Know Your Suppliers: Watching Out For Fake and Counterfeit Products

Even though many of us are spending more and more time within the procurement and supply chain world looking for different risk factors in our supply base (e.g., declining financial metrics, increasing lead times, etc.), perhaps we should be giving just as much attention to making sure what we're buying is in fact what we think it is. This recent Reuter's feature does a great job of capturing the story of one business that continually sold fake integrated circuits into the defense and transportation industries, including to BAE Systems and Alstom. It's an almost made-for-prime-time tale: "Shannon Wren ran what appeared to be a low-key computer business in Florida but had a love for fast and fancy cars, spending hundreds of thousands of dollars on a Rolls Royce, a Ferrari Spider, a Bentley Arnage and motorcycles ... [Yet] his real moneymaker was allegedly selling fake integrated circuits he imported from China and Hong Kong ... used in virtually every piece of electronics equipment."

In this specific case, the circuits were "passed off as being from firms such as Texas Instruments Inc., National Semiconductor Corp and Intel Corp," meeting specific military-grade specifications "designed to work despite extreme hot or cold temperatures, including in space, and to withstand extreme vibrations like in a missile or aircraft." In certain customer situations, the circuits "were allegedly sold for use in missiles and handheld radiation detectors as well as for controlling high-speed trains," though the article (and other sources I could find on the story) does not suggest whether or not the components actually made their way into finished products.

Even though much of the counterfeiting activity within the supply chain takes place in China, it's important to realize that just because you're buying from a well-known trading company or distributor that stocks inventory onshore, you're not any more protected than doing business directly with suppliers in local supply markets (in fact, you could very well be at a higher risk, as this case shows). To prevent fake and counterfeit parts and products -- not to mention those that fall in a grey area, such as consistently barely meeting the low end of a product specification -- from impacting our finished products and goods, it's essential to look at tools such as supplier information management/supply base management that can help create traceability.

Unfortunately, many of these tools today (even those from leaders like Aravo and Rollstream) can only provide traceability at the supplier level on a multi-tier basis. But in the future, I suspect they will quickly move to embrace part-level traceability to prevent nightmare scenarios such as a sub-standard or fake circuit making its way into a defense system or a high-speed train. Perhaps in the end, part-level traceability (including full documentation, audit trails, credential tracking/validation, site-audit support, etc.) will prove the killer application for supplier information management tools.

Jason Busch

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