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tHe pIcA repOrt: trAcKInG prOFItS
At a time when businesses are exploring almost every option to help
them stay profitable, many are ignoring the big gains that can be made
by tackling grey market trading, says richard bergner.
In these challenging economic times, one preoccupation dominates business
owners’ minds: how to increase their bottom line. Some cut back on spending;
others close down operations to reduce overhead and labour costs. But there
is one solution that most corporations overlook, which could potentially
increase their bottom line by millions of dollars.
The process does not entail the tightening of corporate belts, but rather the
closer scrutiny of a company’s supply chain and a willingness to engage in
any action needed to ensure that merchandise is not being diverted for sale
to grey markets.
In late 2008, a global healthcare company doing large amounts of business in
Africa and the Middle East was unaware that large amounts of its products
were being ‘U-boated’. In other words, the merchandise was not leaving the
US; instead, it was being diverted by distributors for grey market sales.
After Professional Investigating & Consulting Agency investigators identified
the redirected product, which amounted to $10 million over several years, the
healthcare company took action to stop the activity. It quickly saw its domestic
sales soar by $3.0 million as a direct result.
Product diversion carves out an enormous portion of commerce and trade
around the globe, and it is growing at an ever-increasing rate.
Third parties undercut a company’s price for a product and then harvest
gigantic profits in the process. It’s going on everywhere, from the local auto
parts dealer to the superstore chain down the block, and it includes all manner
of goods, from brand-name batteries to band instruments.
In the US alone, diverted products are estimated to account for tens of billions
of dollars in sales annually. Virtually every manufacturer faces the potential of
lost sales, tarnished reputations and ill will from customers due to products
sold through illicit trade chains.
The bad news is that many manufacturers are oblivious to what is going on
and the fact that millions of dollars, literally, can be squeezed out of their
supply chains.
The good news is that it is also within reach of these corporates to adopt
some best practices that will unearth the diverters and put a stop to this
costly activity.
At a time when world economies are on a tumultuous roller coaster, the
prospect of adding millions to corporate profits is an opportunity that should
not be ignored.
Unfortunately, many companies do turn a blind eye to these practices. In
part, this is because diversion is often a problem that has its roots firmly
www.worldipreview.com World Intellectual property review September/October 2009 53
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