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Mitigating the Risk of Counterfeiting: Identifying a Proactive Vendor

The risk of counterfeit chips is not new and it's not going away, unfortunately. Much as is in other industries, the semiconductor and electronics industry faces real threats from counterfeiters whose self-enriching, criminal behavior endangers products and sometimes lives. Reducing your risk of receiving counterfeit or substandard parts is vital to your product's performance and reputation and every one of your vendors should be a partner with you in managing that risk. To ensure that this is the case, you want to partner with companies who understand that being proactive when it comes to quality and anti-counterfeiting is the key element to success.

Pro-active measures are key to success

To best protect you against counterfeit electronics ever arriving at your dock, there are both certifiable and non-certifiable steps that can and should be implemented by your vendor or sourcing agent. I'll start with the non-certifiable, priority- or philosophy-based steps.

The best way for your vendor, and also your business, to successfully be part of the anti-counterfeiting solution is preparation. That sounds like a simple step, too easy for high-tech counterfeiters, yet that old boy scout motto of “ve prepared” still holds true. So, how do you prepare? What does it mean to ensure your vendors are proactive and prepared to meet today's counterfeit challenges?

First, collect knowledge. Your vendor has to understand what, where, when, and how counterfeit and substandard product enters the supply chain. Quite simply, the widespread occurrence of counterfeit parts merits heightened vigilance of almost every shipment. Counterfeit parts will, at some point, arrive at a vendor's dock. It is true of all industries and of all items, regardless of value and even of source, whether franchised or not, to think otherwise is not being prepared.

At Smith, we vigilantly review the global supply chain and market dynamics. We know when specific parts are likely to go into shortage or excess, what demand states are and how criminals might target various components due to opportunism. Having this market knowledge allows us to monitor part flow and be extra vigilant for those parts that are out of balance in the supply chain. Shortages can offer opportunity for counterfeiters to introduce fake or substandard parts because the price of those parts has gone up; similarly, when there is an excess of parts, even if pricing drops, illegal parts are often entered into the supply chain in the hopes that high volumes of valid, quality parts will mask those that are fake and the illegal parts can “slip in” among the good ones.

Next, put a proactive internal process in place. Of course, in order to implement the anti-counterfeiting solutions you have to first know what those risks are (the knowledge I mentioned earlier). Proactive risk mitigation comes into play regarding the internal processes and procedures your vendor has implemented to ensure the quality of part shipments before the orders are even placed. There are a number of checkboxes to include in evaluating the knowledge, capabilities and capacities of your vendors, but most essentially, your vendors should:

  • Have the same type of quality screening in place that you have for evaluating and choosing your vendors. (Approved Vendor Lists should be thorough and regularly re-evaluated and audited.)
  • Share traceability, flow-downs, and transparency.
  • Perform visual, physical and functional testing of parts based on thorough and customizable inspection checklists.
  • Supply certificates of conformance for shipments and parts.
  • Possess industry standard accreditation with regular re-certification for quality management systems, facilities, etc.

These pro-active measures are really part of the core philosophy of quality and the earmarks of the capabilities and professional leadership of your sourcing vendor. There are many pitfalls in the expansive, global supply chain, and there are definitely counterfeit and substandard parts in the market that warrant real concern. Knowing where and what these pitfalls are, how to stay clear of the counterfeit and substandard parts, and then the ability to successfully test and identify these non-conforming parts are essential elements of the screening necessary when reviewing and selecting vendors from whom you intend to source, whether regularly or as occasional sourcing vendors.

Come by tomorrow, and I'll have more to stay about the standards, accreditations, certifications, and processes that should be used as part and parcel of your vendor rating checklist in deciding who you source from. In the meantime, let us know how you work with your distribution and component vendors to proactively detect counterfeits in the comments section below.

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