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10 Tips for Avoiding Counterfeit Components

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:

  1. Make certifications a requirement:
  2. 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.

  3. Identify distributors
  4. 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.

  5. Work with distributors that are aligned with industry organizations
  6. 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.

  7. Check the supplier's trade references.
  8. 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.

  9. Check online presence:
  10. 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.

  11. Check with ERAI and GIDEP
  12. to see if there have been any negative reports against the company.

  13. Check its Dunn & Bradstreet credit rating.
  14. A poor credit rating could be a sign of troubles in the quality department as well.

  15. Have clear and concise purchasing agreements
  16. , including language that deems counterfeit parts have zero value.

  17. Protect yourself
  18. by requesting net terms, especially with a new vendor.

  19. Report any incidences
  20. 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.

20 comments on “10 Tips for Avoiding Counterfeit Components

  1. JADEN
    July 20, 2011

    In addition, purchase shoud be made from an authorized distributor, not from a distributor with no product warranty.

  2. Clairvoyant
    July 20, 2011

    Excellent post, Dawn. These are some great tips that every purchasing department should use.

  3. Barbara Jorgensen
    July 20, 2011

    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?

  4. eemom
    July 20, 2011

    I agree.  Your tips to avoiding counterfeit components should go a long way to start the education we discussed in your previous posts. 

  5. Daniel
    July 21, 2011

    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.

  6. Jay_Bond
    July 21, 2011

    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?

  7. hwong
    July 21, 2011

    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.

  8. EBAKER
    July 21, 2011

    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.

     

  9. garyk
    July 21, 2011

    EXCELLENT REPORT!!!!!!!!!!!!!!!!

    Adeniji Kayode did you read this report!!!!

    I hope this helps answer some of your questions!!!

  10. itguyphil
    July 21, 2011

    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.

  11. ddeisz
    July 22, 2011

    Dawn,

    From an ID perspective, your list has lots of merit. Not mentioning fully authorized sources within your 10 tips explicitly seems rather self-serving. Hats off to you for the dialog and putting forcus on the issue, but fully authorized sources for parts are still the best way to avoid countefeit.

    Dan Deisz

    Rochester Electronics

  12. Dawn Gluskin
    July 22, 2011

    Dan – The 10 Tips are part of the entire series I wrote regarding effectively using independent distributors to fill in supply chain gaps & safe procurement.  I submitted my material to EBN as one piece.  Due to length, they made an editorial decision to cut the article into four segments.  However, yes, that was, in fact, the point of the entire blog!!  Solely utilizing authorized sources is NOT a valid option for electronic manufacturers (aka your clients).  They have commitments to get product out & when faced with exorbitant lead times and/or obsolescence issues, the independent marketplace comes through for them with product, saving them millions in potential revenue loss.  So, realistically, although only buying from authorized might be self-serving (as you say) for you, it is not a realistic solution for many.  Again, I will use the same example in your previous reply to me: That is like saying never leave your house & you won’t get hit by a car.  While that might be realistic advice, it is simply not practical & nobody is going to follow it!  Therefore, my goal has been to educate and spread awareness on how to SAFELY procure from the independent market.  It is all about supplier selection, being educated, and most importantly: testing.  The fact of the matter is, there are hundreds of millions of dollars in pristine & authentic excess inventory sitting on shelves of independents, CM, and OEMs across the world.  What do you suggest happens to this material?? The re-sale of this surplus is a completely valid business model & it helps to keep production lines up and perfectly good electronics out of landfills.    While tossing the surplus might work out nicely for component manufacturers and authorized dealers, it does not serve the electronic manufacturing community, nor the planet.  So, I stand by my Top 10, which does not & should not, include only buying from authorized.

  13. Dawn Gluskin
    July 22, 2011

    Thanks again to everybody for all the great feedback on this blog series throughout the internet. 🙂 A lot of people certainly feel passionate about this topic.  For those who have asked about the Top 10 & expressed concerns over time constraints in following all of the advice on the list.  Firstly, they are just guidlines, but I would definitley recommend meeting as many of them as possible to ensure you are getting quality componets.  (I would even take it a step further and recommend site visits on top of the rest, if at all possible).  While there is a lot more work upfront in fully validating vendors, it will absolutely be worth it in the long run.  If the thought of spending several hours to fully research a new vendor seems unfavorable, think about the alternative.  If you let a bad vendor slip through the cracks and end up with counterfeit components on your board, how much money is it going to cost in re-work & lost production time?  What about potential lose of clients due to manufacturing a bad board??  You can't put a price tag on your reputation! When you weigh out the options as such, the bit of extra work in the front end does not seem as bad!  Thanks again for your questions & feedback!

    -Dawn Gluskin

    SolTec Electronics

  14. ddeisz
    July 22, 2011

    Dawn,

    I am not taking things to the extreme and saying “only purchase from authorized sources” when a part doesn't exist through authroized channels. That would be stupid. I am saying that IF a part exists from an authorized source, buying from the authorized source is the lowest risk to counterfeit.

    Implementing the 10 tips you write about doesn't come at zero time and cost. Working with an authorized source for the same part means most all of those steps can be eliminated. Detection versus Avoidance.

    Your series is very good for the cases where an authorized source doesn't exist for a part and I agree with what you are saying.

    Counterfeit avoidance can be significantly improved by going to authorized sources for parts first and then following your criteria in the independent market second. If everyone followed that order, there would be significantly less counterfeit.

    Dan

     

     

  15. Dawn Gluskin
    July 22, 2011

    I am not taking things to the extreme and saying “only purchase from authorized sources” when a part doesn't exist through authroized channels. That would be stupid .”

    The above is something we completely agree on, Dan!!  🙂

    In my relationship with my clients, we are always positioned as a supplemental vendor to fill in supply chain gaps.  Yes, there are also the ones that come to us for cost savings and we are happy to help with that as well, whenever possible.  However, in most cases, our clients have agreements with franchise that require a certain purhasing volume in exchange for various perks.  We are not looking to interfere with that relationship.  Again, we supplement the supply chain gaps.  So, what you are saying (go to authorized first) happens in many cases, which is why I wasn't sure where you were coming from??  I have, however, heard many component manufactur's preach to not buy from independents under any circumstances, which does not make any sense – even you agree!  I wish component manufacturers would get on board to help in the fight against counterfeits.  It is their intellectual property that is being tampered with, after all!!  For a while now, their solution has been to avoid independents and surplus materials, altogether.  We all know that won't happen.  Hopefully, they will have a change of heart.  They should not feel threatened by the reputable independents out there as we all have our place in the supply chain and there is plenty of market share to go around!  Thanks again for your perspective, Dan.  It is appreciated.

  16. Tim Votapka
    July 22, 2011

    Dawn's top 10 guidelines are very good measures to guard against counterfeit. Having written policy in place adds even more protective measures and saves time and cost. I'd take it one step further; go around to your staff and do what's known as a “spot-check” on them with regard to your policy. If they know it, they'll tell give it back to you without any lag or flub. If they hesitate or stammer in any way, you know there's something misunderstood there that must be cleared up completely. Otherwise, you run the risk of an arbitrary rule entering into your organization and that leads to aberration.

  17. Kunmi
    July 22, 2011

    Excellent article, The most important of the ten tips is the written policy and the authorized resources. I agree with dawns comments but I still have some concern with the counterfeit issues. Many organization have the written policies but do they all follow them, sometimes NO. Even the authorized resources can only try, people still do what they think work for them. It  is very sad because they are values and controls in place but our authorities do not follow them.

  18. Mr. Roques
    July 22, 2011

    But I'm sure there are a few manufacturers that are looking for those counterfeit components. Do you agree? I wont say that the big names are doing that but smaller ones that have small margins are looking to increase revenue by creating a “cheaper” product.

  19. mfbertozzi
    July 26, 2011

    Great article and discussion, following previous  interesting editorials. Tips reported are very useful and easy to understand and keep in mind, imo. I was thinking on top of them, how Govs could help market and endusers in beating counterfeit. Are we really convinced counterfeit is banned globally? Marc Herman for example, here at EBN, reported a few months ago very focused pictures on that, unfortunately not really positive.

  20. Dawn Gluskin
    July 26, 2011

    I'm glad you all are finding the tips to be helpful!  Anybody with additional questions, I invite you to please join us this Thursday, July 28th, at 12:00 EST as I do a LIVE CHAT Dialogue with EBN users!  Click the LIVE CHAT link on the front page to add it to your calendars.  I look forward to answering any questions you may have.  Thanks again for all of your feedback!

     

    LIVE CHAT with Dawn Gluskin

    What You Really Need to Know About the Open Market

    “Not all non-franchised distributors are created equal. Many companies that play in the open (non-authorized) distribution market have gone to great lengths to ensure that the components they sell are counterfeit-free. In this Live Chat, Dawn Gluskin, founder and CEO of distributor SolTec Electronics, will talk about what differentiates these companies from unscrupulous open-market brokers.”

    Add this event to your calendar.

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