Theft. Piracy. Counterfeits. Gray market activity.

These words and their implied threat to any company’s bottom line intimidate even the most intrepid executive. While some executives chalk up gray market activity as “the cost of doing business,” New Momentum, www.newmo.com, believes that companies can proactively recapture lost revenues, market share, and brand reputation through tightening their value chains. They can accomplish this by creating a brand protection process for analysis and utilizing SaaS-based Enterprise Risk Management (ERM) solutions ‐‐ and subsequently shut down illegal activity. 

 

 

Think this activity is irrelevant to you? Think again. These serious concerns affect almost every department within an enterprise: the office of the Chief Financial Officer, the Chief Marketing Officer, the Vice President of Sales, the Vice President of Supply Chain, the Vice President of Channel Management, the Vice President of Customer Service, and, of course, the Brand Protection Officer. The reward for attacking gray market and counterfeit activity is substantial – on the order of more than $10.5 billion in annual recovered revenue for one customer – a serious return on investment (ROI).

 

 

Do You Know What Gray Market and Counterfeit Activity is Costing Your Company?

 

 

According to the Alliance for Gray Market and Counterfeit Abatement (AGMA) and KPMG, the value of gray market information technology (IT) products alone averaged $58 billion in 2007. Counterfeiting has been conservatively estimated as a $650‐billion problem annually. Of all goods sold worldwide in 2007, 7‐10% is believed to have been counterfeit. The cost of these activities is not just lower revenues, but lost jobs. Especially painful in today’s economy, counterfeits are believed to have cost 750,000 jobs in the US alone.

 

 

 

The Center for Medicine in the Public Interest estimates that worldwide counterfeit pharmaceutical sales are increasing at about 13% annually—nearly twice the pace of legitimate pharmaceuticals—and could become a $75‐billion industry by 2010. A shortage of financial resources, a lack of coordination between countries, and weak anti‐counterfeiting laws in some regions are hurting law enforcement agencies’ ability to detect and prosecute counterfeiters.

 

 

What an End‐to‐End Solution Means to a Line of Business Executive

 

 

Conservatively, AGMA and KPMG estimate that 10% of all goods are gray market/counterfeit. Of that amount, at least 25% can be recovered through implementing an end‐to‐end process and software solution like the one that New Momentum offers. For one client, in one year, that revenue recovery amount translated into more than $10.5 billion. That’s a pretty big number to add back onto a revenue line.

 

 

 

We’d like to know your experiences or comments about counterfeit and gray market piracy risks.  For more information about New Momentum, please visit our website or contact Chris Jensen, VP of Marketing at 949-276-5988

The Future of Brand Protection

New Momentum recently interviewed Joshua Greenbaum, the founder of Enterprise Applications Consulting to learn more about the latest threats and solutions when it comes to brand protection. Greenbaum is an industry analyst and award-winning columnist with over 25 years of experience in the industry.

Q: In your opinion, what are the greatest threats to a company’s brand in today’s market?

A: The greatest threats to a company’s brand can be categorized into three main components –consumer/retailer publicity, product quality, and brand dilution. All three can be the result of activity that occurs at any given point of the life cycle. For example, your team may not fully understand the threats involved with the multiple points of the supply chain combined with the geography of where parts are created. The global market and the speed at which negative information is shared compounds the complexities. A lot of problems start at the supply chain level. These problems have been ignored for years.

Q: Do you think companies are doing enough to protect their brands?

A: In honesty, no – there are too many examples of companies that are not doing enough to get a better handle on the challenges and complexities in their supply chain. Today, we have seen many high profile cases of toys that contain lead, manufacturers with security threats, and medical solutions that don’t go as planned. The good news is that more and more companies are realizing that the supply chain issues have vast, unanticipated effect on their brand.

Q: What are the major trends in brand protection?

A: One of the key trends is harnessing the power of the Internet to improve brand protection. It is no longer an option but a necessity. The fact is that there is so much going on globally in so many locations and time zones that we must use technology like the internet to be able to combat such a widely spread problem. Some may say that many of their problems are being caused by the internet – it is key to understand that the benefit of using internet technology to protect your brand outweighs any challenges caused via the internet.

Q: What is your perspective on the various brand protection solutions?

A: Despite the technology available today, many companies take a mildly automated, classic investigative approach to brand protection. As we have seen, this type of approach misses a lot. The solutions are normally not automated enough and with so many languages and the vastness of the problem, you need more than an investigative team to make a dent in the challenges you are facing. At this time, law enforcement is not equipped to go after the sophisticated technology problems we see today.

Q: Would you consider a software as a service (SaaS) solution like New Momentum to be a valuable tool in the battle against counterfeiting and other threats to IP?

A: Absolutely – the on demand nature of the high tech solution allows New Momentum to accumulate a tremendous amount of information – on-demand. Since it is a web-based solution, it doesn’t require your IT department to become brand protection experts. In an on- demand environment, the functionality becomes richer. Unfortunately, with an on premise model, the system never is going to include inputs and outputs of the individual customer. Solutions like New Momentum continually become smarter and smarter and customers can benefit from what is working for other customers – this is invaluable.

Q: Where is the status of brand protection likely to be in 15 years?

A: Branding is a trend that’s been growing increasingly in the last 10-15 years. I believe brand protection is going to become imperative for both every size organizations– even the small ones. Attacks will become more individualized and pervasive and brand protection will be almost synonymous with personal security – everyone is going to have a brand and threats will accumulate at a large rate. We have to protect our brand outside of the walls of our company. We need to get better and smarter at protecting ourselves. We need to start laying the groundwork today. High profile cases have brought awareness and some of the market leaders are starting to apply sophisticated solutions that actively deal with these problems.

What’s the real cost of endless cost cutting in the high tech industry?

Think your lean manufacturing techniques and outsourcing to low cost regions are the answer to increasing profitability?  Think again…it may be costing you more than you realize. Faster…better…cheaper. This has been the way enterprises create greater profits and competitive advantage is gained.  But these practices made companies more vulnerable and created more risks to profitability such as: a rise in counterfeits from products being outsourced to low cost regions, supply disruptions due to natural disasters or supplier breakdowns, longer and more variable lead times, questionable product quality and  internet crime.   Unfortunately, the more efficient and global your business is, the more your business is at risk. So how can a company balance the competing needs to reduce risk while deploying efficiency initiatives?

A few forward-looking companies such as Cisco are setting up entire brand protection departments to stop counterfeits as well as supply chain risk management teams to minimize disruptions.  Yet, most executives aren’t even moderately aware that their companies could be teetering on the edge.

What’s needed? 
You need to focus in two areas.  First, every company that makes or uses electronic components in their products needs C-level executives leading the charge and playing an active role in managing risk.  It’s hard to measure risk and, as a result, often top executives don’t get involved.  Well, they don’t get involved until they are clearly shown that counterfeits are costing them millions or billions a year or until there’s a major supplier failure that causes them to miss peak season sales. 

Next, if you take a good look at your supply chain planning solution, you’ll see the next big problem–you don’t have everything you need to neutralize today’s supply chain and business risks.  Typically the systems most companies have in place (ERP, PLM, SCM) rely predominantly on internal data that summarizes only a historical view, and provide little or no information on what is currently happening in the market.  The only way to gain visibility into counterfeiting worldwide, deal with a fire at a supplier’s facility or a critical component in a new product introduction that’s in short supply is with information.  But not just information that’s within your enterprise or supply chain walls, but unstructured transactional data—a current snapshot of global buying and selling activity.  And you need real-time information matters such as natural disasters, geopolitical events or business issues that could restrict a vendor from meeting a critical delivery or cause your most valued customer to cancel a major order.

A new genre of software solutions, such as New Momentum, www.newmo.com, that compliment your current enterprise software investment can help you with an important part of dealing with your risk exposure.  These solutions solve the problem of getting unstructured information and business intelligence from the “open market,” and they present you with risk assessment analysis through a suite of real-time, portal based SaaS application modules.  

 Supply chain risk management needs to be elevated to get C-level attention much like SOX initiatives have been in the last decade.  You need to look carefully at the horror stories and not stick your head in the sand, thinking it won’t happen to us.  Take action now to reduce the possibility of supply risk.

We are interested in hearing about your supply chain risk management experiences and concerns.  And we’d like to hear if you agree with or have a different point of view.