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Live Chat 8/15: Avoid the Counterfeit Trap

Caveat emptor . Let the buyer beware. That's the theme of EBN's upcoming chat with distributor Components Direct. We'll be discussing the growing problem of counterfeit components and how to spot them.

Counterfeit electronic components are appearing with increasing frequency, according to IHS. Based on a conservative estimate, a total of 1,336 verified counterfeit-part incidents have been reported for transactions involving a minimum of 834,079 purchased parts in 2012, the market research firm says.

Over time, these figures translate to a substantial risk to the electronics supply chain and the critical industries associated with it. A 2012 study by IHS found that more than 12 million counterfeit electronics and semiconductor components have entered the distribution chain since 2007, with 57 percent of all counterfeit parts obsolete or end-of-life components.

“Counterfeit parts represent a serious and growing risk to the electronics supply chain in general and to the aerospace and defense industry in particular,” said Rory King, director of supply chain product marketing at IHS, in a written statement. “Each month that passes, more than a hundred counterfeit incidents comprised of thousands of suspect parts are reported.”

As counterfeiters get more sophisticated, no one is immune to the problem. Components Direct, which supplies both analog and digital devices, found more than 124 million units of its product floating in the gray market across 6,500-plus part numbers and a variety of date codes.

However, the supply chain is not without recourse. The first step is to understand the problem and its complexity. On Thursday, August 15, we'll be talking about the most common methods of creating fake parts, and how to identify those bogus parts.

We'll also be taking about how to avoid imitation parts — primarily by partnering with and buying from authorized, manufacturer-direct suppliers. According to a May 2012 report by the Senate Armed Services Committee, titled “Inquiry Into Counterfeit Electronic Parts in the Department of Defense Supply Chain,” an “overwhelmingly majority” of the more than 1 million counterfeit parts identified in an investigation of the DoD's supply chain were sourced from a party other than the original manufacturer or its authorized distributor.

We'll also look at best-practices for purchasing and learn how organizations can set procurement policies to safeguard themselves against counterfeit parts. For example, when evaluating an authorized supplier, a buyer should look for attributes such as traceability, control of records, and inventory documentation, Components Direct told EBN. Limited reporting, minimal record-keeping, and a lack of information-sharing compound the counterfeit issue, a 2010 report from the US Department of Commerce noted.

We've invited Anne Ting, executive vice president of marketing, and Steve Martin, executive vice president of sales, from Components Direct, to field your questions and help generate conversation around this important topic. We'll be gathering in the EBN chat area at 2:00 p.m. EDT (11:00 a.m. PDT) on Thursday, August 15. Hope to see you there! In the meantime, feel free to post comments, thoughts, and questions below.

8 comments on “Live Chat 8/15: Avoid the Counterfeit Trap

  1. elctrnx_lyf
    August 15, 2013

    I believe counterfeiting can be solved only if all the companies along the supply chain maintains the rigor. Looking forward for interesting session.

  2. ahdand
    August 16, 2013

    @elctrnx: Yes but it wont be an easy process since it has not yet being started properly yet. So to start everything fresh is needed if so.

  3. FLYINGSCOT
    August 16, 2013

    Is it the case that most counterfeit component are obsolete or EOL in nature?  If so I was wondering if this makes them more difficult to identify?

  4. Hailey Lynne McKeefry
    August 19, 2013

    This conversation is invaluable… and let's keep it going. Also, weigh in (and comment) on our most recent poll on Anti-Counterfitting. So far authenticity testing is far away the favored response. It will be interesting to see how that evolves.

  5. jesse_securecomponents
    October 25, 2013

    Using a trusted supplier is a critical part of counterfeit avoidance. You should first go to the original manufacturer or their authorized distributors. If the part is not available from either of those sources then you should work with a qualified independent distributor or broker.

    It is imperative that you qualify your independent distributors and brokers. Ask to see their quality certifications. Can they prove that they are AS9120 certified? Are they AS6081 certified? QTSL approved? Are they involved in industry efforts to mitigate the effects of counterfeits?

    If you had a life-threatening health condition you would not simply rely on the first doctor you come across after doing a Google search. You would do your due diligience and research potential health care providers. You'd see where they trained/went to school, you'd see if they were a leader in their particular field of expertise, you'd consider whether they published and were thought of as an expert.

    The same analysis should be used when considering what supplier you may use. In many instances electronic components are being used in life-critical applications (medical, military, etc.). In short, you must remain vigilant.

  6. Hailey Lynne McKeefry
    October 25, 2013

    @Jesse, thanks for weighing in. You make some very important points. There's a huge dose of you get what you pay for and caveat emptor. The certification piece is really critical. Do you find that most independants have this sort of seal of approval or is it pretty rare?

  7. jesse_securecomponents
    October 25, 2013

    @Hailey 

    There are a handful of independents who are spending the time and resources necessary to earn the certifications I discussed. My feeling is that the increased awareness and heightened quality requirements will have the effect of weeding out independent suppliers who are not committed to quality.

    The amount of time, energy and dollars necessary to pursue these counterfeit avoidance certifications will likely remove the fly-by-night operations who set up shop in their basement or their garage with little to no regard for quality. I encourage your readers to visit the Defense Logistic Agency's QTSL list for a list of distributors who have been audited and approved by the DLA to sell them microcircuits from sources other than the OCM or franchise. The list can be found at http://www.landandmaritime.dla.mil/offices/sourcing_and_qualification/QTSL.aspx

    Again, I cannot stress enough that quality managers and procurement directors need to be vigilant in vetting suppliers and maintaining their approved vendor lists. 

  8. Hailey Lynne McKeefry
    October 25, 2013

    Thanks for these resources, Jesse. This type of list is incredibly helpful. Next week, we'll be having a chat about strategic sourcing and how to make it smoother and more accurate. I hope you will join us. Stay tuned for more details.

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