Counterfeit Prevention: Why Inspections Are Not Enough

In recent posts we’ve looked at the growing problem of counterfeit parts, and changing regulations that will compel companies to take action. But what can be done? Many remedies are specific to the parts of concern. Labeling can vary by region, and testing techniques for mechanical parts are irrelevant to electrical components or software.

In general, there are two rules of thumb when it comes to eliminating counterfeit parts from supply chains:

Rule #1 – Inspect what you expect.

Rule #2 – Rule #1 is completely inadequate.

Industry has long been devoted to the notion that in order to detect any sort of product defect all you have to do is look. Yet preventing counterfeit parts from making their way into your product requires that your entire enterprise understand the minute details that differentiate your product from other lesser products.

Detection might involve simple visual inspections and measurements, more sophisticated and expensive imaging technology, destructive testing that renders a sampling unusable, and even functional testing where a part or product gets used for its intended purpose prior to sale. Each technique plays a role in ensuring that your product stays special.

But, let’s not be naïve. Isolated testing can be very expensive and over-reliance on testing is a fragile proposition as counterfeiters become increasingly sophisticated at defeating any particular test. And, fundamentally, inspecting cannot eliminate fakes, but only keep you from passing them along. Which brings us to Rule #2.

The causes of the counterfeit part epidemic are numerous and subtle. Even our notions of what constitutes a counterfeit part are a source of confusion. Obviously, a part that was made by an unauthorized manufacturer should be considered counterfeit, regardless of how well it resembles an authentic part. But, what about an authentic part that sat in the original manufacturer’s inventory too long, was sold into a distribution network at a discount, then emerges as “new” at your receiving dock?

Supply chains are often long, complicated, and inhabited by a full spectrum of crooks and saints. Many do not have adequate processes or systems to allow full auditing of the chain of custody of their parts. And all shades of suppliers are able to find their way into reputable industry groups.

Electronic waste is often processed and recycled. So what starts as a noble green initiative becomes fodder for ignoble, or perhaps just ignorant, flippers who resell used parts into unsuspecting procurement organizations.

Even adherents to Rule #1 can find themselves victims of counterfeiting. And, who wants to do business with a partner that is repeatedly victimized? Counterfeit victims who may be embarrassed by bad press, afraid of penalties, or are simply ensuring their margins by selecting the lowest-cost suppliers, tend to protect their assailants and obscure scrutiny by law enforcement and a normally vigilant market place.

So, how can we vaccinate our businesses from the ravages of counterfeit parts?

If you are looking for a silver bullet, see Rule #1, but be prepared for disappointment. Otherwise, you’ll need to start thinking about wrapping your inspection and testing programs with a more holistic and proactive approach to component and supplier management.

In my next set of posts, we’ll discuss how to evaluate and score suppliers, manage and approve suppliers list and collaborate securely with your supply chain.

Photo: Hamilton Watch. Operation – burring – skilled inspection work, 1936, The U.S. National Archive, Flickr (CC – no known copyright restrictions)

This entry was posted in Best Practices, Supply Chain Management and tagged , , , , , . Bookmark the permalink.

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