Wednesday, May 16, 2007

Fraud and global supply chains - unanticipated consequence

I've written about vulnerable global supply chains, melamine fraud, poisonous fake glycol and non-fake fur recently. Now I'll add a story from surgeon about a mesh used in a hernia repair in the US ... (emphases mine)
Meanwhile: Bad medicine, sneaking in - International Herald Tribune - Atul Gawande - May 15, 2007

... The mesh manufacturer, Johnson & Johnson, was reporting that the mesh I'd put in was counterfeit. It was fake.

Someone had infiltrated the supply chain somewhere between Sherman, Texas, where the authentic mesh was manufactured, and Boston, where I'd operated on the patient. Apparently, mesh can travel through many hands. The original lot had gone to a Memphis, Tennessee, warehouse, and then through at least two hospital goods distributors, which sell and trade medical supplies on what turns out to be a worldwide market, like oil. Somewhere along the way, a counterfeiter replaced the lot with fake mesh packaged exactly like Johnson & Johnson's, right down to the lot number. It is believed this happened someplace in Asia. But no one really knows.

The material looked like ordinary mesh to me. But according to the alert from the Food and Drug Administration, it wasn't sterile. And although it seemed to be polypropylene, the fibers and weave were different from the manufacturer's...
I'd love to know why a shipment of mesh went from Memphis to Asia and back, and how the switch was made. Global supply chain management is an underrated topic. I suspect these long multinational supply chains make it possible to play quite a few games with taxes, revenue recognition, earnings, inventory, price manipulation, buy low/sell high strategies and more. We also know from the glycol story that traders are incented to conceal their partners (business secrets). This shadowy, anonymous, and amoral network likely creates many "dark alleys" where switches can be made.

I suspect even "honest" supply chain vendors may have arguably legal financial incentives to keep this world in the shadows.

At this rate we won't need terrorists to destroy the world economy, petty crooks and, perhaps, aggressive corporations will suffice ...

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