Faced with shortages? Counterfeit parts prevention requires vigilance, smart choices and controls
By Gordon Brown, VP Supply Chain – EMEA, Plexus
The trade in counterfeit electronics has been one of the most discussed and analyzed topics in the electronics industry for years and there seems to be no end in sight. There are numerous reasons why counterfeit parts surface, and companies need to be particularly vigilant during supply chain constraints, where low levels of required supply increase the pressure to access the open market. Originally posted on Plexus Blog.
What are Counterfeit Electronic Parts?
ERAI provides a number of different definitions for a counterfeit part. It is a part whose origin or quality is deliberately misrepresented.
Counterfeits components are increasingly sophisticated, as are the tactics used by scammers to target desperate buyers facing shortages.
Disciplined supply chain risk mitigation needs to remain a central focus. One fundamental best practice to reduce the risk of procuring counterfeit or substandard parts, is to know the source of the parts. The latest industry reports continue to fuel concerns over which supplier to trust when it comes to sourcing electronic components, with buyers becoming wary of rogue suppliers.
Counterfeit electronic components present a significant risk to businesses. These components could impact end product reliability, cause malfunction or premature failure. Depending on the product’s application, a component failure could cause serious injury or even loss of life. Such an event might result in prosecution or legal action by the impacted parties or representatives, leading to a loss of product confidence, a product recall, damage to the manufacturer’s reputation and financial losses across the board.
Three Keys to counterfeit parts prevention
1. Understand your supplier choice
When it comes to sourcing electronic parts, there are four options:
- Original components manufacturers (OCM) manufactures products/components and has ownership of the IP, copyrights or trademark.
- Authorized/franchised distributors are suppliers authorized by the manufacturer.
- Independent distributors can be authorized by some OCMs to sell from their line card; however, these distributors also sell other parts that are not authorized. This dynamic makes it difficult for buyers to determine which components are authorized and which are not. It’s crucial for OEMs to thoroughly check the independent distributors’ internal quality processes, looking for rigorous inspection and test protocols.
- Electronics Brokers: On the other side of the spectrum are the brokers, who primarily move inventory and are not authorized resellers. These brokers store very little, if any, inventory. And the stock that comes in the door usually goes out the same day.
Understanding the differences and risks involved in purchasing from these sources is key to avoiding bad outcomes. The safest way to proceed is to buy direct through an OCM or an authorized/franchised distributor while only working with independent distributors who have a track record of not receiving counterfeit parts, can guarantee product authenticity and/or have the capability to test components prior to shipment. It’s also important to buy from those partners that are willing to stand by their supply chain with process audits and insurance. But, in the current constrained market, that may not always be an option. So why not just add all brokers to approved supplier lists to keep products flowing through manufacturing and avoid part delays? The answer is simple: supply chain risk mitigation.
2. Implement robust purchasing controls
To ensure peace of mind when sourcing materials, the appropriate anti-counterfeit credentials and quality controls must be in place to support informed decisions. The knowledge and expertise of an experienced team working to defined processes is indispensable and a first line of defense.
Global trade association memberships, for example GIDEP and ERAI, provide the industry with real time reporting and industry leading training. By joining an organization that provides members with access to a list of known counterfeit components and the suppliers providing them, companies can protect against the risks of purchasing rogue parts. Many of these trade associations offer curriculum and certification of general detection methods and interpretation of technical results. Combining the historical view from industry associations with counterfeit detection training, teams are able to assess the risk of suppliers, components and parts purchased within the open market. This risk assessment approach is the foundation purchasing controls are built upon.
In line with trade associations, testing to ensure authenticity of parts is vital. This is particularly important when parts may need to be sourced from the open market. As electronic components brokers are not authorized by OCMs to sell their parts, conscientious companies should block order placements for all brokers until it can be ensured the brokers source parts responsibly from known sources and perform the right level of verification.
3. Request third-party testing
In addition, taking time to request a third party test report for broker supplied components mitigates risk. This should include a combination of numerous tests such as thickness checks, x-ray, x-ray fluorescence for metallurgy analysis and decapping. It might be appealing to cut down on testing, particularly if the process may take too long and create delays. But the results of shortcutting this process could be extremely costly if faulty, counterfeit or used parts are put into end products.
Testing standards provide a reliable seal of quality sources. To ensure the highest possible standard of counterfeit testing, the Independent Distributors of Electronics Association (IDEA) has established an inspection standard, the IDEA STD 1010. This standard is highly recognized within the electronics industry and provides a fundamental checklist. Benchmark-testing standards are key to ensuring the authenticity of electronic components, and the standard raises quality-conscious, reputable independent distributors to a higher level in the market.
Counterfeit Electronic Components: With the appropriate controls, there’s no need for pessimism
Plexus is a member of both GIDEP AND ERAI. We adopt zero tolerance policies to shield against the risks associated with counterfeit products entering our supply chain. These policies include detection, prevention and removal, as well as mitigation policies. Read more our approach to supply chain risk mitigation.
Providing an in-depth inspection of every part in the supply chain is an impossible task, but today’s counterfeit parts prevention best practice is not about checking every part. It’s about taking the time to make smart choices from where parts are sourced and ensuring that the right controls in place so that faulty, counterfeit or used parts don’t end up in your supply chain. The more companies that commit to these steps, the greater the opportunity to deter counterfeiters. Combined with objective industry standards, this focus can make a real difference.
The message that needs to be spread to the market is a simple one; continued development and improvement of all related control processes for the prevention of counterfeit material is imperative even when faced with difficult market conditions. Investing time into building the right supply chain will mitigate risk, protect brand reputation and avoid catastrophic product failures.