4 Vital Best Practices to Mitigate Counterfeit Electronic Parts
Your chance of unknowingly purchasing a counterfeit electronic component increases by 25% annually, according to IHS Markit, a source for engineering specifications, standards, manuals and technical publications. Exacerbating that trend is that in 2019, 66.91% of parts reported to be nonconforming, suspect counterfeit, or counterfeit were sold by companies not located in China, stated the ERAI Inc., a global information services organization that monitors, investigates and reports issues affecting the global electronics supply chain.
This percentage is alarming because it bolsters the awareness that more mitigation is needed. Simply avoiding open-market parts from China-based companies or certain supply regions as a way to avoid suspect/counterfeit parts is not a viable strategy. With spurious components flooding the supply chain, how can you determine if an electronic part is authentic or not? What should you do?
Here are four vital best practices to mitigate counterfeit electronic parts for your business:
1. Assess the risk before you buy.
Receiving a counterfeit component can have immense monetary repercussions—increased purchasing costs, lost revenue, wasted tax dollars and potential lawsuits. It can also lead to reputational damage, compromised national security, and even have life or death consequences. Assessing the risk of part failure is extremely important before you make a purchase.
If you’re looking to procure a hard-to-find or obsolete electronic part, you should work with an independent distributor that can secure the vast array of parts you need. Determining if your distributor is a legitimate one is of the utmost importance. A legitimate distributor should have a rigorous quality management system and counterfeit mitigation processes in place to detect, inspect and verify that your electronic components are authentic. Dealing with hard-to-find or obsolete parts can make the authentication process even more challenging, so make sure your distributor offers a counterfeit mitigation process that includes:
- Assessing the perceived risk levels of the component and application.
- Detecting and mitigating the risk.
- Controlling and reporting any substandard, inauthentic part.
- Implementing solutions to preserve the integrity of your supply chain needs.
Another way to determine the legitimacy of an independent distributor is to verify its certifications to show that the company is qualified to handle and mitigate counterfeit risks. The most important certificate to manage suspect counterfeit components is SAE AS6081 Counterfeit Electronic Parts: Avoidance, Detection, Mitigation and Disposition for Distributors. It is an aerospace standard, which provides requirements, practices, methods and guidance to mitigate the risk of purchasing and supplying suspect counterfeit and counterfeit parts.
You may also want to determine if the company was reported by GIDEP, ERAI or other industry associations for any deficiencies or for distributing suspect counterfeit parts. Ask yourself if the company is on top of emerging industry standards, or if it participates in governing bodies and associations, such as the Government-Industry Data Exchange Program (GIDEP) or the ERAI. If so, these are good indications that you have found yourself a solid independent distributor to work with.
2. Be knowledgeable about the types of counterfeit parts.
Did you know that the majority of counterfeit parts are recycled? This presents a unique challenge because by all other standards, the part may seem to be a legitimate product.
While recycled parts make up the majority of counterfeit components, there are still a number of other types of counterfeit electronic parts that you should be aware of—remarked, overproduced, defective, cloned, tampered products, and forged documentation.
Rigorous lab testing and verification processes are the only way to determine if a part is genuine and authentic. Inspections include visual, 2D and 3D X-rays, scans and electrical, parametric, functional, temperature and/or structural tests. Remember, even the smallest things can make the biggest difference. If your company does not or cannot perform testing, make sure to purchase from a distributor that does and offers only authentic parts.
3. Choose an authorized distributor with a diverse supply chain.
Independent distributors (as mentioned above) acquire obsolete or hard-to-find products from all over the world, and then detect, inspect and verify that the parts are authentic. If you aren't looking to purchase obsolete or hard-to-find products, you might consider going directly to an authorized distributor for your needs. An authorized distributor has official permission to sell a manufacturer’s products and obtains the parts directly from the original source, or original component manufacturer (OCM). This means that the threat of purchasing a counterfeit electronic part is close to nil.
Working with an authorized distributor also gives you access to all manufacturers’ full range of up-to-date technical and product information, including documented evidence of a part’s supply chain history. This document will identify all supply chain intermediaries involved, starting from the OCM. Knowing the supply chain traceability of a part will help you avoid suspect counterfeit and counterfeit parts from entering your supply chain.
And—an added benefit—robust authorized distributors have direct access to hundreds of manufacturer lines across various industries including alternative energy, aerospace, defense, industrial, automation, medical and automotive.
A collaborative company should hold the titles of both an independent distributor and an authorized distributor. This is a tried-and-true way to protect yourself from counterfeit electronic components making their way into your business, or worse, your end-products.
4. Consider a long-term stocking option.
Now that you are aware of the types of counterfeit electronic components that exist, along with what makes a company best suited to decipher authentic from counterfeit products, you might want to consider long-term purchasing programs for end-of-life (EOL) products from trusted distributors.
Long-term purchasing/stocking options work like this: a customer needs a part that is going EOL, a distribution company will buy as much as the customer needs from the manufacturer, stock it, and schedule just-in-time delivery of the items.
While this may not be as vital as the other three best practices, long-term stocking options ensure that you have legitimate products on hand, when you need them. As EOL components become more scarce, verifying their authenticity becomes increasingly difficult as more counterfeits are introduced into the supply chain to meet the demand. However, when an authorized distributor or independent distributor keeps verified products on hand, it helps to mitigate the high risk you would encounter searching for EOL products on the open market.
Protecting your business and customers from counterfeit electronic components should be a vital practice for companies across the globe. It's essential for remaining profitable, keeping your customers safe, and staying in good standing within the community. You don’t have to mitigate suspect counterfeits alone. There are trusted companies who specialize in counterfeit mitigation, and want to help you.
Don’t know where to start? Schedule a virtual audit with Area51 Electronics to determine if its quality management system and counterfeit mitigation processes are a good fit for you.
Area51 Electronics is a global distributor of electronic, electrical and electromechanical components, hardware and assemblies. The company specializes in authorized manufacturer lines while carrying the advantage of being an independent distributor of hard-to-find, obsolete (end-of-life) verified components. Area51 Electronics adheres to the strictest protocols for achieving an authentic, verified electronic part. It carries the highest level of care, quality assurance and counterfeit mitigation possible.