A Client’s Digitalization Success Story: Anti-Counterfeiting
Updated: May 28
How Amore Pacific -- the world’s 7th largest cosmetics company -- used tooling digitalization to tackle counterfeiting
Counterfeiting in the Cosmetics Industry
Counterfeiting is a recurring thorn in the sides of manufacturers, and it shows no signs of stopping. In 2019, the OECD concluded that the value of counterfeit goods in 2016 amounted to $509 billion -- some 3.3% of total world trade. This figure has only increased over time, with counterfeiting making up 2.5% of global trade in 2013 and 1.8% in 2007.
For cosmetics and beauty companies, there is little wonder why counterfeiting is so particularly objectionable. Imitative products don’ts just harm revenue and brand damage, they pose real health and safety risks to consumers whilst masquerading under their name.
Cosmetics products are relatively easy to make; the ingredients are inexpensive and the technical requirements are low. With an ever-growing and remarkably resistant market (globally worth $505 billion in 2018 and expected to grow at 7.14% CAGR from 2018 to 2023), it would seem all-too tempting to package and sell fake products under a quality brand.
“Between 2013 and 2016, the share of trade in counterfeit and pirated goods in global trade grew very significantly. Moreover, this growth was reported during a period of a relative slowdown in overall world trade” - OECD/EUIPO, 2019, Trends in Trade in Counterfeit and Pirated Goods
It’s little wonder that cosmetics giants spend billions of anti-counterfeiting measures every year, with $37 billion spent in 2014 alone. Despite this, counterfeiting continues unabated. An incident with Estée Lauder comes to mind, when governments seized more than 2.8 million fake products over 1500 incidents. Given standard interdiction rates, the trade could easily amount to more than ten times that figure. Custom seizures of pirated goods carry on, with OECD reporting a minimum 130,000 seizures every year from 2014 to 2016.
The worst part is the health risk. Counterfeit manufacturers are not obliged to follow health regulations. They can flood the market with cheap, hazardous products, packaged to look like the real deal. Unsafe, unhygienic, and unregulated manufacturing practices create short- and long-term health problems for consumers. These things speak for themselves, but they also mean incalculable brand damage and diminished customer loyalty.
Amore Pacific’s Digital Approach to Anti-Counterfeiting
For South Korean companies, the damage from counterfeiting can run up to $7.2 billion a year. Amore Pacific (AP) decided it had to take a stand.
Amore Pacific’s first important realization was that many of the fake products on the market were created by AP’s very own toolings. This is what they learned: once partnered with Amore Pacific, unscrupulous contract manufacturers would relocate Amore Pacific’s molds to Chinese subcontractors. These subcontractors operated AP’s toolings using cheaper ingredients and subpar processes, creating high amounts of low-quality products.
Amore Pacific’s problem was that they couldn’t track their toolings as they moved around the supply chain. Their conclusion was that they needed a digital record-keeping system to keep track of their toolings in real time.
In 2017, Amore Pacific found the answer in eMoldino. The digital solution we provided was meant to digitalize toolings:
Attachable sensors picked up where the toolings were, immediately discouraging suppliers from relocating the toolings.
The sensors tracked shot counts and recorded total activity uptime. This helped AP benchmark suppliers for possible counterfeit operations. Shot data let them compare the amount of parts produced with the amount of parts finally delivered; tooling uptime let them spot any abnormal production patterns.
This, and other, data was transmitted to an end-user system where AP could track their toolings (and assorted KPIs) digitally in real-time.
eMoldino’s system was created to show off impactful KPIs. The intent was for clients to use these KPIs to strengthen practices in procurement, quality, engineering, etc. The ingenuity of Amore Pacific was in adapting this system to address their longstanding counterfeiting issues, on top of using the solution as it was initially advertised.
It was an eye-opening moment for all parties involved. For us, it was a pleasant learning experience, a notch in our belt, consulting with a company of such reputation in the cosmetics industry. For Amore Pacific, we were just the answer they were looking for. Not only did the solution help against counterfeiting, it kept track of their toolings -- this was a goal that they’d always been working towards, separate from the counterfeiting issue.
Ingenious Use of Digitalization
We recognize that toolings are the backbone of manufacturing -- this is why ours is a tooling digitalization solution. There is vast potential in digitalizing your toolings; the cost savings, process optimizations, and visibility from tooling digitalization has been lauded by industry-leading companies the world over.
Drop us a message if tooling digitalization catches your interest. Now is a great time to start talking about topics you’d like to share or hear from us.