The True Costs of a Counterfeit Supply Chain

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I know this is Norman Katz‘s area of expertise, and while I thoroughly intend to allow him to lead most of the discussion on this topic in his new column here on Sourcing Innovation, ISM’s e-Side Supply Management recently ran a great article by Robin B. Gray Jr., the Executive Vice President of the National Electronics Distributors Association that had some great facts, and tips, I just couldn’t ignore. Here’s the jist:

  • Counterfeiting and IP piracy amounts to 250 Billion a year (FBI),
      resulting in lost sales totaling as much as 600 Billion (WCO).
  • Counterfeiting and piracy have resulted in the loss of 750,000 jobs in the US alone. (CBP)
  • Eliminating counterfeit parts could create 250,000 jobs in the automotive industry alone. (FTC)

According to the Office of Educational Technology (OET), 50% of counterfeit electronic components were bought from brokers (30%) and unauthorized distributors (20%). While you might be able to find genuine parts from unauthorized sources, can you afford to take a chance? Not only are you at risk for lawsuits if something goes wrong because of a counterfeit part, the damage to your brand and reputation is potentially huge!

So, before you buy a product, not only should you make sure the source is authorized (which is often as easy as checking a manufacturer’s web-site or picking up a phone), be sure to:

  • assess the seller’s reputation,
  • determine the seller’s financial stability,
  • practice quality control,
  • determine the product’s traceability,
  • assess (your) legal liability, and
  • ask for documentation.