Counterfeit parts still a challenge: white paper

A white paper covers the issues of counterfeit parts and approaches companies can take

August 23, 2011
by Purchasing b2b staff

Gilbert, Ariz. – A white paper from Supply & Demand Chain Executive offers procurement professionals some approaches to take to avoid the pitfalls of counterfeit parts entering their supply chains.

The white paper, called Fighting the Fakes, describes the scope of the problem and how industry is reacting. In particular it looks at the electronic sector and how one company, L-3 Communications, tackled the issue.


Counterfeit and fraudulent goods, says the white paper, cost businesses in the US more than US$200 billion per year and result in the loss of 250,000 US jobs, reports the Federal Bureau of Investigations.

But it’s not just the economic impact. Inferior or counterfeit goods also pose risks to health and safety.

In the electronics sector, which is still grappling with the issue, its losses are at US$ 10 billion per year.


The white paper offers users a basic checklist of questions to put to a given distributor. These include:

• Are they members of the Independent Distribu¬tors of Electronics Association (IDEA) and ERAI?
• Are they AS9120 and ISO9001:2000 certified?
• Are they ESD S20.20 Compliant?
• Are their inspectors certified to IDEA-3000?
• Do they have supplier controls and flow-down clauses regarding counterfeit mitigation requirements?
• Have they ever delivered a counterfeit or sub¬standard part to a customer? If so, how did they resolve the issue?
• Do they have a die library and will they share it?
• Do they offer escrow services?
• What is their policy upon discovery of coun¬terfeit or suspect parts in terms of impounding and reporting to organizations like GIDEP and ERAI?
• Which third-party testing facilities do they use, and which services were performed?
• Do they purchase from regions likely to be the source of counterfeits or substandard parts, such as China, India or Africa?

It also suggests companies use tools to manage component lifecycles and identify potential obsolescence risk.

How companies opt to treat counterfeits will also impact how they structure their relationships with suppliers, say the authors. Companies could decide, for example, that detecting a counterfeit part and return¬ing it to the supplier for a refund would represent too great a risk. So they could opt to not pay for a lot unless it has passed their independent screening houses, at which point they would formally take ownership of the parts and pay the supplier.

The biggest key is communication. That includes all employees, customers and suppliers.