A presentation combining research focused on counterfeiting, food safety, and food defense/bioterrorism.

1. Combating The Impact of Product Counterfeiting:
Defining the Growing Risk to Supply Chain
Cost and Service Performance
Omar Keith Helferich PhD
September 23, 2010

2. Overview
• Source of Information and experience
• Review of Planning and Response during
major disruption events
• Review of MSU National Center for Food
Protection and Defense Research
• Recommendations to enhance Food Supply
Protection
© 2010 Michigan State University

3. Research and Industry Perspective
• Michigan State Anti-Counterfeiting and
Product Protection Program (A-CAPPP)
• National Center for Food Protection and
Defense (NCFPD)-Food and Pharmaceuticals
• National Environmental Health Association
• Industry Sustainability Assessment
© 2010 Michigan State University

4. Review: Counterfeit in Food Safety
Discussion Scope
Counterfeit/ Economic Fraud
Food Defense/
Food Safety
Bioterrorism
© 2010 Michigan State University

5. Review: Counterfeit Actions
• Adulterator
• Tamperer
• Thief
• Over-runs/ Unauthorized Production
• Diversion
• Simulation or Look-a-likes
• Counterfeiter
© 2010 Michigan State University

6. Review: Supply Chain Aspects of the Food Threat
• The international supply chain
– Overview
– Diversion
– Transshipment
– Free Trade Zones
• SCM countermeasures and deterrents
– Integrated approach/ raise the stakes
– Coordinated activities/ countermeasures
© 2010 Michigan State University

7. Review: Food Fraud Scale
• The global counterfeit food threat is estimated at $49
billion, and the UK’s Food Standards Board (FSA)
estimates the UK “level of fraud” around 10 percent.
(Ravilious, 2006)
© 2010 Michigan State University

8. Review: Food Fraud Scope
• Product Substitution
• Product Up-labeling
• Product Adulteration
• Product Copy/ Unauthorized Refill
• Product “Freshening”
© 2010 Michigan State University

9. Review: Counterfeit Countermeasures
• Overt
• Covert
• Forensic
• Track-and-Trace
• Authentication
• Investigation
• Regulation
• …Standard Operating Procedures
© 2010 Michigan State University

10. Research and Field Experience: Over 25 years
• Safety & Environmental Health Ground Zero
engineering & research WTC 2001
• Coordinating Logistics for
• Red Cross Logistics & Mass Care
Field Volunteer during major events
• MSU Food Security Research Team
for DHS -2005-07
• Research in sustainability &
disaster planning & recovery
• Co-Developed initial white paper on
supply chain security following WTC
2001 Issues:
Chaos after an Incident
Public Health
Secondary Events
Communications & Infrastructure Damage
Economic and Public Services Recovery
© 2010 Michigan State University

11. Dimensions of SC Security: Incident Management Process(*)
3. Detection
4. Response
2. Mitigation
Lessons
Learned
5. Recovery
1. Planning
Supply Network Continuity Management Process
*Comprehensive *Simple *Flexible *Tested
*Revised for Changing Threats
Minimizes Loss & Disruption
* Drs. Helferich and Cook: 2002 CLM Research Results
© 2010 Michigan State University

12. Dimensions of Supply Chain Security:
Impact Matrix
Attribute Scale Measure
Severity Minor to Massive Lives, Injuries, Fear, Dollars, Performance
Duration - Minutes to Years Time
Impact
Geographical Local to Global Square Miles and Boundaries
Detectability Easy to Difficult Warning Systems and Awareness
Frequency Low to High Historical vs. Concern
Wind, Water, Disease, Fire, Explosion, Contamination, Radiation
Other SC Disruptions - Intentional/Unintentional
© 2010 Michigan State University

13. Dimensions of Supply Chain Security : Measures
• Ability to detect security incidents
• Reduction in the number of security incidents
• Increased resilience in recovery
• Changed risk profile –exposure vs. actual cost
• Changed cost with continuity programs, insurance vs. shrink, injuries,
downtime, turnover, temporary substitution
• Improved security relative to competitors
• Improved ability to meet security requirements
• Relationships without recognition of potential risk vulnerabilities
© 2010 Michigan State University

14. Intentional and Accidental Food
Contamination and Disease Outbreak Impacts
Year Event Impact
1984 Salad bar contaminated by religious cult 751 ill
1989 Detection of cyanide in Chilean grapes $200 M
1996 Outbreak of BSE in UK cattle $5.8 B
1997 Outbreak of FMD in Taiwan pork 3.85 M hogs
1999 Contamination of livestock feed with dioxin $850 M
2001 Outbreak of FMD in UK cattle $8.32 B
2003 Exotic Newcastle disease in US poultry $180 M
After 03 Spinach, Beef, Pet food, Toothpaste, Seafood, etc. $M to $B
Yearly Losses due to 5 major food borne pathogens in US food $6.9 B
supply
© 2010 Michigan State University

15. Food Supply Vulnerability (*)
• Planning completed to prepare and respond to intentional disruptions is also
valuable for natural or accidental events.
• The severity and impacts of the incident are dependent on the agent and scenario,
ability to accomplish the event, and efficiency and effectiveness of detection and
response.
• Significant evidence has been found that indicates that agro terrorism is a target
of terrorist groups.
• World Health Organization urges “farm to fork” contingency planning due to the
potential impact of attacks on national food supply sources. WHO states the
following as examples, but expects it could be much worse depending on the
agent used:
• 1985- 170,000 sick in the US from contaminated pasteurized milk
• 1991- 300,000 infected with Hepatitis A from clams sourced in China
• 1994- 224,000 infected with salmonella from ice cream in US
* Dept of Homeland Security: Areas of Vulnerability: People, Physical & Processes
© 2010 Michigan State University

16. Introduction and Dimensions
of Supply Chain Security
• The application of policies, procedures, and
technology to protect SC assets (product,
facilities, equipment, information, and
personnel) from theft, damage, or terrorism
and to prevent the introduction of
unauthorized contraband, people, or weapons
of mass destruction.
– Closs and McGarrell (2004)
© 2010 Michigan State University

17. MSU R&D Initiatives:
DHS Supply Chain Security Benchmarking Objectives
• Define Supply Chain Security
• Identify status of supply chain security initiatives
• Identify competencies and capabilities that firms are using to
enhance supply chain security
• Discuss benchmarking tool for improving supply chain
security
This research was supported by the U.S. Department of Homeland Security (Grant number N-00014-04-1-0659), through a
grant awarded to the National Center for Food Protection and Defense at the University of Minnesota. Any opinions,
findings, conclusions, or recommendations expressed in this publication are those of the author (s) and do not represent
the policy or position of the Department of Homeland Security.
© 2010 Michigan State University

18. MSU DHS Research Supply Chain Security
Impact: A State of Transition
• From • To
– Corporate security – Cross functional team
– Theft prevention – To include anti-terrorism
– Inside the company – End-to-end supply chain
– Vertically integrated supply – Business model that includes 2nd
chain with 1st tier suppliers and 3rd tier suppliers
– Country or geographic – Global
– Contingency planning – To include crisis management
– Reactive – Proactive
© 2010 Michigan State University

19. MSU Research Conclusions
• Food supply chain firms are increasingly interested in protecting their
supply chains to protect their customers and brand names.
• Firms must develop a broad range of competencies to achieve supply
chain protection.
• Firms have seen performance improvements in detection and resiliency.
• In general, firms embarking on supply chain security initiatives will, at
least initially, increase firm and supply chain operating cost.
• Better performance is linked to extended supply chain security efforts
throughout the supply chain.
© 2010 Michigan State University

20. Where is Your Firm’s Security Program Opportunity?
Vital Segments Priority Tools/ Methods Improvement Tasks/COAs
1. Senior Management Input Formalize Senior Mgt
Council
2. Risk Assessment Define and Prioritize Risks
3. Benchmarking Formal Benchmarking-MSU
4. Facility Security Risk Utilize Formal Risk
Assessment Assessment- Carver Shock
5. Baseline Security- Top Priority Risks
Protection
6. Enhanced Security- CRT Process for Unique
Protection Incidents
7. Security Program Design SC Cross Functional &
Process Design
8. Plan and Process Independent Audits
Implementation
9. Process Monitoring & In Line Security Process with
Control Balanced Scorecard Metrics
10. Process Review Ongoing Measurement &
Learning
Accumulative Continuous Improvement
© 2010 Michigan State University

21. Assessment of Food Vulnerability:
CARVER Plus Shock
• Assessment method most commonly used
and recommended by both USDA and FDA is
the CARVER plus Shock.
• This tool can be used to assess vulnerabilities
within a system or infrastructure. Conducting
the assessment allows focus on the most
vulnerable points that pose the greatest risk.
© 2010 Michigan State University

22. Assessment of Food Vulnerability:
CARVER Plus Shock
• CARVER plus Shock is an acronym for seven attributes used to
evaluate the attractiveness of a target for attack:
– Criticality- measure of public & economic impacts
– Accessibility-ability to access target
– Recuperability- ability for system to recover
– Vulnerability- ease of accomplishing the attack
– Effect- amount of direct loss from attack
– Recognizability- ease of identifying the target
– Shock- combined measure of the physical, health,
psychological and economic effects of attack
© 2010 Michigan State University

23. Summary of Key Learning's: Supply Chain &
Security
• .
Need for a “Baseline Process” based on Risk
• Recognition that Security is not a “Quick Fix”
• Promoting that “Security is everyone’s responsibility
• Supply Chain concerns, not only enterprise or functional specialties
• Noticed/addressed based upon crises and failures, not successes
• Only as robust as the weakest link
• Weakened by poor communications and technology, personality and
“turf” politics
• Most successful when integrated into operations, not add-ons
• Essential to business success with in-line process support of BU
• In need of increased focus on Internal Access Control and Monitoring
• In need of Increased focus on intentional incidents contaminations
• Executive cross-functional security councils w/leveraged cross-functional
leaders to drive agenda
© 2010 Michigan State University

24. Combating Counterfeiting &
Adulteration Supply Chain Risk
Supply Chain Counterfeiting
GAPS & Opportunities Current &
Emerging
Best Practices Guidelines,
Development of Prevention &
Mitigation Guidelines Checklists,
Standards
Risk Based
Analysis Development of Supply Chain
Anti-Counterfeiting Internal Proven
Standards Standards
Development
Processes
Recommended Process for
Standards Implementation &
Enforcement
© 2010 Michigan State University

25. Risk and the Response-based Business
Model
Response-based Business Model*
DISRUPTION EVENTS
Natural
Criminal/Terrorist
Public Health
Supply Network Lean Inventory
Process/Equipment
Rationalization Management
Law / Regulations
Globalization
*Bowersox & Lahowchic, “Start Pulling Your Chain”
© 2010 Michigan State University

26. Dimensions of SC Security: Expectations-
A Changing Future
• Secure supply chains – containing advanced
security processes and procedures
• Resilient supply chains – able to react to
unexpected disruptions quickly in order to
restore normal operations
Rice and Caniato (2003), “Building a Secure and Resilient Supply Network,”
Supply Chain Management Review, September/October.
© 2010 Michigan State University

27. SC Protection: Potential Mitigation Programs
Proactive
Sustaining
Environment Excellence
Executive Commitment
Mitigation Pathway to Success Process
Human Resource Backup- Cross Training
Continuity Training & Education Process Redesign
Mutual Aid Agreements Supply Chain Network Design
Shared Committed Inventory Critical Parts Inventory
Reactive Assets Backup General Parts Catalog Increase Parts Inventory
Environment
Collaborative Arrangements Process Backup Systems Backup
Vision Control Team Process
Supply Chain Mitigation Initiatives: Physical, People, & Process
© 2010 Michigan State University

28. Average Percent Improvement Reported by
Manufacturers from SCS Investments
Efficiency Visibility
60
60
50
48 50
50
40 43 Reduced Inspections
40 Improved Asset Visibility
Percent
Increased Automated Handling
Percent
30 More Timely Shipping Information
30 29 Less Process Deviation 30
30
20 Shorter Transit Time Reduced Inaccurate Shipping Data
20
10 10
9
0
Resiliency Inventory Management & Customer Relations
35
40
30 31 38
37
25
Shorter Problem
30
Resolution Time Reduced Theft/Loss/Pilferage
23
20
Percent
21 Quicker Response to a 26 Decreased Tampering
Percent
Problem Less Customer Attrition
15 20
Reduced Time to Identify Reduced Excess Inventory
10 a Problem
14
10
5
0
0
Source: Innovators in Supply Chain Security: Better Security Drives Business Value – Stanford University White Paper, June 2006
© 2010 Michigan State University

29. Discussion and Feedback
Thank You!
SC Security ‘Brand
Protection Pays’

30. Review: Packaging for Food and Product Protection
(P-FAPP) Initiative
• The first step in the P-FAPP Product Protection Initiative is to create
Teaching and Outreach Funding to develop university course content, to
develop infrastructure, and to validate the long-term interest in the topic.
• Teaching and Outreach Funding Deliverables:
– Undergraduate/ graduate Product Protection On-line Course – June 2008
– Executive education: Offer a Product Protection ‘short course’ – September 2008
– Certificate/ degree program: In development
– Continue the aggressive schedule of academic and industry presentations
• For information please contact MSU/P-FAPP directly:
– John Spink, Director, P-FAPP, 517.381.4491, SpinkJ@msu.edu
– http://foodsafe.msu.edu/Packaging_for_Food_and_Product_Protection_Initiative.html
• Dr. Helferich may be reached at okeithhelferich@msn.com or
info@supplychainsustainability.com
© 2010 Michigan State University