Counterfeit Parts Widespread Problem across Manufacturing Sector

Did I really hear Mitt Romney talk about supply chain management (SCM) during this month’s Presidential  Debates? OK, it was only the word “counterfeit” that caught my attention, but apparently SCM has arrived in Washington in a big way.

Counterfeiting conjures up images of smoky backrooms with pallets of paper, fancy printers, and amateur chemists squinting to determine if the mole on one dead president’s nose looks just like the one from the bill in his wallet. But counterfeiting doesn’t stop at banknotes.

It turns out that counterfeit goods are a significant and growing portion of the world economy. The International Anti-Counterfeiting Coalition (IACC) has estimated that counterfeits account for over six percent of the world economy.

For sure, a big chunk of this is handbags and athletic shoes. But how confident are you that your favorite automobile does not include dozens of fake or substandard parts? The auto industry alone reports that counterfeiting has a $12B impact worldwide. And those estimates are probably not accurate due to the black economy that goes largely unreported.

A counterfeit is any lower-quality part or product that is substituted or acquired as an authentic item. Counterfeiting often arises by simply mislabeling items, either through malice or neglect.

Any object can be counterfeited, but the more complex or difficult to examine, the lower the risk to the scoundrels who pass them along for pennies on the dollar. Electronic components, fasteners, materials, and all manner of electromechanical gadgets are being copied and sold as something they are not.

We should all be concerned about the proliferation of counterfeits. The obvious harm of unknowingly paying a higher price for a lower-quality gadget only scratches the surface.

Counterfeit airbags and aircraft engine mounts, for instance, pose serious safety concerns. Earlier this month the Obama administration warned that millions of cars repaired after collisions might have Chinese-made counterfeit airbags that may not inflate properly in an accident.

And counterfeiting brings many secondary costs to manufacturing companies too. Which brings us back to the story told by Mitt Romney during the final Presidential Debate with President Barak Obama.

The story of a valve company that performed warranty work on a product that they did not manufacture. The fake so closely resembled the authentic valve it even displayed the victim company’s own serial number. The valve company might as well have been held up by a street thug. The loss was the same.

So, what can be done? Counterfeiting is so insidious and damaging that it must be attacked similar to a disease. Prevention is the best policy. The root causes of poor quality must be isolated and addressed.

While it’s very difficult to stop completely, comprehensive data management and industry best practices can cut substantially into a counterfeiter’s margins, which ultimately discourages the behavior, or perhaps shifts his attention to your competitor.

Stay tuned for more on this in my series of posts addressing counterfeit parts and supply chain management.

In the meantime, share your own experiences with counterfeit parts and what if anything you’re company’s done to eliminate risk.

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