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Construction Industry Offers Strategies to Fight Counterfeiting

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.

For example:

  • 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.

Training/educating
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.

18 comments on “Construction Industry Offers Strategies to Fight Counterfeiting

  1. Daniel
    July 29, 2013

    Linda, counterfeit products/components are there is market for a long time and personally I feel it's difficult to filter out because customers are encouraging such products. Quiet some time back, I read that even in NASA, they had found counterfeit components because of the negligence of the people who are handling components for space application.

  2. apek
    July 29, 2013

    You cannot control introduction of counterfeit into supply chain by having few people rigorously screen such parts. Human beings make errors unknowingly. Additionally, the man power that construction industry is going to employ to mitigate the counterfeits mights just be so extensive that it wuld make sense to manufacture the products domestically. By having domestic competition and mass production and manufacturing done in rural areas of US where cost of living and payscales are lower compared with cities, it is possible to cut down the costs significantly. Besides such measures would more importantly reduce US trade deficits with LLCs and help domestic economy.

  3. SunitaT
    July 29, 2013

    The fake goods that enter the supply chain result from mishandling and retesting of the raw materials when they are bought. As the article explains, this is not necessary as the fake goods come from trusted vendors complete with its papers and legal documents, which is a huge setback. Moreover, in a world of competition, companies often recommend goods that are fake, to each other, which when bought will result in the wastage of money, and unsatisfied customers.

  4. SunitaT
    July 29, 2013

    Black markets that exist in China, India, Japan are the main suppliers of the fake goods, directed at a western based industries. These areas are teeming with experienced con artists who can fake even the most complicated electronics, (e.g. Use poor quality materials) without getting caught. This again is due to the sit-back-and-watch attitude of the government, which has double standards: one one hand, it makes profits from the black markets, as dealers often bribe officials to ensure their safety from raids, and on the other hand, the government tries to affiliate an industry.

  5. SunitaT
    July 29, 2013

    The zero tolerance policy may sound good on paper, but accomplishing it is a difficult task, mostly because of corruption at different levels. A healthy percentage of the fake goods come from trusted dealers, which either fail to recognise the fake goods, or are just bribed. Imparting education and removing corruption at each level would need the joint efforts of the ones who are concerned, and also a huge sum of money to carry out such a plan.

  6. Nemos
    July 29, 2013

     I realize how the Counterfeiting can affect the quality of the final product. And I believe that everybody that is involved in the supply chain knows now how the low cost supply policy can damage their businesses. 

  7. ITempire
    July 29, 2013

    Every manufacturing concern has to rely to some extent or the other on distributors and wholesalers as it cannot reach out itself to customers and retailers itself. This is where the loop-hole lies. Frequent audits of distributors and thorough background checks before agreements are made is also one way to go to fight against counterfeiting.

  8. ITempire
    July 29, 2013

    Tirlapur, no company would want the counterfeit of its products' parts are being sold as there is only a disadvantage of doing so. If the company wants to reduce the price of its product then it can buy cheaper parts from other manufacturers and fix it into its products; the difference being that that would not be called counterfeiting.

  9. Daniel
    July 30, 2013

    “You cannot control introduction of counterfeit into supply chain by having few people rigorously screen such parts. Human beings make errors unknowingly.”

    Apek, basically I would like to know that, what are counterfeit products/components? Everybody has a right for manufacturing their products or components, am I right. Other than branded items, everything comes under the purview of local/un branded and not counterfeits. Customer has the right for selection, based on their financial impact.

  10. prabhakar_deosthali
    July 30, 2013

    The counterfeit or the second quality parts creep into the supply chain and enter into the production line mainly because of laxity on part of the inward inspection procedures. Normally in large assembly lines the material from the approved vendors is accepted based upon “Self-certification” by the vendor.  This allows for the entry of second quality parts to be mixed along with the genuine parts either knowingly or unknowingly.

     

    The remedy would be to have a random sample pick up from these self certified batch of parts and do a thorough inward inspection of the same. If a counterfeit is detected then reject the whole batch and also penalize the vendor.

  11. SunitaT
    July 31, 2013

    Counterfeit sources that creep into businesses' supply chains and used as building blocks can extremely compromise the quality of end products and post severe impacts to the businesses. There must be anti-counterfeiting strategies on both fronts – supply source counterfeiting and end product counterfeiting.

  12. ahdand
    July 31, 2013

    @Waqas: Yes nobody wants that to happen but it cannot be stopped as well since we do not have a control as such in it.       

  13. elctrnx_lyf
    July 31, 2013

    I think it is possible to eliminate the counterfiet components with each and every buyer and seller along the supply chain verify the integrity of the parts or components or materials till all the way down to raw materials such as reare earths. But every buyer should be ready to pay a little extra cost to the seller to ensure the highest standard of quality.

  14. Daniel
    July 31, 2013

    “I think it is possible to eliminate the counterfiet components with each and every buyer and seller along the supply chain verify the integrity of the parts or components or materials till all the way down to raw materials such as reare earths.”

    Elctrnx, what am suggesting that instead of categorizing it as counterfeit components mark it as second quality and some of the peoples may interested to use .

  15. Daniel
    July 31, 2013

    “Yes nobody wants that to happen but it cannot be stopped as well since we do not have a control as such in it.       “

    Nimantha, its happened only because of the negligence from responsible peoples. I think if the filtering process got automated, such things can be avoided up to an extent.

  16. Daniel
    July 31, 2013

    “The counterfeit or the second quality parts creep into the supply chain and enter into the production line mainly because of laxity on part of the inward inspection procedures.”

    Prabhakar, you are right. it's happening only because of the negligence from inspecting and filtering peoples.

  17. FLYINGSCOT
    August 2, 2013

    I do agree that training and education are key to fighting this issue.  It is also important to have an effective audit strategy in place for your company.

  18. drtrcrV-8
    August 6, 2013

    Suggestions: Employ rigorous regular inspection procedures (accompanied by random spot checks) on all purchases. Yes, I know this is expensive:so is your Reputation!  When “Deliberate Counterfeit Products” are discovered, contact the vendor imediately to reject shipment/stop payment, then PUBLICISE THE VENDOR!!! The counterfeiters cannot tolerate any 'spotlight' on their operations, & the vendors will also be forced to have more rigorous inspection procedures to stay in business. It will only require a few such inforcements for “The word to get out” that  there is a “zero-tolerance for counterfeiting”: if you get caught, no one will buy from you, as you will now be a “known counterfeiter” &, as such, “untouchable”.  

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