Despite the seeming tide of counterfeit components that have bombarded the electronics market in recent years, buyers are not helpless against the onslaught.
As previously discussed in Part 1 and Part 2 of this three-part series, counterfeit methods are widely known, and education is half the battle in stopping them. Beyond this, however, the purchasing agent's best line of defense is to establish a relationship with and only purchase from authorized, manufacturer-direct suppliers.
Authorized distributors with guaranteed product traceability back to the manufacturer are filling a gap in the supply chain stemming from the inherent mismatch between product and components lifecycles. Because component lifecycles are generally decreasing, manufacturers are continually switching components manufacturing to newer and more profitable lines.
This leaves buyers in a bind, as they often need to seek out obsolete or end-of-life components from a source that is not the original manufacturer. Furthermore, component shortages or long lead times for fulfilling orders may arise due to unforeseen circumstances that drive urgent demand.
In these cases it is tempting, for reasons of cost or expediency, to turn to an independent broker or less than reputable source for a sought-after component, exposing one's organization to counterfeits. An authorized distributor with guaranteed traceability back to manufacturer is as good as purchasing from the manufacturer itself. These suppliers will in some cases even pass through to the buyer the warranty on a component to reinforce guarantees of quality and authenticity.
There are several measures a buyer should look for when evaluating an authorized supplier. Let's walk through them.
- Traceability — An authorized source can provide documented proof tracing components back to the manufacturer, such as through CofCs or authentic packing slips. Maintaining proper documentation on all parts creates traceability, which is the best means to pinpointing and averting fraud or counterfeiting, because there is a documented path in place.
There is also an increased level of responsibility, which comes from a traceable supply chain. Independent brokers and other unauthorized suppliers will often not provide any measure of traceability. Despite any price discount, untraceable parts should raise a red flag for buyers dealing with an unauthorized source.
- A control of records — Adherence to standard requirements of records-keeping is a key indicator of a reputable components supplier. In a 2010 reporton counterfeits, the US Department of Commerce noted that “the issue is further compounded by limited reporting, minimal record keeping, and a lack of information sharing.”
Authorized suppliers maintain strict inventories of all records associated with components, their manufacturers, and shipping/storage/fulfillment, and are not reluctant to share this information at the request of a buyer.
- Fit for intended purpose — This especially applies to components destined for military or civil aviation uses in which components must be able to withstand extreme physical conditions beyond the standard spectrum. Failure of counterfeits in military aviation has become a poster child for the danger of counterfeits to mission-critical industries.
Authorized suppliers are able to provide buyers with documents issued by civil aviation authorities, such as the Federal Aviation Administration, that the components in question meet airworthiness and other aviation requirements.
- Splitting — This occurs when a buyer wants to purchase less than one full lot of components, which is subsequently split and sold to different customers. Authorized distributors maintain strict control and accounting of the split batch to ensure that standards are maintained and buyers can trace their purchases back to the original lot (and from there, back to the manufacturer). Buyers should be skeptical of any supplier who cannot provide documentation of the original lot.
Armed with this knowledge, buyers can establish policies within their procurement departments to help ensure that they don't fall victim to counterfeit components. A government agency such as NASA provides an example of how buyers can institute safeguards to prevent counterfeit components from entering their supply chains.
NASA’s Dryden Flight Research Center uses five testing phases and inspections to ensure that aircraft parts are legitimate. Suppliers must complete a detailed survey about their capabilities, including where their parts are manufactured, and the center determines their weaknesses. The center also requires contractors to document the parts they use, and parts are inspected and tested before any flight.
Of course, the industry cannot battle counterfeits alone, and the federal government, recognizing the dangers of counterfeit parts in the government supply chain, has joined the fight. Because of national security issues, the US Department of Defense (DoD) in late March updated the Defense Federal Acquisition Regulation Supplement to the Federal Acquisition Regulation.
The updates are part of measures intended to regulate the detection and avoidance of counterfeit electronic parts as a portion of the National Defense Authorization Act (NDAA) of 2012 (carried through in the 2013 Act). The new NDAA regulations specifically spell out new requirements for analyzing, assessing, and acting on reports of counterfeit electronic parts and suspect counterfeit electronic parts, and holding contractors accountable.
In order to encourage the reporting of counterfeits, which has lagged due to fear of liability among companies, the NDAA specifically protects procurements professionals and their companies from civil liability based on reporting a suspect counterfeit part. This underscores the increased emphasis on reporting as another toll in the fight against counterfeits.
As this series has shown, counterfeits are a problem that is not going away anytime soon. However, as the ramifications of counterfeits become more and more evident, the supply chain is fighting back with the help of industry groups, standards bodies, government agencies, and supply chain collaboration between the component manufacturer and their authorized distributor.
Still, buyers must continue to educate themselves, seek out authorized, manufacturer-direct suppliers, and always remember that venerable warning: buyer beware!