Everyone agrees counterfeiting poses a threat to the health of the electronics supply chain. Previously, I have focused on the extent of the problem, the roles of the different players in the supply chain, and how the industry keeps seeing independent distributors as the main culprits. (See: Don't Blame Independent Distributors Alone for Fake Parts, Part 1 and Part 2, and Countering Counterfeits.)
In this blog, I am focusing instead on practical steps industry players can take to avoid getting snagged in the counterfeit web. The first step in avoiding counterfeits is to put in place processes and procedures for selecting vendors. Here are ten additional suggestions:
Make certifications a requirement:
ISO 9001, ESD S20.20, and AS9120 are the basics. Once released, the AS6081 should also be in place. A company that has not been audited by a third-party certification body and certified compliant to these minimum standards is not likely to be effective at avoiding counterfeits.
Identify distributors
that have systems and processes in place to screen for counterfeit parts including thorough visual inspections and advance counterfeit detection techniques such as decapsulation, pin-print analysis, X-Ray, SEM, EDF, XRF, and full functional testing.
Work with distributors that are aligned with industry organizations
such as ERAI, IDEA, GIDEP, and SMTA. These are some great organizations that work hard to keep counterfeits out of the marketplace. Distributors that align with these organizations are more likely to have up-to-date counterfeit avoidance processes in place.
Check the supplier's trade references.
Any good distributor will have a long list of happy customers that you can contact for a reference check. Any company without a list of trade references, trade references that give bad feedback, or references from unknown organizations should be avoided.
Check online presence:
A quick Google search can tell you a lot about a company. Is it in the news; is it active in the community; does it have any bad press out there; and what kinds of things are posted on its social media sites, if it has any? This is another good snapshot to get an idea of how a company operates.
Check with ERAI and GIDEP
to see if there have been any negative reports against the company.
Check its Dunn & Bradstreet credit rating.
A poor credit rating could be a sign of troubles in the quality department as well.
Have clear and concise purchasing agreements
, including language that deems counterfeit parts have zero value.
Protect yourself
by requesting net terms, especially with a new vendor.
Report any incidences
of suspected counterfeits to GIDEP and ERAI. Seize the parts so that they do not get back into the supply chain.
There are at least a few dozen independent distributors out there that would pass the above criteria with flying colors. Align yourself with one of these reputable organizations. There are also hundreds of independents out there that don't even come close to meeting the above requirements. Avoid them like the plague, unless you want your supply chain infiltrated with sub-standard parts. If you do not avoid them, please don't blame the entire industry when you get bad parts. There are plenty of good companies out there that can support your requirements and protect you. A little due diligence goes a long way.
Much like any industry, you can at least call the person's bluff by just asking this question. Most people don't expect it so they will have no real response for it. If you get something commendable verbally and in writing, you'llknow you're dealing with a real professional.
One way I test an independent distributor's resolve is to ask if they will agree to liquidated damages if the parts they supply fail when used. ALthough nobody, whether franchised or not, will agree to liquidated damages, it drives the point home and opens up discussion regarding the source of supply etc.
One suggestion on the article. You might also like to add categorization about the type of counterfeit products. Definitely there are more detrimental situations where counterfeit will cause alot more harm than others. For example, if drugs are counterfeited. Not only will it cause the supply chain disruption, it will also cause the patients' health and the brand of the original company. It's a snowball effect there.
Your 10 tips seem pretty spot on to help avoid getting counterfeits into your companies supply chain. It does seem like some of those steps could be limited by time or money. Do you think if following just a couple of steps will help weed out the counterfeits, or would somebody need to try every feasible step to ensure they are getting legit products?
Dawn, I agree that all these 10 points are very much valid but I don’t know how we can follow this. In most cases requirements are time bounded and may not get enough time for all these types of checks. So I think it’s better to shortlist a number of companies based on these 10 point s and can do further business with them when requirement comes. I know most of the companies have a preferred vendor and as demand comes they used to procure items through third party, some of them even from local market too. In such cases the vendors also have to follow the same procedure of 10 point scrutiny.
Great information as always. There is one issue I am wondering about in regard to procuring through non-authorized channels. Some component makers say they will not honor warrantys or returns for parts not bought through authorized channels. Have you run up against this, and has the component maker stood by its policy?
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.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
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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