Counterfeiting: Blame the Criminals, Not the Brokers

Do you get frustrated when you see people hashing and rehashing a problem without ever coming up with a way to fix it, when you can see an obvious solution? I know I do. Sometimes when I'm watching the news out of Washington, I even get so annoyed that I find myself wanting to invoke my grandmother's fix for everything: "Give ‘em to me for one day. I'll make sure it never happens again!"

Well, I can't help but think that there's a parallel when it comes to solving the problem of counterfeit parts. This issue has become very high profile -- and for good reasons. Now, it seems to me that many companies are reacting out of fear instead of making a wise, thought-out decisions about where and how they acquire components.

From my perspective, it's a lot like the fearful reactions of banks and lenders in 2008 -- and the result then was that credit screeched to a halt. It seems to me that something similar could happen with parts acquisition, and that wouldn't be in anybody's best interest.

Let's look at a few examples where this is happening and a few "wise"-practices.

Because of the new anti-counterfeit legislation, many companies have said, "We will not use brokers or independent distributors." With all of the noise and confusion surrounding the issue of counterfeit parts, I can understand why they are saying this. However, that's a lot like throwing out the baby with the bath water. Reputable brokers and independent distributors play valuable and necessary roles in the supply chain. Refusing to work with them because some unscrupulous vendors are exploiting the situation is causing the whole industry to suffer.

There is a real solution: Follow the steps that many independent distributors have been following for years. These companies did not react out of fear or panic. They took a cautious and methodical approach to mitigate risk.

Organizations like the Independent Distributors of Electronics Association (IDEA) and ERAI Inc., saw this issue coming years before the masses started talking about it. In fact, these organizations and their members helped sound the alarm that created awareness of the risk. Beyond that, they encouraged member companies to self-police and helped to create standards to prevent substandard parts from entering their clients' supply chains.

Take a look at some fear-based responses and suggested wise-practices that could be implemented instead:

1. We are going to require testing on 100 percent of parts that are not from distribution or acquired direct from suppliers: Require testing in accordance with the standard sampling profiles already in place in IDEA and military testing standards.
2. We are going to jump on every new testing method -- electron microscopy, for example -- even if it is not fully vetted: While it is important to take advantage of new testing techniques, it is more important not to rush to use something that is not 100 percent founded or not yet part of any external standards body such as ASE or ISO.
3. We will not source parts from anyone but the factory/franchise: One to 5 percent of an approved vendors list (AVL) has parts that cannot be procured from factory/franchise distribution. Companies need to be able to source these parts from alternative channels to meet their clients' needs.
4. Brokers and independents are causing the problem: Brokers and independents are not causing the problem. Criminals are!

A wise strategy is the way companies that are not reacting out of fear are solving the counterfeit parts problem. Here's what they are doing:

• Selecting their preferred independent distributors from the role books of IDEA and ERAI.
• Implementing a program to assure "purchasing discipline" in their organization.
• Establishing an internal system to make sure proper procedures are followed.
• Completing regular audits (desktop and on-site) of their preferred independents.
• Asking their preferred independents to come in and train on what to look for.
• Asking for increased screening and testing where appropriate and requiring documentation.
• Becoming part of the solution by minimizing e-waste and using a preferred independent to help recapitalize and dispose of stranded material.
• Removing vendors from their preferred lists when they cannot or do not adhere to the requirements they have put in place.

Clearly, the counterfeit parts problem cannot be resolved in a day or a week. However, if everyone takes a step back, looks at the whole issue, and implements wise solutions to minimize risk, I believe it can be addressed without bringing the industry to its knees. What do you think?