A few years can make a big difference, unless you are trying to move the needle away from counterfeiting in the construction industry. However, a look at the problem may yield some best-practices for the electronics industry.
Several years ago, a research team from the Construction Industry Institute (CII) found that knock-off construction materials and equipment were entering the capital project supply chains at an alarming rate, Kim Allen, associate director, Construction Industry Institute, told EBN in an interview.
To get to the bottom of the problem, the team embarked on an investigation into the “little-explored world of sophisticated counterfeiting of non-retail products” from places including China, India, Hong Kong, Russia, Eastern Europe, and Indonesia, where these fake goods were sold cheaply, according to the CII Research Team 264's report “Product Integrity Concerns in Low-Cost Sourcing Countries.”
At the end of their investigation, the researchers made some recommendations to put an end to such counterfeiting. But despite those recommendations, and compliance with those recommendations within the industry, counterfeiting is still a big problem in construction.
In its report, Research Team 264 (RT 264) focused on knock-off construction materials and equipment that might look like the real thing, but were actually manufactured with inferior materials. During the investigation, researchers discovered that those counterfeit materials sometimes come complete with fake documents attesting to their quality and integrity.
As part of their work, the researchers conducted almost 190 face-to-face interviews with industry and government leaders around the world.
The results of those interviews were stunning to say the least.
- Seventy-six percent of the people interviewed in the United States reported that their organizations have been affected by counterfeiting.
- Eighty-three percent of all the counterfeit items discovered by the respondents' organizations came from approved vendors.
- The most common nation of origin for the counterfeit items was China, while the most common destination country was the United States.
- The people who unknowingly placed the orders for the counterfeit products were most often in the US.
- Steel items, mainly piping, were the items most often counterfeited, followed by electrical items like circuit breakers.
As Allen said:
Counterfeiting can originate anywhere in the world, in terms of point of manufacture. It is financially driven by the global demand for low-cost suppliers, and in most cases, these materials are unknowingly getting into our supply chains. It is still under study and remains a risk on capital projects. Counterfeit material is still getting through.
In its report, RT 264 offers some steps that the industry as well as individual contractors can take to combat counterfeiting including:
Maintaining the integrity of the supply chain
It's not just enough to have an approved vendors' list. Organizations must develop practices and procedures to qualify suppliers and sub-suppliers. Additionally, the researchers said qualified reps from companies sourcing the goods should visit the facilities of these suppliers and sub-suppliers to ensure they're operating on the up and up before putting them on the approved vendors' list. Companies should never buy anything from a supplier not on the approved list.
Adopting a zero-tolerance policy
Everyone involved in the construction industry must report all incidences of counterfeiting to the appropriate authorities as well as support law enforcement in their efforts to prosecute the people involved.
Knowing how to spot potential counterfeit goods and materials
If a supplier offers products at a price that's too good to be true, of if he's extremely eager to make a sale, it's probably because the materials are counterfeit. If the supplier includes generic documentation and invoices with the materials he ships rather than the normal, very specific documentation, companies should question the integrity of the goods.
Organizations must educate their employees on the dangers of counterfeit goods and teach them how to stop those materials from entering the supply chain. “We've seen more training and education, more rigorous supply chain qualification and source inspection, and re-evaluation of approved vendors,” said Allen. The industry also has to educate customs officials and other members of law enforcement about how to spot counterfeit construction goods and materials.
The electronics industry is moving in this direction. SAE International, a global association for aerospace, automotive, and commercial vehicles industries, is working toward publishing a standard titled “Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition.”
“It needs to get to the point where we have a zero-tolerance culture; no longer acceptable in our industry,” Allen said. “Everything from piping and steel to valves, instrumentation, electrical equipment, and crane assemblies, it's an amazing array of counterfeit materials.”
Whether sourcing semiconductors and capacitors, or the construction materials mentioned here, these best-practices provide a road to ending counterfeiting in the supply chain.