Eradicating Counterfeit Parts: It’s Time to Establish Your Plan

Counterfeit parts risk product quality and your good reputation, and potentially open your business to myriad law suites. Electronic components are a particular problem, so much so that the US Department of Defense is updating acquisition regulations as part of the National Defense Authorization Act (NDAA) 2012.

Ultimately, the regulatory intent is to protect tax payers from purchasing counterfeit parts. The new rules should help manufacturers detect and avoid counterfeit parts. But they also put responsibility for costs of corrective action back on the suppliers.

The regulations compel manufacturers to take extraordinary actions to publicize and eliminate bogus sources, so that not only the manufacturer and end-customer benefit, but the entire US supply ecosystem. But as with any law tackling a complex and often technical problem, lawyers and legislators are still haggling over such basics as the definition of a counterfeit part.

The new law will require manufacturers to certify all authorized distributors. And when they can’t, for example, when parts are no longer in production, then the DoD will identify the trusted suppliers. So, while the intent is worthy, the regulations will result in new layers of costly bureaucracy. Many suppliers will have a hard time complying and may even opt out of certain defense-related markets. Eliminations of components will certainly affect product designs.

And it’s not just a defense-industry problem. Electronics that may be economical to produce with an assured, legacy, defense market may disappear and not be available anymore for mundane consumer goods.

The counterfeit parts problem can be ignored only at great peril. Supply chain risks, development costs, and innovation hang in the balance.

So, where to start? There is no silver bullet, and the most productive improvements vary from product-to-product. There are a number of industry groups, such as ERAI and SAE International, which track the issues, educate professionals, and advocate for manufacturers. But your counterfeit parts problem can be addressed by no one but you.

A fundamental question that must be addressed is: “Would you know a counterfeit if you saw it?” Assuming that you have labeling and performance specifications for the parts that you buy, and an inspection process in place upon receipt, the next question is: “Do you have trusted sources?” Do you have a plan in place to ensure that your sources remain trusted? What will you do if your trusted sources can no longer deliver, for whatever reason? Can you redesign your product to eliminate the need for any specific part?

The longer such questions are postponed in a product development cycle, the more costly they can become. Counterfeit parts are here to stay and their impact is only going to increase. Plan accordingly.

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