earlier example of the wine farm, the company could trace every single product involved in the supply chain from grape to bottle. The unique identifiers are known by the brand owners, and they can easily pick up any irregularities within the production process at certain checkpoints, as well as the consumer. These companies can use the identifiers to engage with the consumers and gain insights via loyalty programs and marketing campaigns.
After a digitizing solution has been implemented, the fraud picture changes completely. Where there were certain loopholes before, there are now airtight checks to ensure fraud is minimized.
- Counterfeiting and product piracy – The unique identifiers are traced and tracked within the supply chain all the way to the consumers. This way visibility and transparency is promoted in real-time.
- Theft of original products – Stolen products are marked with unique identifiers and are tracked as they surface from the supply chain. Insurance companies then use this information as proof for stolen goods.
- Grey markets – Diverted products are traced, and when they emerge elsewhere in a supply chain, the brand owners know immediately.
- Unauthorized production – The brand owners have greater insight and much more accurate data available in terms of products in the supply chain. They know exactly what goes in and what is produced. Therefore, they will be able to audit the actual production on a much finer scale.
- Falsified raw materials in the end product – All the raw materials receive a unique identifier, and the data is aggregated to the product as it moves along in the supply chain. If a fraudulent product enters the supply chain, the brand owners will know immediately.
The food and beverage industry can greatly benefit from digital solutions and protect themselves as well as the consumers from future food fraud.