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Cosmetics Supply Chain Transparency for Business Value and Opportunity

Today, we’re looking at what cosmetics supply chain transparency means, why it matters, and how cosmetic companies can achieve it through the use of technology and gain much more than just a healthier bottom line.

Cosmetics supply chain transparency vs. traceability

Cosmetics supply chain transparency means the whole supply chain is visible, from raw materials, production, and packaging to delivery to retailers and, ultimately, consumers. A lack of transparency in complex supply chains that move billions of products can cause significant risks to both consumer and product owner.

Transparency results from creating a full, shareable, fact-based profile of every aspect of the supply chain. It is a means for companies to support its claims (e.g., product provenance, sustainability, ethical sourcing) and tell the world, “We are what we say we are.” In this way, transparency is a strategic concept — one more and more cosmetic companies are adopting because of its significant benefits for operational efficiency, consumer engagement, brand protection, and profitability.

Traceability most often concerns individual products and aggregations (e.g., boxes, cartons, pallets) and observing/monitoring them as they make their way through the supply chain. It is a means to identify, follow, and verify what’s in your supply chain, as well as comply with regulations that mandate traceability through serialization and digitalization.

Cosmetics supply chain transparency for business value

It’s the global cosmetics market will grow from $287.94 billion in 2021 to $415.29 billion in 2028. Indeed, there are signs the market is booming. For example, L’Oréal, the world’s largest beauty brand, reported record profits last year, with CEO Nicolas Hieronimus, recently commenting, “2021 was a historic year for L’Oréal … Over two years, the Group achieved growth of +11.3 percent like-for-like, spectacularly outperforming a market that had returned almost to 2019 levels.”

The other leading cosmetics brands also did well in 2021. Unilever reported just over $24 billion in beauty and personal care sales, and Estée Lauder had $16.2 billion in sales, an increase of 13 percent over last year.

The “Big 3” of the cosmetics industry have something in common other than strong market performance: Each is committed to transparency and puts it front and center in their business strategy and mission. For example, L’Oréal held a virtual “Transparency Summit” last year, Unilever equates transparency with “integrity,” and Estée Lauder has a dedicated supply chain transparency page on its website.

Transparency and risk management

Despite the opportunity for growth, however, global supply chain challenges can threaten a company’s ability to satisfy growing consumer demand. We all know about the supply chain weaknesses revealed during the pandemic, including overreliance on manufacturing hubs and shipping bottlenecks, not to mention changes in consumer expectations and the way they want to buy and interact with cosmetics.

In a rapidly evolving landscape of tougher regulations, ongoing supply chain uncertainty, increased consumer expectations, and brand risk, transparency has become foundational for success.

Regulatory compliance. Cosmetics regulations vary around the world. For instance, laws in the EU are much broader than in the United States. Generally, however, companies are responsible for making sure their cosmetics are safe, properly labeled, and comply with the regulations that apply to them.

Furthermore, more and more regulatory bodies are calling for modernization via the adoption of digital technologies to ensure products are safe and that companies are able to remain compliant as regulations evolve. Cosmetics supply chain transparency (and traceability) is crucial to compliance. Read our “Global Cosmetics Market” white paper to learn more about regulations in key markets and how technology is driving the industry.

Counterfeits and fakes. And as we’ve written before, counterfeiting is a big problem for the cosmetics industry. Fake products endanger consumers’ health. They can contain toxic substances such bacteria, animal waste, and carcinogenic substances (e.g., lead).

Counterfeits and fakes also damage profits. In “Global Trade in Fakes: A Worrying Threat” (June 2021), the Organisation for Economic Co-operation and Development (OECD) reported that the global value of counterfeits and pirated goods amounted to as much as $464 billion in 2019, or 2.5 percent of world trade.

Brand reputations are also jeopardized by counterfeits. One bad (or very bad) experience can send customers to your competitors and tarnish your image, especially as consumers broadcast their opinions online. Our brand protection series talks more about counterfeits. It’s a real problem that every industry must contend with.

Diversion, theft, and gray markets. The complexity of global supply chains makes it possible for products to end up in markets where they shouldn’t be. Unauthorized or unofficial distribution channels shepherd expired, damaged, or otherwise compromised goods to unauthorized third-party sellers that consumers may think are legitimate. A product bound for Asia winds up in the United Kingdom.

Transparency is not a singular solution for these problems, but it is an indispensable facet of a coordinated, integrated supply chain management strategy to mitigate risk and create real business value.

Mainstreaming sustainability and ESG reporting

As we’ve noted, consumers are demanding more information about the products they purchase; they want to know that ingredients have been ethically sourced and are safe. They want a trust-based relationship with their brands — and if they don’t get it, they’ll happily take their business elsewhere.

This means cosmetics companies must be vigilant and forthcoming about everything in their operations, from their labor standards and how they source raw materials to packaging and other fundamentals of their supply chains. In response, environmental, social, and governance (ESG) reporting has become more prevalent.

ESG reporting measures a company’s social and environmental performance through its supply chain and operations. Cosmetics companies are under pressure, not least from consumers, to reduce their environmental and social impact, set up monitoring systems, use sustainable materials, and publish their social credentials. In this way, ESG reporting is part of cosmetics supply chain transparency.

Or, more accurately, cosmetics supply chain transparency enables effective, accurate ESG reporting.

Leading cosmetics companies are now using ESG reporting, or some form of it, as a strategic tool to monitor their success in sustainability. For example, in 2021, L’Oréal implemented “L’Oréal for the Future,” its sustainability program for 2030. Without mincing words, it prioritizes transparency in product manufacturing, transport, the sourcing and quality of ingredients, sustainability, and more:

“Our commitments towards 2030 mark the beginning of a more radical transformation and embody our view as to what a company’s vision, purpose and responsibilities should be to meet the challenges facing the world.”

Ironically, ESG has enabled some bad players to essentially fake their declarations of transparency and sustainability. It’s called “greenwashing,” when “a company purports to be environmentally conscious for marketing purposes but actually isn’t making any notable sustainability efforts.” Greenwashing is the antithesis of transparency. It’s unethical, and companies that engage in it never intend to meet or quantify their stated transparency, sustainability, and ESG claims.

We’ll be talking more about cosmetics supply chain sustainability tomorrow. Be sure to visit our blog for that.

Final thoughts

Cosmetics supply chain transparency benefits consumers and brand owners alike. For consumers, it means products are safe and legitimate, comply with regulations, and demonstrably rise to the company’s sustainability and ESG goals. For brand owners, transparency offers greater operational efficiencies, mitigates common supply chain risks, and creates opportunities to burnish their reputations, engage with consumers, and tell them with certainty that your products and processes are what you say they are.

Is it difficult to attain transparency? No. Our Traceability System enables companies to follow everything in their supply chains in real time from virtually anywhere in the world. It makes every product a “digital asset” with a certified, provable, and sharable provenance. Its intuitive, scalable solutions can be used individually or as a complete platform to create transparency and end-to-end supply chain traceability and visibility. rfxcel and Antares Vision Group are committed to bringing transparency to all supply chains. We can show you how we do it in about 15 minutes, so contact us to schedule a demo.

And if you’re interested in a transparency case study of sorts, read our global seafood “Transparency Trilogy.” What’s true for seafood is true for cosmetics: Its supply chain reaches into remote areas and involves vulnerable populations and threatened resources.

Antares Vision Group Selected to Speak on Supply Chain Traceability and Smart Hospital Systems at GS1 Connect 2022

AV Group members will present “Supply Chain Traceability: Can Your Business Survive Without It” and “Smarter and Safer Hospitals: When Innovative Technologies Meet Patient Safety”

Travagliato (Brescia), June 1, 2022 Antares Vision Group (AV Group), a technological partner of excellence in digitalization and integrated data management, the global leader in track and trace hardware and software solutions, and one of the main players in inspection systems for quality control and integrated data management, has been chosen to provide thought leadership presentations at the GS1 Connect Conference, June7-9 in San Diego.

In “Supply Chain Traceability: Can Your Business Survive Without It?” Herb Wong, vice president of strategy and innovation at rfxcel, which is part of AV Group, will discuss why traceability is foundational to business success in a rapidly evolving landscape of digitalization, ever-changing consumer expectations and power dynamics, tougher regulations, and supply chain uncertainty. The session will be held Thursday, June 9, at 1:45 p.m.

In on-demand session 509, “Smarter and Safer Hospitals: When Innovative Technologies Meet Patient Safety,” Antares Vision Digital Healthcare Department director Adriano Fusco, and Dr. Alberto Sanna, director of the Research Center for Advanced Technologies for Health and Well-Being of the IRCCS San Raffaele Hospital in Milan, will discuss how traceability and GS1 standards enabled end-to-end visibility of medications – from their arrival at the hospital to dispensing – through the use of optimized resources that focus on patient safety.

AV Group Chairman and Co-CEO Emidio Zorzella said he was excited that GS1 Connect attendees would have the opportunity to hear Mr. Wong, Mr. Fusco, and Dr. Sanna talk about the Group’s technology. “The ultimate goals of traceability and GS1 standards are to protect people and optimize business processes,” he said. “These are also AV Group’s goals. I think people will have a strong reaction when they see how our technology is improving people’s lives, making businesses more efficient and effective and, we hope, making the world a better place.”

GS1 Connect is an annual event hosted by GS1 US. It brings together trading partners to network and learn about the value of using standards-based business processes and best practices for optimum efficiencies in managing the supply and demand sides of their value chains. The theme of this year’s conference is “Adapt,” focusing on how businesses have used GS1 Standards to overcome challenges to thrive in uncertain times. It will feature more than 40 live sessions, more than 50 exhibitors, trading partner roundtables, and other events centered on user stories and leadership insights for supply chain optimization.

For more information, contact AV Group Public Relations Specialist Davide Antonioli at davide.antonioli@antaresvision.com or +39 339-812-4446.

 

ABOUT ANTARES VISION GROUP

Antares Vision Group is an outstanding technology partner in digitalization and innovation for enterprises and institutions, guaranteeing the safety of products and people, business competitiveness, and environmental protection.

AV Group provides a unique and comprehensive ecosystem of technologies — including software and hardware — to guarantee product quality (inspection systems and equipment) and end-to-end traceability (from raw materials to production, from distribution to the consumer), through integrated data management, applying artificial intelligence and blockchain too.

AV Group is active in the life sciences (pharmaceuticals, biomedical devices, and hospitals), beverage, food, and cosmetics industries, and is expanding into other sectors. The world leader in track and trace systems for pharmaceutical products, it provides major global manufacturers, including more than 50 percent of the Top 20 multinationals, and numerous government authorities with solutions to monitor their supply chains and validate product authenticity.

Listed since April 2019 on the Italian Stock Exchange in the Alternative Investment Market (AIM) segment and from May 2021 in the STAR segment of the Mercato Telematico Azionario (MTA) (electronic equity market), AV Group operates in 60 countries, employs approximately 1,000 people, and has a consolidated network of more than 40 international partners. antaresvisiongroup.com

rfxcel, part of AV Group, has deep expertise in providing leading-edge software solutions to help companies build and manage digital supply chains, lower costs, protect products and brand reputations, and engage consumers. rfxcel.com

Understanding the Supply Chain in Africa, Part 2: Challenges and Opportunities

Welcome to Part 2 of our look at the supply chain in Africa. In Part 1, we did “Africa by the numbers,” getting into the details of the continent’s geography, demographics, economy, and goals of “Agenda 2063.” Today, we’re talking about three challenges and three opportunities. There’s a lot to cover, so let’s get started.

Three challenges for the supply chain in Africa

As we said in Part 1, Africa is big: about 11.7 million square miles (30.3 million square km). The continent has eight primary physical regions — the Sahara, the Sahel, the Ethiopian Highlands, the savanna, the Swahili Coast, the rain forest, the African Great Lakes, and Southern Africa — and traversing these diverse landscapes is not always easy.

Which brings us to the first challenge for the supply chain in Africa: physical and electronic infrastructure. Stated simply, Africa has a long way to go with infrastructure. McKinsey & Company’s “Solving Africa’s infrastructure paradox” (March 2020) provides a good overview of this challenge, the paradox being that there’s a high demand for projects and sufficient capital, but not much action. Specifically,

“… infrastructure investment in Africa has been increasing steadily over the past 15 years, and … international investors have both the appetite and the funds to spend much more across the continent. The challenge, however, is that Africa’s track record in moving projects to financial close is poor: 80 percent of infrastructure projects fail at the feasibility and business-plan stage.”

One eye-opening statistic from the McKinsey article: More than two-thirds of the world’s population that does not have access to electricity lives in sub-Saharan Africa. That’s 600 million people. The challenge is self-evident. Agenda 2063 has ambitious infrastructure components (e.g., rail, air, water) and could very well smash this paradox. But it will take time.

Here are two other key challenges for the supply chain in Africa:

The informal economy. The Center for Global Development reports that Africa’s informal sector is the largest in the world, citing International Labor Organization statistics that it accounts for almost 90 percent of the economy in sub-Saharan Africa and about two-thirds in North Africa. Research from 2019 showed that the informal sector provided 90 percent of all new jobs and 70 percent of all employment across sub-Saharan Africa.

In Africa’s urban areas — the fastest-growing in the world — World Bank data shows that almost 81 percent of jobs are in the informal sector, while the International Labor Organization reported that almost 96 percent of youth ages 15-24 and a little more than 93 percent of women work in the informal economy.

This means that a significant part of the supply chain in Africa is informal, operating through non-official channels and without government oversight, regulation, or taxation. This makes it difficult for businesses to operate in Africa and enables an environment in which other supply chain problems can arise.

Counterfeits. Illegal copying and counterfeiting is widespread in Africa, as it is in other parts of the world with unregulated informal economies and insufficient supply chain protections. Bad actors are only too happy to exploit these conditions.

For example, 42 percent of all fake medicines reported to the World Health Organization from 2013 to 2017 came from Africa. (WHO estimates one of every 10 medical products in low- and middle-income countries is substandard or fake.) Reading between the lines, the proliferation of counterfeit medicines in Africa’s supply chain might be even greater, as weak regulations and lax enforcement often results in under reporting.

To illustrate the problem, last year an Interpol-supported operation in Southern Africa targeting “trafficking of illicit health products and other goods” nabbed 179 suspects and seized products worth approximately $3.5 million. Examples of similar events include the following:

    • 2015-2018: Almost 20 tons of fake medicines seized in Mali
    • 2017: More than 420 tons of illegal pharmaceutical products seized in seven West African countries
    • 2018: 19 tons of counterfeit medicines seized in Ivory Coast, Guinea-Bissau, Liberia, and Sierra Leone
    • 2019: 12 tons of counterfeit pharmaceuticals intercepted in Ghana

But official channels are working to address the problem, including these initiatives:

    • The United Nations Office on Drugs and Crime announced a “holistic strategy” to combat crime and fake drugs in West and Central Africa.
    • The African Union announced that the African Continental Free Trade Area (AfCFTA) Secretariat had signed a letter of intent to work with other partners to combat counterfeit trade.
    • The Lomé Initiative is a binding agreement among the Republic of the Congo, Niger, Senegal, Togo, Uganda, Ghana, and the Gambia to criminalize trafficking falsified medicines.
    • The legal profession is also aware of the problem.

Three opportunities for the supply chain in Africa

The rise of manufacturing. African manufacturing made headlines last month when Afrigen Biologics and Vaccines in Cape Town, South Africa, announced it had successfully copied Moderna’s COVID-19 vaccine with no input from the U.S.-based company. At about the same time, the director of the Africa Centers for Disease Control and Prevention said 10 countries were making vaccines right now or planning to do so, with South Africa, Senegal, Rwanda, Algeria, and Morocco taking leading roles.

Led by organizations such as the African Partnership for Vaccine Manufacturing and the African Vaccine Manufacturing Initiative, a coordinated push is underway to manufacture vaccines in Africa “from scratch” (i.e., not merely “filling and finishing” imported products) and make the continent “vaccine independent.”

And this is emblematic of an African manufacturing renaissance of sorts. In the second quarter of 2021, for example, United Nations’ growth estimates indicated a 17.8 percent expansion of manufacturing output. (Output had dropped by 17.1 percent during the same period in 2020, primarily attributable to the pandemic.) Also in the second quarter of 2021, manufacturing output increased “in many African countries,” including South Africa (39.3 percent), Rwanda (30.2 percent), Senegal (22.6 percent), and Nigeria (4.6 percent).

Other examples are abundant: Carmaker Nissan is opening new facilities, and analysts see Africa emerging as an auto industry hub, including for electric vehicles. Overall, research shows that manufacturing on the continent is growing, or strongly rebounding from the pandemic, especially in key economies in sub-Saharan Africa.

A healthy manufacturing sector means a supply chain with opportunities to modernize alongside production facilities, to adopt international standards (e.g., GS1) and best practices, and to build the infrastructure to secure products from the time they leave the manufacturing floor to the time they reach consumers.

A large — and young — labor force. As we noted in Part 1 of our series, approximately 1.4 billion people live in Africa (about 17 percent of the world population) and the median age is 19.7, making it the youngest continent on the planet. According to the World Bank, half of the population in Sub-Saharan Africa will be under 25 by 2050.

This could poise African countries for an employment/ongoing manufacturing boom similar to what’s happened in Vietnam, Malaysia, Singapore, Mexico, and India. With more jobs in more sectors, including technology, and more products originating on the continent, the supply chain will need to grow and adapt. This will create opportunities for modernization and synchronization with global standards and best practices.

A consumer-centric economy. Africa is an enormous market for domestically produced and imported goods and services. As AfCFTA matures and projects under Agenda 2063 and other initiatives are completed, hundreds of millions of consumers should have more and easier access to these goods and services. They should also be willing to spend more money: As of 2021, the final household consumption expenditure in Africa was a little more than $1.9 trillion; McKinsey says this could reach 2.5 trillion by 2025.

This will have a huge impact on the supply chain in Africa — for manufacturing, logistics, distribution, warehousing, and “the last mile.” The more vigorous Africa’s economy becomes, the more businesses should anticipate development of new industries, dissipation of the informal sector, increased demand for better products, and a growing “consumer class” that will come to expect the supply chain to work everywhere on the continent.

Final thoughts

The supply chain in Africa is a work in progress. Some countries, particularly those in Sub-Saharan Africa, are farther along than others. The reasons for this are diverse, ranging from stronger institutions and more stable infrastructure to fortunate geography that facilitates better access to the flow of global trade.

It’s the wise organization that follows the progress and continuously prepares to do business in Africa. This means being able to work with the supply chain, complying with regulations as they’re rolled out and refined, optimizing your systems — and finding the right solution provider.

Contact us today to speak with one of our digital supply chain experts. In just a few minutes, they’ll demonstrate how our Traceability System will ensure your business can integrate with the supply chain in Africa. After doing that, move on to the last installment of our Africa supply chain series, which highlights the pharmaceutical regulatory environment. In the meantime, think about your supply chain and consider the words of Dr. Akinwumi Ayodeji Adesina, president of the African Development Bank Group:

The future belongs inexorably to the continent of Africa. By 2050, it will have the same population as China and India do now. There will be burgeoning consumer demand from a growing middle class, a population of nearly 2 billion people, of which around 800 million young people will be looking for meaningful and sustainable employment.

If we can harness this potential by aligning supply with demand, markets with customers, and skills with jobs, and keep most of these elements and links largely within Africa, then Africa will become an unstoppable economic force, capable of feeding itself and the rest of the world for good measure. That is the future scope for Africans to shape in their own interests and for their own economic ambitions.

 

Understanding the Africa Supply Chain, Part 1

Supply chains are about people. Yes, technology — like the digital solutions we provide — and regulations are important, but people are the true drivers, the alpha and omega. People design supply chains and make them run (efficiently and legally, we all hope). As consumers, people are the final destination of every supply chain; if you don’t understand their needs, wants, and habits, and if your products cannot reach them reliably, you’re out of business. The Africa supply chain is no exception.

In Part 1 of our series about the Africa supply chain, we’re looking at facts and figures about the almost 1.4 billion people on the continent. By understanding the people — where they live, their economies and how they work, and ambitious initiatives that will affect their daily lives — we provide the context for a broader discussion and understanding of the Africa supply chain. Let’s get started.

Africa by the numbers

Geography and population

Africa is big. It’s about 11.7 million square miles (30.3 million square km) total, and about 5,000 miles (8,000 km) from north to south and 4,600 miles (7,400 km) from east to west. Only Asia is bigger: 17.2 million square miles (almost 44.6 million square km).

There are 54 countries in Africa. As we said above, the population is approximately 1.4 billion — that’s about 17 percent of the world population. For comparison, there are roughly 4.6 billion people in Asia, 748 million in Europe, 654 million in Latin America and the Caribbean, 370 million in North America, and 42.5 million in Oceana. Africa is also the youngest continent in the world: The median age is 19.7 years. According to the World Bank, half of the population in Sub-Saharan Africa will be under 25 by 2050.

Africa has the highest growth rate in the world, and its population has increased every year since 2000, when it was approximately 811 million. By 2100, the population will approach parity with Asia. Nigeria is the most populous country, with 206 million people, followed by Ethiopia, which has 115 million. Egypt ranks third — 102 million people — and is the most populous country in in North Africa. (Be sure to read our overview of the Egypt pharmaceutical supply chain to learn about what’s happening there.)

The continent is home to between 1,500 and 2,000 languages, about one-third of the world’s languages. At least 75 of those have more than 1 million speakers.

Urbanization

Africa has led the world in urbanization this decade. As of 2021, 609 million people lived in urban areas; this could reach 722 million by 2026. According to the Population Division of the United Nations Department of Economic and Social Affairs, 22 cities in Africa are expected to grow at an average annual rate of more than 5 percent in the first half of the 2020s, and 58 are expected to grow at 4-5 percent. The two fastest-growing cities in the world are Gwagwalada, Nigeria, and Kabinda, Democratic Republic of the Congo. Cities in Angola, Tanzania, and Mozambique are topping current growth statistics, and by 2035, Africa’s fastest-growing cities are forecasted to be Bujumbura, Burundi, and Zinder, Nigeria.

Proliferation of mobile technology

According to the GSMA, an association representing mobile network operators around the world, 495 million people — 46 percent of the population — were subscribed to mobile services in Sub-Saharan Africa at the end of 2020. This was an increase of almost 20 million over 2019. By 2025, adoption of 4G will double to 28 percent (the global average is 57 percent), and 5G will reach 3 percent of total mobile connections.

GSMA reports that 40 percent of the population in Sub-Saharan Africa is under the age of 15. Overall, Africa’s very young population will drive mobile use. Importantly, we can also assume that this demographic will use their mobile devices for everything from banking and shopping to entertainment, creating opportunities for companies to connect to consumers and involve them in the Africa supply chain.

Economy

Pre-pandemic, United Nations statistical data showed that Africa’s economy grew by about 3.4 percent in 2019, “creating one of the longest stretches of uninterrupted positive economic expansion in [the continent’s] history.” This helped fuel a growth of the middle class year over year.

In 2020, Africa experienced a 3.4 percent contraction in gross domestic product (GDP).

According to the United Nations Industrial Development Organization (UNIDO) Industrial Development Report 2022: The Future of Industrialization in a Post-Pandemic World, the pandemic has caused considerable output loss in Africa, as it has in most of world. Here are projected output losses by 2021 for the “economy groups” in Africa:

    • North Africa (four economies): 7.3 percent
    • Less-developed countries (14 economies): 6.8 percent
    • Sub-Saharan Africa (12 economies): 6.4 percent

For perspective, estimated output losses were 7.5 percent in West Asia (5 economies), 4.1 percent in Northern and Western Europe (4 economies), 2.7 percent in North America and Pacific (4 economies), 10.3 percent in less-developed countries in Asia, and 1.4 percent in China.

According to a quick online survey of Africa-based websites, the top job sectors on the continent are agriculture, which accounts for 15 percent of GDP; infrastructure; mining; service; banking and finance; information and communications technology; entrepreneurship; entertainment; and tourism. See here and here for more information.

In 2020, 453 million people were employed in Africa, with the majority in Eastern Africa. The two most populous countries, Nigeria and Ethiopia, had the highest working populations, about 56.6 million and 51.3 million, respectively.

According to the World Bank, regional growth in Africa projections look like this:

    • Sub-Saharan Africa: Growth for 2022 and 2023 will remain just below 4 percent.
    • East and Southern Africa: Growth of 3.4 percent in 2022; excluding Angola and South Africa, 4.3 percent growth is expected in 2022.
    • West and Central Africa: Growth of 5.3 percent in 2022; the West African Economic and Monetary Union (Benin, Burkina Faso, Côte D’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo) is projected to grow at 6.1 percent in 2022. Nigeria is expected to grow by 2.9 percent (African Development Bank Group).

Agenda 2063 and the Africa Supply Chain

Agenda 2063 “is Africa’s blueprint and master plan for transforming Africa into the global powerhouse of the future.” It is being implemented through five 10-year plans, the first of which is scheduled to end next year. Many of its Flagship Projects relate to modernizing and expanding infrastructure; therefore, they are directly related to the Africa supply chain. For example:

African High-Speed Train Network: The network will connect all countries’ capitals and commercial centers, including connecting the 16 landlocked countries to major seaports and neighboring countries.

Single African Air-Transport Market (SAATM): The goal is “the full liberalization of intra-African air transport services in terms of market access [and] traffic rights for scheduled and freight air services by eligible airlines, thereby improving air services connectivity and air carrier efficiencies.”

Continental Commodities Strategy: The goal is to move Africa away from being a raw materials supplier to “developing [its] commodities as a driver for achieving the structural, social, and economic transformation of the continent.” Integrating into regional and global value chains is a key part of the strategy.

The African Continental Free Trade Area (AfCFTA): The goal is to accelerate intra-African trade and boost Africa’s “trading position in the global market by strengthening [its] common voice and policy space in global trade negotiations.” Thirty-six countries had ratified the AfCFTA agreement as of February 5, 2021.

Final thoughts

To understand your supply chain, you have to understand people. We hope this overview of Africa was informative, showing where people live, how they work, the continent-wide trends, and what’s being done to ensure the Africa supply chain better serves every person in all 54 countries.

Everything we’ve talked about today influences the Africa supply chain; however, urbanization could be the most telling and important. As cities continue to grow — remember, urban populations are projected to reach 722 million by 2026 — people will demand more access to goods and services, and the supply chain will have to respond nimbly and efficiently. The proliferation of mobile devices and networks, especially among young people, is another important driver.

rfxcel understands supply chains. The technology, the regulations, and how they affect people. Move on to Part II of our Africa supply chain series, where we discuss recent developments and regulations in specific countries. And be sure to contact us if you have any questions or want a short demonstration of our solutions. We’d love to hear from you.

Last but not least, take a look at our other news from the Africa and Middle East region:

Why We Should Worry About Counterfeit Cosmetics

Counterfeit cosmetics have boomed during the pandemic. Not that they’ve ever not been in fashion among the criminal set. But recent research shows a renaissance, a proliferation of often dangerous fakes readily available to more people and through newer channels.

We just published a white paper about the global cosmetics market. It has a section about counterfeit cosmetics, and now we want to keep the conversation going with more information about this global problem. Here we go.

The statistics reveal “a worrying threat”

In “Global Trade in Fakes: A Worrying Threat” (June 2021), the Organisation for Economic Co-operation and Development (OECD) reported that the global value of counterfeits and pirated goods amounted to as much as $464 billion in 2019, or 2.5 percent of world trade.

Worldwide, there were “consistently” more than 130,000 customs seizures of counterfeit and pirated goods annually in 2017, 2018, and 2019. “Overall,” the report continues, “the unified database on customs seizures of IP-infringing goods includes almost half [a] million observations.”

In 2017 and 2018, counterfeit cosmetics and perfumery products accounted for about 4 percent of all customs seizures. That rose to just under 10 percent in 2019 — a considerable jump in a very short time. Furthermore, cosmetics and perfumery products were among the Top 5 products “targeted by counterfeiters” every year from 2011 to 2019. (The others were articles of leather, clothing, footwear, and watches.)

What toll do counterfeit cosmetics take on the industry’s fiscal health? One report shows that annual sales losses from counterfeiting in cosmetics and personal care products sector amounted to 4.7 billion euros, or about $5.3 billion.

Our brand protection series talks more about counterfeits. It’s a real problem that every industry, some more than others, must contend with.

Counterfeit cosmetics in a huge global market

According to a Fortune Business Insights report published in September, the cosmetics market was worth $277.67 billion in 2020. Despite an overall decline in sales during the pandemic, the market is projected to grow to $415.29 billion by 2028.

The market has responded to consumer demand for a wider variety of products, and online shopping has added an ease of access. Online shopping will drive the market and, according to industry watchers, could account for nearly 30 percent of global beauty sales by 2026.

However, the dramatic shift from in-person to online purchasing during the pandemic has emboldened criminals to churn out more and more counterfeit cosmetic products. As OECD put in its “Global Trade in Fakes” report, “Under confinement, consumers turn to online markets to [fulfill] their needs, driving significant growth in the online supply of a wide range of counterfeits.”

Research from the U.S. Department of Homeland Security supports this finding. Its “Combating Trafficking in Counterfeit and Pirated Goods” report (January 2020) noted that “Selling counterfeit and pirated goods through e-commerce platforms and related online third-party marketplaces is a highly profitable venture.”

The threat to businesses and consumers

Counterfeit cosmetic products are a real threat to manufacturers and consumers. The bogus goods mimic the original, undercutting company sales. They bypass quality control processes and regulatory oversight, which means they can contain harmful “ingredients.”

For example, in 2018 authorities in the United Kingdom recovered counterfeit cosmetics that were found to contain mercury and high levels of hydroquinone, a skin-whitening agent. UK Police have also warned consumers about fake products containing “rat droppings, human urine, and arsenic.” Police in Los Angeles found counterfeits with bacteria and animal waste.

With the surge in online orders, shipping has become important to the counterfeit industry. The OECD reported that between 2017 and 2019, 64 percent of global seizures were postal shipments and 13 percent involved express couriers. In the same period, 77 percent of all counterfeits seized by authorities were discovered during the shipping period.

Final thoughts

Counterfeit cosmetics — counterfeit anything — threaten consumer safety and brand reputations.

Your supply chain is your first line of defense. With the right solution for end-to-end traceability, like our rfxcel Traceability System, you can leverage data and lock down your supply chain guard to against counterfeits and help mitigate other risks.

You’ll also be able to meet consumer demand for transparency. You can tell them with certainty that your products are what you say they are. You’ll ensure product safety and protect your brand.

If you have questions, we can help. Take a look at our solutions for brand protection and download our white paper about the global cosmetics market. And contact us today to arrange a short demo of our Traceability System. In about 15 minutes, our supply chain experts can show how our solutions will turn your supply chain into your most valuable strategic asset.

Top Reasons Your Supply Chain Is the Key to an Effective Consumer Engagement Strategy

Welcome to Part II of our series about effective consumer engagement. In Part I, we talked about the benefits of consumer engagement. Today, we’re focusing on your supply chain — and how you can use it for a next-level consumer engagement strategy. Let’s jump right in.

It’s all about data from your supply chain

Your supply chain is a gold mine of information that you can leverage for a robust consumer engagement strategy. The basic building block is serialization, which turns each one of your products into what we call “digital assets.” Each digital asset has a unique digital identity that can be monitored from production all the way to the person who buys it.

With rich, traceable data about every item in your supply chain at your fingertips, you can establish and maintain connections with consumers before, during, and after the sale. (You can also do much, much more, but that’s beyond the scope of what we’re talking about today.)

Four ways supply chain data can supercharge your consumer engagement strategy

1. You’ll share the product information that consumers demand. Consumers demand information. Every product — every digital asset — in your supply chain can be “loaded” with data that consumers can access at the store, at home, at a restaurant, at a sporting event. Anywhere. For example, a quick scan of a 2D Data Matrix code or QR code with a smart phone will reveal every detail you want to share about your product: where and when it was grown or made, its ingredients, the route it took to get to the consumer. This demonstrable provenance using supply chain data builds consumer trust and confidence; it is foundational to consumer engagement.

2. You’ll create compelling customer experiences. Consumers also want experiences. With data from your supply chain and other brand resources (e.g., an app) you can curate experiences such as contests, loyalty programs, games, and unique online content. You can encourage storytelling about your brand. If you’re a winemaker, connect people to a virtual tour of your vineyard. If you sell organic foods, share video recipes online or invite people to see your sustainable operations. If you make cosmetics, link to virtual try-ons. Importantly, you can hyper-personalize and hyper-target every engagement, and even “broadcast” specific information to specific locations or events.

3. You’ll communicate directly with consumers. Your serialized product is a device for one-on-one communication with the person who bought it. When a customer accesses the information from your digital asset, you can connect them to your website, social media, an app, a survey, or other forums where they can start a conversation with your brand. They can ask questions and provide feedback — and you can give answers and reactions. Relationship-building is another cornerstone of an effective consumer engagement strategy, and the products people are literally holding in their hands are the first step of the conversation.

4. You’ll gain valuable insight into your customers. An effective consumer engagement strategy creates a world for your customers. And as they navigate and participate in that world, they share information. Where are they buying your products? What do they like? What don’t they like? What inspires them? What engagement activities resonated the most? This business intelligence can inform every part of your business, from how your supply chain works to creating better consumer engagement strategies.

Final thoughts

The purchase used to be the last part of your supply chain; now it’s the beginning of a new realm of possibilities. Every digital asset is an opportunity to connect your customers to your brand and put your products front and center in their lives.

rfxcel’s Traceability System is an end-to-end supply chain solution that creates the digital assets. It gives you in-depth, real-time insights all the way from production to your final customers. The data you connect to your products will fuel compelling consumer engagement activities that can reach people everywhere you do business.

And now, as part of Antares Vision Group, we can offer even more ways to engage with consumers. Contact us today to find out more.

 

BONUS CONTENT!

Last year, we did a piece called “Supply-Chain Traceability Is Building a New Kind of Consumer Kingdom.” Here’s an excerpt that ties into what we’ve said about an effective consumer engagement strategy:

In fact, consumers are not only thinking deeply about where the things they buy come from and what goes into making them, they are actually becoming a pivotal part of the supply chain itself. What’s more, they’re participating willingly and with gusto, demanding detailed information about the goods they purchase and even expecting to interact with products far beyond the point of sale. Just how far will they go to get what they want? More than 70% of customers say they’re willing to share their data in exchange for a more personalized experience, according to one recent survey.

Read the full article here.

What Does It Mean to Be a CRPT Partner in Russia’s Supply Chain?

The Center for Research in Perspective Technologies (CRPT) operates Russia’s National Track and Trace Digital System. Known as Chestny ZNAK, the supply chain system was established by Federal Law No. 425-FZ, signed on December 29, 2017. rfxcel has been prepared for these regulations since 2018, and is now an established CRPT partner.

Let’s take a look at what it means to be a CRPT partner, including the benefits it brings to our customers.

What is the CRPT?

The CRPT is a public-private partnership akin to the European Medicines Verification Organization. Its many responsibilities include generating the serial numbers and verification codes (i.e., crypto codes) required by Chestny ZNAK.

Business giant USM is the CRPT’s principal partner, with a 51 percent stake. USM was founded in 2012 and has interests in many of Russia’s key sectors, including metals/mining, telecom, technology, and internet. According to USM, Chestny ZNAK is the country’s first public-private partnership in the IT sector and the first of its kind at the federal level. Private investments totaling more than 200 billion rubles ($2.5 billion) are expected over the next 15 years.

rfxcel as CRPT partner

Last year, rfxcel earned official CRPT partner status in 10 of the 11 industries for which the organization has chosen partners: medications, footwear, tires, light industry, perfumes, dairy, bottled drinking water, bicycles, wheelchairs, and tobacco. Furthermore, we are the only official CRPT partner for several of these industries.

To be named a CRPT partner, a solutions provider must prove it can work with Chestny ZNAK, comply with its strict serialization requirements, and support companies that do business in Russia.

For example, to be named an official integration, software, and tested solution partner for medications, members of our Moscow team met with the CRPT to demonstrate the rfxcel Traceability System, answer technical questions, and share examples of compliance reports. After an internal evaluation, the CRPT notified rfxcel that it had validated its solution and designated the company as an official partner on its website.

What does being a CRPT partner mean for our customers?

The benefits we bring as a CRPT partner are pretty straightforward. First and foremost, we have proven that our signature rfxcel Traceability System integrates seamlessly with Chestny ZNAK and meets regulatory requirements for key industries.

Russian law calls for serialization, aggregation, unit- and batch-level traceability, crypto codes, and electronic reporting and records management. Our rfxcel Serialization Processing and Compliance Management solutions ensure you’ll comply with these mandated labeling and reporting requirements. Plus, our solutions have a Russian-language user interface that makes integration and start-up much quicker.

The other benefit of being a CRPT partner is that we’re trusted. The CRPT knows our solutions, knows our team in Moscow, and knows that we take compliance very seriously. They know our customers include major pharmaceutical and consumer goods brands. They know we’re committed to making the transformation of Russia’s supply chain smooth and effective, and support the mission “to guarantee the authenticity and declared quality of goods being purchased by customers.”

So, when you work with rfxcel in Russia, you’re working with a CRPT partner that is equipped to deliver quick integration and compliance today, tomorrow — always.

Sneak peek: another recent rfxcel accomplishment in Russia

We’ll share more details about this soon, but earlier this month we received accreditation as an IT company from Russia’s Ministry of Digital Development, Communications, and Mass Media. The Ministry develops and implements national policy and legal regulations for a range of industries, from telecommunications to Internet governance.

That’s all we’ll say for now. The official IT company accreditation is another reason why we continue to be the leader in Chestny ZNAK integration, operability, and compliance.

Final thoughts

We are proud of being an official CRPT partner. It’s proof that our software ensures companies in any industry will remain compliant while they do business in Russia.

Contact us today for more information about how we can help you succeed with Chestny ZNAK. And be sure to download our white paper about Russian compliance. Fully updated for 2021, including information about new pilots for beer and beer-based drinks and biologically active food additives , it’s an easy-to-understand guide to Russia’s strict supply chain regulations for every industry.

The L1-L5 Solution Providers, Explained

Jargon. For better or for worse, it’s a fact of life — more so for people like us who work in the highly technical field of supply chain management. From ANSI to XML, an alphabet soup of shop talk can rain down upon us without warning, often leaving us scratching our heads (or at least searching online). L1-L5 solution provider? What does that mean?

And if we say rfxcel is an L4 and L5 solution provider, what does that mean? With as little jargon as possible, let’s find out. (Hint: It has nothing to do with alleviating back pain.)

What does the “L” stand for in L1-L5 solution provider?

The “L” in “L1-L5 solution provider” stands for “level,” as in the level of serialization in a supply chain. To put a finer point on it, it means the level of serialization and information management in a supply chain. And if you hadn’t guessed, there are five levels:

  • Level 1: Device
  • Level 2: Packaging
  • Level 3: Site
  • Level 4: Enterprise
  • Level 5: Network

The list above progresses from the smallest or most localized level, the L1 device level, to the most expansive and all-encompassing level, the L5 network level. Generally, L1, L2, and L3 are grouped together because they’re happening where products are created and packaged; L4 and L5 are paired together in the realm where those products enter the greater supply chain to make their way to their final destinations.

When talking about L1-L5, let’s work backwards from largest to smallest. This way, we can “zoom in on” the details and put everything in a more vivid context.

Level 5: Network

L5 is where rfxcel has its roots and where we built our reputation for supply chain excellence. The network level is where all serialization and regulatory data is managed, including with your trading partners, regulatory authorities and their repositories, and customers. It ensures you’re communicating with partners and complying with regulations.

Level 4: Enterprise

rfxcel’s roots also run deep in L4, which manages and verifies all your serialization and regulatory data/compliance reporting before sending it to L5. It also generates your serial numbers and manages all your business processes. When you design your solutions for L1, L2, and L3, you must decide how they will integrate with your L4 solution.

Level 3: Site

This is where we enter your actual manufacturing facilities and processes. L3 manages the line systems (i.e., L2) at your site to ensure that they are working optimally. L3 is optional; if present, it serves as the “middle man” between L4 and L2, requesting serial numbers from the former and allocating them to the latter.  L3 will also verify the L2 data before it is submitted to L4.

Level 2: Packaging

L2 systems control the L1 hardware and manage the serial numbers which are printed and applied on packages by L1 devices. L2 systems will communicate with the L4 (or L3,f present) to send/receive serial numbers as needed.

Level 1: Device

L1 comprises devices on a packaging line that enable serial numbers to be affixed to packaging and products, such as barcode printers, label printers, and labelers. It also includes cameras and scanners used for quality control, such as visual inspections of products and labeling.

rfxcel is an L4 and L5 solution provider that integrates with L2 and L3

As we said above, we’ve built a reputation for excellence for L4 and L5, the enterprise and network levels. This is our business: Creating innovative software solutions that optimize key supply chain requirements and functions — from the nuts and bolts of serialization and regulatory compliance to environmental monitoring and data analytics — and bring true end-to-end track and trace capabilities to any supply chain.

Our solutions ensure you’re communicating with all your trading partners, all regulatory bodies and their repositories, and your customers. We’ll help keep your lines running smoothly. We’ll yield rich, actionable data that you can use to improve your operations, connect with your customers, and build consumer trust and brand reputation.

We create one uniform, harmonized supply chain that takes care of everything from unit-level serialization and global compliance network needs to closing the last mile all the way to the person buying your product.

Final thoughts

All levels are important. They rely on one another to make things work. When you’re planning a serialization solution, you have to think very carefully about how they’ll interact and communicate.

rfxcel makes sure your data is accurate, travels quickly between and among levels, and meets the requirements of your partners and government authorities — no matter what systems you have in place now or will get in the future. Interconnectivity and interoperability are the cornerstones of all our implementations.

If you have questions about L1-L5, are looking to build a solution, or are considering switching solution providers, contact us today to talk with one of our supply chain experts and see what our award-winning rfxcel Traceability System can do.

Why We Need Wine Industry Track and Trace, Part 1

It was tempting to write about wine industry track and trace as a film noir (or a film pinot noir, as it were). There would be clandestine grape-stomping, midnight rendezvous in terraced vineyards, rogue chemists, cases stuffed with euros and dollars, sting operations and FBI raids, people taken away in handcuffs. In the closing scene, the one-time victim would celebrate triumph over those who did them wrong.

This much drama for wine industry track and trace? Yes, though it’s about much more than the serious work of fighting counterfeits and illicit trade. It’s about using technology to build provenance, streamline operations, and satisfy customers.

Part 1 of our two-part story covers the basics of wine industry track and trace. Part 2 will get into specifics. Let’s start our investigation.

Seriously, why do we need wine industry track and trace?

Not all supply chains are created equal. For example, if you read our Seafood Transparency Trilogy, you know a large, geographically diverse, and fragmented supply chain poses many challenges.

Plus, some products are more complex than others, which means they have more complex supply chains. From raw materials/ingredients to what consumers expect (or demand), supply chains vary wildly depending on what’s being made, where it’s being delivered, and even “the culture” of the product.

As you might have guessed, wine has a complicated supply chain. GS1, in its 2009 Wine Supply Chain Traceability Guideline, said, “The wine supply chain has always been complex and fragmented and with more distant suppliers and ever-more demanding customers, the unique characteristics of this supply chain bring challenges to implementing an effective traceability system.”

If you wanted to get technical, you could argue that there are actually two wine supply chains.

First, there’s a supply chain for “table wine” or “mass market wine.” Depending on where you live, you’ll find these in your local grocery store, in a wine/spirits shop, or in a state-owned store (an “ABC Store,” “package store,” or “state store”). This supply chain has many actors and the product changes hands many times. The product itself changes dramatically as it moves from raw materials to a finished good. Stakeholders typically have access to technology, including track and trace technology.

The second supply chain is for “fine wines,” which are produced in much smaller quantities than table wines. Though these vintages are sold in “regular” wine shops, they’re often reserved for boutique settings frequented by aficionados with deep pockets (or at least bigger budgets they’ve set aside for their passion). The steps of production and distribution may be very localized, resulting in a supply chain with far fewer actors than for mass-produced wine. For example, a winery in Burgundy, France, might do everything from growing the grapes and bottling to distributing pallets, cartons, or cases to local retailers. Because of their size, they may not have access to the latest track and trace technology.

So, why do we need wine industry track and trace? Here are the key reasons:

  • It’s a complex, fragmented supply chain.
  • There are diverse ingredients and raw materials, ranging from fertilizers and water to bottles, corks, and caps — and, of course, grapes.
  • Wine is heavily regulated.
  • Consumers of all stripes want the full provenance for what they’re drinking.

Wine industry track and trace will improve operations for all, ensure compliance with regulations, and satisfy consumer demand for detailed information and transparency.

Two other reasons for wine industry track and trace

Like other industries, wine has business and professional organizations for its supply chain stakeholders. There are trade publications and trade shows. It does big promotions. It has all the trappings of a large, important industry.

Unlike other industries, however, wine has a following. It is more than a product. Wine is a global culture unto itself. And this means there are aspects to its history and very existence that have ramifications for the supply chain.

For starters, there’s a thriving counterfeit market and illicit trade. Granted, this isn’t unique to wine, but the intricacies of the production process and the many facets of supply and demand make it an especially daunting problem. These stories from 2020 give an idea of its scope:

Furthermore, there’s a thriving, passionate collectors’ scene around the world. There’s a huge private trade, in-person and online clubs, mega-exclusive events and dinners, and auctions with nosebleed prices. And there’s lots of money changing hands. A desirable bottle of wine can cost as much as a car. Or a house. The 2019 auction market alone was valued at more than $520 million.

As a cautionary tale that combines the scourge of counterfeiting with the rarefied air of the highest echelons of the wine elite, there’s the fascinating case of Rudy Kurniawan. If you don’t know the story, start here. You might want to grab a glass of wine — just make sure you know where it really came from.

So, counterfeiting and illicit trade are major problems, including in collectors’ circles, where today’s wines are tomorrow’s pricey classics. Provenance, therefore, is vitally important across the supply chain, which is another compelling reason for wine industry track and trace.

Final thoughts

In our faux noir introduction, we said the victim triumphed in the end. What we meant was that wine industry track and trace protects everyone in the supply chain, from winemakers and their trading partners to everyday consumers and auction houses.

Producers can prove the provenance of their ingredients and final products. They can create a story about their wines, connect with consumers, and build and safeguard their brand reputation. Distributors and retailers can maintain the chain of ownership and help ensure only genuine products make it to market, all while streamlining and automating logistics. Consumers can know more about the wines they buy, such as where the grapes were grown, when they were harvested, and if they were treated with pesticides. For fine wines that may become collectors’ items, provenance can be “passed down” as a bottle or case or entire cellar ages, providing much-needed proof that a wine is what it’s label says it is.

As the leader in track and trace technology, rfxcel can help. Our award-winning rfxcel Traceability System is perfectly suited for wine industry track and trace. For example, our Raw Materials Traceability and Finished Goods Traceability solutions create the entire product provenance with detailed data about every aspect of production. Our Integrated Monitoring solution rides along with products as they move through the supply chain, protecting them from environmental excursions, diversion, and theft. With our MobileTraceability app, you can see and control your supply chain from virtually anywhere in the world.

Talk with one of our supply chain experts today to learn more about what we can do. And check back soon for Part 2 of our wine industry track and trace series.

READ PART 2 OF OUR WINE TRACK AND TRACE SERIES.

Russia Chestny ZNAK Track and Trace: A Refresher Course

Russia is in the midst of creating the world’s most ambitious — and strict — supply chain track and trace system. Its National Track and Trace Digital System, known as Chestny ZNAK (and sometimes translated as Honest SIGN or Honest BADGE), is on track to be fully operational in 2024. Chestny ZNAK track and trace requirements are tough, and they’ll cover virtually every type of product you can imagine.

No matter what role you play in the supply chain, you have to understand how the system works and what the regulations mandate. Let’s examine Chestny ZNAK track and trace, from its origins to what it requires.

The origins of Chestny ZNAK track and trace

On December 29, 2017, Russian President Vladimir Putin signed Law No. 425-FZ, officially inaugurating the Chestny ZNAK track and trace system. Its goal is to streamline quality control, protect against counterfeits, and monitor supply and demand and expenditure. The regulations cover 12 product categories: medicines, furs, footwear, bottled drinking water, tires, tobacco, dairy, wheelchairs, bicycles, light industry, perfumes, and photo cameras and flashbulbs.

Chestny ZNAK is run by the Center for Research in Perspective Technologies (CRPT), a public-private partnership akin to the European Medicines Verification Organization. Its principal partner, with a 51 percent stake, is business giant USM, which was founded in 2012 and has interests in many of Russia’s key sectors, including metals/mining, telecom, technology, and internet.

According to USM, Chestny ZNAK is the country’s first public-private partnership in the IT sector and the first of its kind at the federal level. Private investments totaling more than 200 billion rubles ($2.5 billion) are expected over the next 15 years.

What are the requirements?

Chestny ZNAK track and trace regulations are arguably the strictest in the world. Companies that do not comply face fines and other penalties, including “deprivation of liberty” (prison), and can in essence be banned from doing business in Russia.

The requirements vary by industry, and deadlines and labeling requirements have changed, but the fundamentals have remained constant: serialization, aggregation, unit- and batch-level traceability, crypto codes, and electronic reporting and records management.

Products must be marked with 2D Data Matrix codes with an 85-character alphanumeric sequence that contains at least four groups of information: a Global Trade Item Number (GTIN), a serial number, a verification key, and a verification code (i.e., crypto code). Furthermore, the owner of goods must create a Universal Transfer Document (UTD) at the moment of ownership, then transfer it to the CRPT.

The crypto codes are an important part of Chestny ZNAK track and trace. At first, every code had to have 88 characters, but a federal decree in August 2019 that amended the procedure for applying drug labelling codes cut the requirement to 44 characters. The CRPT issues the codes, which only authorized representatives can request/receive. rfxcel is an approved partner of the CRPT; more on that below.

For the pharma sector, it’s prudent to note that Chestny ZNAK track and trace requires over-the-counter (OTC) drugs to be labeled, scanned, and recorded in the system. This is a significant departure from the EU Falsified Medicines Directive (FMD) and the U.S. Drug Supply Chain Security Act (DSCSA).

These are the broad strokes of the Chestny ZNAK track and trace regulations. There are other requirements — such tracking products with Universal Transfer Documents (UTDs), which must be sent to the CRPT when ownership of goods changes — but we won’t get into those here.

How does it work?

Chestny ZNAK track and trace is a five-step process that calls for complete traceability all the way to consumers. Let’s walk through these steps.

First, the CRPT sends the manufacturer, wholesaler, retailer, or importer — referred to as “economic agents” in the regulations — a unique digital code for every product that must be affixed to the packaging. Only a CRPT-authorized representative can request codes. Every product is logged in Chestny ZNAK’s catalogue of marked goods.

In the second “logistics” step, the digital code becomes an immutable “passport” that legitimizes the product at every step of the supply chain. Every transfer of ownership must be recorded.

Next, the product arrives at the location where it will be sold or dispensed. The receiver scans the item, Chestny ZNAK receives a transfer confirmation, and it’s ready for sale.

Fourth, the product is sold or dispensed. The seller is required to have a point-of-sale cash register, a system connected to the internet that typically includes a touchscreen, a scanner to read 2D Data Matrix codes and other codes, a credit card scanner, and a printer. The product is scanned at checkout and the cash register reports to Chestny ZNAK that “the code has left circulation.” If the scanned data doesn’t match what’s in the catalogue of marked goods, the product is counterfeit or otherwise illegitimate and cannot be sold.

In the last step, the consumer takes over and becomes the final supply chain quality control checkpoint. Using the Chestny ZNAK app for smart devices, described as “your main assistant for product quality tracking and counterfeit detection,” a person scans the 2D Data Matrix code on the product and gets instant access to rich information directly from Chestny ZNAK. If a scan reveals a “violation” — meaning the product is counterfeit or not in compliance with marking regulations —  consumers can report it directly to the CRPT. They can also send questions about how the app works and suggestions to improve it

Here, we want to point out that the Chestny ZNAK track and trace app reminds us of our own MobileTraceability app, only for consumer use. Both can show the date, time, and place of production, the expiration date, and details about the product’s journey from the farm or factory to the store. Our MobileTraceability app is a powerful tool for track and trace in any industry. Check out our short video about how it works in the food and beverage supply chain.

Final thoughts

If you follow our blog or read our news, you know rfxcel is the leader in Chestny ZNAK track and trace compliance. That’s a bold statement, but we think we have the facts to back it up:

  • We’re an official integration, software, and tested solution partner with the CRPT. We’ve demonstrated that our solutions, particularly our signature rfxcel Traceability System (rTS) and Compliance Management (rCM), can meet the stringent Chestny ZNAK track and trace requirements and ensure companies stay compliant.
  • rTS works seamlessly with Chestny ZNAK track and trace, including a Russian-language user interface that makes integration and startup much quicker.
  • We’ve prepared for Chestny ZNAK since 2018.
  • We’re one of the few providers with active implementations in Russia.
  • We’ve tripled our workforce in Russia over the last year. Our team in Moscow provides our clients, which include major global consumer goods and pharmaceutical companies, the quickest time to market while fully automating their compliance reporting.

Contact us today learn more about how we can help you with Chestny ZNAK track and trace. No matter how far along you are in your preparations to meet the requirements, you should talk to us — even if you’re already working with another provider. Our powerful software ensures companies in any industry remain compliant with the complex regulations.