How to Improve Supply Chain Security by Removing Counterfeit Parts

By Megan Nichols, Technical Writer and Editor at Schooled By Science

High-quality parts play substantial roles in helping companies build solid reputations and earn the trust of customers. However, numerous sources and ongoing research show that counterfeit products represent a trillion-dollar global problem that could hurt companies’ bottom lines and endanger consumers.

Taking supply chain security seriously has effects that span beyond enterprises, however. It also concerns national interests, particularly when entities supply parts to military or government clients.

A Closer Look at the Scope of the Problem

Before getting into how companies could mitigate issues with fake parts, it’s crucial to investigate the matter more closely. Digging deeper into the statistics highlights why companies should not see this issue as a remote concern that is not likely to affect them.

ERAI, Inc. is an organization that examines risks in the electronics supply chain worldwide. It also maintains the largest database of suspect and nonconforming parts in the electronics sector. Published statistics show the global semiconductor industry posted a 12% decrease in sales for 2019 compared to the previous year. However, the same source found that the number of suspicious parts reported to ERAI in 2019 went up by 18%.

Counterfeit goods span beyond the electronics industry, and they often result in big business for the criminals who deal with those products. Consider a recent example where border control officials in Dallas, Texas, stopped a shipment from Hong Kong containing more than $108,000 in fake goods. The products ranged from Tiffany rings to Beats headphones.

Government statistics from 2019 also showed that officials took 169 shipments of computer networking equipment containing fake trademarks. The border control specialists concluded that the items had a total suggested retail value of $7.3 million and came from 21 ports around the United States.

These cases emphasize that counterfeit goods are — unfortunately — not isolated from the world’s supply chains. That reality means businesses of all sizes must consider counterfeit parts genuine risks, then work to spot and remove them.

Understand How Abnormally Low Prices Can Give Telltale Signs

One of the first steps in boosting supply chain security involves understanding what constitutes reasonable prices for the parts a manufacturing company needs.

Consider an example where a purchaser decides to source components from a party that is not the original equipment manufacturer (OEM) or an authorized reseller because that entity claims to offer authentic parts at 50% of what they typically cost.

Such a deep discount should quickly raise red flags in the mind of the person buying the parts. For example, what would drive the seller to tolerate such a loss by selling real components so cheaply? Knowing how much parts should cost is a practical step to take in avoiding possible counterfeit items.

Give Your Business to Supply Chain Partners That Abide by Regulations

Keeping your supply chain secure also means proactively committing to only work with suppliers that know and follow the appropriate regulations for the things they sell.

For example, there are standards requiring U.S. Department of Defense (DoD) personnel and contractors to report suspicious parts in a shared database. They must also carry out internal company safeguards to avoid counterfeit components.

Research indicated that the DoD needed to improve its reporting and oversight associated with fake parts. Even so, plenty of reputable suppliers consistently learn and follow the rules without supervision.

If a supplier explicitly mentions that its military-grade products get built according to specific standards, that’s a strong sign of high-quality items. For example, the rules encompassed within MIL-STD-1275 establish standards for 28-VDC electrical systems found in military ground equipment. The relevant guidelines give specifics about voltage compatibility while protecting against reverse polarity input damage. Products built to these standards also include safeguards against noise interference from nearby equipment.

Setting such standards is crucial for upholding national security and promoting the success of mission-critical operations. That’s why some providers offer custom-built equipment. Whether a company purchases customized or off-the-shelf products, working with providers that demonstrate a thorough knowledge of applicable rules can go a long way in preventing counterfeit problems.

Go Directly to Suppliers’ Websites Rather Than Using Search Engines

Search engines may seem like good starting points for companies that want to expand their supplier networks. However, an investigation of sources for counterfeit automotive parts showed that search engines often direct visitors to sites that sell fake items.

One investigation showed that a website selling counterfeit airbags for Honda cars received 61.24% organic traffic from people who used a popular Russian search engine and typed the phrase “buy airbags cheap.”

These findings emphasize that it’s important for potential buyers to navigate directly to the websites of suppliers that interest them instead of typing terms into a search engine field. Otherwise, it could be too easy to either come across a site posing as a genuine company or one that intentionally tries to lure customers away from legitimate sites with extremely low prices and other “perks.”

Many well-established companies know the importance of dealing with trusted suppliers. However, if a business owner is in the early stages of operating or overeager to get what seems like a great deal, they could be more susceptible to coming across misleading sites. Entering a supplier’s website directly into the search bar is a quick and effective measure to avoid landing at websites that could sell counterfeit products.

Become Familiar With Emerging Techniques to Tackle Counterfeiting

Reducing the likelihood of supply chain problems related to counterfeiting also requires company representatives to stay aware of the innovative ways that researchers hope to better address fake parts soon. Then, it’s easier to decide if and when it’s appropriate to investigate those developments further.

For example, a team at MIT created a millimeter-sized cryptographic tag that could help stop counterfeiting associated with virtually any product. It can also deliver secure communication via an ultra-low-energy method.

In another case, scientists scanned two types of metal with a sensor that measured electromagnetic signals. They found that pieces have “fingerprints” and that looking for those identifiers could help people spot fake products such as inauthentic bolts.

Getting results will likely involve using multiple technologies simultaneously. One recent effort combined distributed Internet of Things (IoT) networks with data stored on the blockchain. The results allowed end-to-end tracking of a part’s origins, which gave manufacturers peace of mind and allowed them to prove authenticity.

Some of these forward-thinking options are still in the early stages and not yet commercially available. However, it’s still valuable for company representatives to remain aware of how technology could soon play an even more prominent role in stopping the distribution of counterfeit parts.

Adequate Supply Chain Security Requires Various Approaches

The tips and examples here highlight why company leaders should not hope for a universally effective and appropriate solution to end the problems connected to fake components. The best approach is instead for business representatives to understand and identify the vulnerabilities that may lead to a compromised supply chain.

Next, they should deploy various methods to address the problem. Tracking metrics also lets companies verify if their techniques get the desired results.

Megan R. Nichols is a Technical Writer and Editor of Schooled By Science. She regularly explores how technology is impacting science and engineering disciplines. Follow Megan on Twitter @nicholsrmegan.

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