Incidents of counterfeit components in the electronics supply chain are maintaining a record pace so far this year, according to IHS. Year-to-date, 2012 has the potential to surpass 2011:
Counterfeit incident reports from the beginning of the year through the end of August averaged 107.3 per month, up slightly from 107.1 in 2011… on a sequential 12-month basis, a total of 1,336 separate verified counterfeit-part incidents have been made for transactions involving a minimum of 834,079 purchased parts. These figures are considered conservative because purchased parts reflect only a subset of all reported incidents.
IHS also notes the data coincides with an important milestone in anti-counterfeiting efforts in the US:
These new counterfeit report figures arrive at a time when the U.S. Department of Defense (DoD) is scheduled to update the Defense Federal Acquisition Regulation (DFAR) Supplement to the Federal Acquisition Regulation (FAR) on October 3, 2012. These updates are part of measures intended to regulate the detection and avoidance of counterfeit electronic parts as part of the National Defense Authorization Act (NDAA) of 2012.
I don’t think anyone in the industry needs additional verification that this is a problem. In fact, I did a casual search of the term “counterfeiting” on EBN’s home page, and the first mention was a mere four days after EBN re-launched as an online publication in October 2010. During this two-year span, we have published statistics, best-practices, blogs, news reports, court documents, and hosted what I’d conservatively call a “spirited debate” on the causes of counterfeits.
We’ve recently co-sponsored a Webinar on approaches to anti-counterfeiting and have done in-depth reporting on recent efforts by the US government to thwart counterfeits in the DoD supply chain.
Granted, it’s a fairly new effort, but I have to admit I’m concerned that one of the centerpieces of the NDAA is agreement on the definition of “counterfeit.” This is from IHS:
To help combat the counterfeit problem, President Obama in December 2011, signed the fiscal year 2012 U.S. National Defense Authorization Act (NDAA), which added regulations for counterfeit part detection and avoidance. The pending October 3, 2012 updates to the DFAR supplement will implement portions of section 818 of NDAA that must add definitions specific to counterfeit parts, define contractors' responsibilities, and clarify the government's role.
One of the key points IHS makes in its latest release has to do with the reporting of counterfeits, which is why I think next year’s data will be even worse than 2012's. The IHS data includes numbers from the ERAI trade association and GIDEP, the Government-Industry Data Exchange Program.
In August, EBN contributing editor Tam Harbert reported that the Defense Logistics Agency (DLA), which accounts for the bulk of the government’s procurement of electronics parts, hasn’t kept up with its GIDEP reports. According to Harbert, a government committee that recently researched the problem of counterfeiting in the defense supply chain cited cases identified by the DLA in 2009 and 2010:
According to the committee, of the 202 cases, only 15 were reported to GIDEP. And only four of those reports were filed by the DLA; the rest came from "private companies or another DoD element." DLA has since changed its practices and says that it is now filing such reports.
So let’s assume the NDAA accomplishes part of its goal, which is to standardize the definition of counterfeits and improve reporting methods. IHS admits its 2012 data is conservative, because it only includes “reported” incidents. A year from now, I’d expect the number of reported incidents to skyrocket, with very little data to measure the effectiveness of the NDAA. But let’s say the NDAA does have an impact. Is it likely private industry will adopt similar practices?
I’d like to hear what you think. My guess is “no,” for reasons I’ll examine in upcoming posts.
Well, then you create a 1st level certificate ("we validate that this company's process is genuine"), 2nd level certificate, etc. Each one costing more than the next.
you right on that, the issue of counterfeit is a bit complex to the extend that your technician may even use one for you to draw more cash into his pocket. Now if you can,t identify counterfeits, he should.So who is suppose to make the report.
Excellent discussion! Barbara, in response to your question: "Do you think the data will change if the new guidelines are followed?" It's too early to tell what effect new NDAA regulations will have on the defense supply chain and broader global counterfeiting efforts. Having said that, the U.S. government and their defense industry counterparts have already made tremendously positive strides to bring awareness to the risk that counterfeits present to armed services personnel, national security and the taxpayers. Education, standardization, information sharing and addressing the "root" of the problem are all key pieces to solving this puzzle. I would like to encourage your readers to follow closely the standards, (AS5553, AS6081 & AS6171), being developed by SAE Aerospace. Participate in educational opportunities which may include free webinars, conferences, and trainings. For example, SAE will be holding a Counterfeit Parts Avoidance Symposium at the end of this month and SMTA|CALCE are hosting a Symposium in early December. These and others are commendable efforts and steps in the right direction. Readers here are also welcome to join ERAI's LinkedIn Group (ERAI: Counterfeit Part Avoidance, Detection, Disposition and Reporting), it's free and full of great information.
I whole heartedly believe unity brings forth change.
Companies do not report counterfeits because they fear it makes them look bad.
What happens is that the End User requires the Independent Distributor who supplied the counterfeit to report the incident.
This way the Government Contractor is unknown, and completely out of the reporting process. They are then able to show they have dramatically reduced the incidents of counterfeiting.
The Independent Distributor also wants to remain anonymous. They do not report to GIDEP. Instead they report to a private company who allows reporting of just the part details.
The original source of the counterfeit is allowed to learn how the counterfeit was detected. They use the information to sharpen their counterfeiting skills and continue on with their nefarious activities.
Everyone in this process including the End User is covering up for their supplier who shipped a counterfeit.
Until all customers military and commercial are required to report counterfeits the problem will continue to grow. Only with fair accurate reporting will we make progress.
When a "Suspect Counterfeit" is identified it should be reported immediately to the supplier of the product. If the supplier is unable or unwilling to supply tractability or other evidence of authentication then the end user must report the supplier and so on down the supply chain until the original source of the counterfeit is discovered. There is no other way.
The days of protecting your supplier with anonymous reporting must end.
@Barbara, Its difficult to believe that counterfeit doesnt happen at all. I think its not getting reported. I guess the people who are buying it are seeing a value in it may be they are cheaper or they are just available when its not longer available from the genuine source or the lead time is huge if to get from genuine source. Defintely the seller would not report it. So if the buyer and seller both are happy how would it get reported. Unless there are detective agencies working on this to catch the parties involved I guess it would be difficult to get the data. But the question is "Is stopping counterfeit such an important task that government employ some detective agencies on this?" I would say yes it is.
I have to admit I keep going in circles on this topic. It seems to be we should have made more headway than this--based on the statistics, at least. Maybe there are more counterfeits because more components are being shipped. But judging by earning reports, component sales have been declining. I think what really alarms me is the reported lack of data from GIDEP and DLA. If the problem is so bad that we need an act of Congress to combat it, where's the evidence? The NDAA hasn't even been implemented yet, but government isn't reporting any incidents of counterfeits in 2012. Does that mean there aren't any? Or that they are just not being reported?
So true GraniteIc. Unless every individual and every organization stands against counterfeit components morally and business wise, nothing will change. The few years will be tough but afterwards it would be good for everyone. And government must also give some subsidy in taxes or any other form to the organizations or individuals who buy from genuine source and say no to counterfeit.
Beware the cheeky cheater. They are all smiles and have a flashily marketing pitch. They will promise you everything. They will solve all your problems. They are so nice and tell you funny jokes and can get you to smile with them. They will make you fee so good about yourself. They will make your job so very easy and supply you with all the parts you need and provide flashy test reports with lots of photos that states, inconclusive.
Beware the cheeky cheater is very charming when things go wrong they will convince you it's your fault because you signed a wavier and accepted the inconclusive test report. You will not want to upset the cheeky cheater who is your friend and makes you feel so good, and after all you did sign that wavier an accepted the inconclusive test report. You will apologies to the cheeky cheater and promise not to report them.
Beware the cheeky cheater will promise to report the P/N and keep you out of it. The cheeky cheater has solved another problem. The P/N gets reported and no one knows you sign that wavier an accepted the inconclusive test report. Beware the cheeky cheater who is solving all your problems when that undiscovered escape cause catastrophic damages the cheeky cheater will explain how you knew about the issues you did sign that wavier an accepted the inconclusive test report.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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