Counterfeit products are an enormous drain on the global economy and have serious financial ramifications. The value of fake products in circulation is estimated to be $250 billion per year, according to the Organisation for Economic Cooperation and Development (OECD). Meanwhile, the World Customs Organisation has identified that these fake products are exported to around 140 countries.

At its very core, the challenge of detecting product counterfeiting requires supply chain transparency. Conventional supply chain management has poor coordination between intermediaries, lacks standardisation, and involves unknown disputes that are impossible to track.

In such a scenario, blockchain technology, the underlying record-keeping system behind cryptocurrencies, has emerged as a transformative change in supply chain management. Read on to learn more about how blockchain can bring supply chain transparency and mitigate product counterfeiting.

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Blockchain’s role in supply chain transparency

The impact of fake products goes beyond just businesses and governments; society is robbed of tax revenues, employment opportunities, and business income. Counterfeiting not only leads to increased spending on fraud detection methods but also reduces the turnover of legitimate companies.

Previous methods such as QR codes, RFID tags, and AI have been used to combat fake products, but they have limitations. For example, QR codes can be duplicated from the original packaging to the fake one, and AI requires heavy computational power, which is not sustainable in the long run.

However, Blockchain technology can identify genuine products and detect fake ones by tracking their supply chain from the maker to the end user.

In a nutshell, a blockchain is a distributed ledger of records. When it comes to the digital asset industry, crypto transactions are verified by network users and bundled into blocks. Every block contains a link to the block before it and the block after it. Hence the name blockchain.

The entire blockchain, which is essentially a ledger of transactions, is then distributed to network participants. This ensures complete transparency as transaction records are open to all. It also ensures that transactions, once verified and added to the chain, cannot be changed.

If bad actors are able to access and alter transaction details on one of the network devices, it will not match with the correct data stored on the thousands of other network devices. This same tech can be used to track the journey of goods from producer to customer.

Therefore, using blockchain in supply chain management will make it easier to track, record, and verify the genuineness of products and detect any fraudulent activity in the network. Traceability and transparency of the supply chain can be improved, preventing the sale of counterfeit goods.

Blockchain keeps an immutable and transparent record of a product's path from manufacturer to consumer by recording the movement of goods on a decentralized ledger. In this way, businesses can guarantee their brand's authenticity, while supply chain participants can avoid disputes since everything would be trackable, from where raw materials are sourced to which intermediaries participated in the process.

A look at some live uses cases

According to an article from the United Nations Office on Drugs and Crime (UNODC), the sale of counterfeit pharmaceutical products from Asia to Southeast Asia and Africa alone amount to over $1.6 billion per year.

To tackle this issue, a company called MediLedger has introduced a blockchain-based drug tracking system called Chronicled. It tracks the journey of medicines, from the producer to the distributor, to the wholesaler to the pharmacy and eventually to the consumer.

Similarly, the multinational technology company, IBM, leveraged blockchain technology to provide healthcare solutions designed to verify health credentials securely.

Apart from the pharma industry, companies like Ford also use blockchain to trace their cobalt supply, while FedEx and UPS use blockchain to track shipments. De Beers, a diamond producer, also verifies that its diamonds don't contain conflict diamonds (aka blood diamonds) via blockchain.

Copies of high-end brands are also quite common and tarnish the reputation of the company. Hence, Louis Vuitton, Tag Heuer, Tiffany & Co., and Parfums Christian Dior are also part of a blockchain consortium called Aura. This enables their consumers to track product history and provide proof of authenticity. Similarly, Walmart has collaborated with Nestle, IBM, Dole, and Kroger to enhance its food traceability. Nestle leveraged blockchain to track its milk sources, and Bumble Bee Foods deployed blockchain to trace yellowfin tuna from the ocean to the end-user.

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Conclusion

Fake products have become a lucrative business, and their negative consequences are often overlooked. In some cases, counterfeit products replicating luxury brands are often encouraged since bargain-hunters tend to buy second copies at cheap prices. Thus, blockchain technology isn’t the only solution for combating fake products - awareness also plays a significant role. Nevertheless, leveraging blockchain technology in the food industry, health sector, electronics, and automobiles is a good start to bring about a pivotal change.