The current global component shortage has created significant problems for manufacturers across industries. With the pandemic and other global supply chain factors, suppliers find it increasingly difficult to meet demand, delaying downstream production of products. Unfortunately, these aren't the only issues caused by the component shortage—the rise in counterfeit parts is becoming an even greater challenge. As the component industry works to catch up with shortages, counterfeit components often slip through the cracks, costing manufacturers and their customers significant time and money.
Benchmark takes the issue of counterfeit components very seriously, and we leverage our high level of expertise in meeting quality standards to combat it. Our commitment to quality has led us to help our customers rewrite or develop their quality assurance policies. The knowledge we've developed over decades of experience has given us the ability to identify and mitigate risks associated with counterfeit components, ensuring the quality of products while saving our customers money.
What is a Counterfeit Part?
What are counterfeit components? Why do they present such a significant challenge? And, how can you avoid them? Counterfeit components are electronic parts that are misrepresented as it relates to their origins or quality and can infringe on the legitimate producer's trademark rights. Any products found to have counterfeit components present a considerable legal and fiduciary risk, especially in the aerospace, defense, and medical industries.
The costs associated with counterfeit components can also be debilitating. According to Industry Week, both consumer and industrial businesses lose approximately $250 billion each year because of counterfeit components. The semiconductor industry alone loses $75 billion annually. In the most extreme cases, counterfeit parts could lead to dangerous product failures, particularly in critical applications such as medical devices or airplane controls.
Counterfeit parts continue to slip through the cracks primarily due to weak links in the secondary market. As a result, customer resales and non-franchised routes are often the most common channels in which these parts can find their way into a system.
The components shortage has only exacerbated this issue. As markets become tighter and manufacturers scramble to get the parts they need, there is more movement in the resale market. This adds risk in two ways. First, movement in the resale market can open the risk of re-claimed or salvaged material, misrepresented material, or even cases where convenience returns introduced adulterated material into the market. Second, if a manufacturer can't locate parts from their regular supplier, they may expand their search to new suppliers out of desperation, which may include unreliable sources that sell products that are not original or reworked.
Additionally, higher prices on the open market serve as an increased incentive to break the rules as unknown suppliers enter the market to benefit by selling compromised products. For example, our production team following component verification rules uncovered a batch of adulterated capacitors that had been sanded down and re-inked, then sold as a different part.
How to Mitigate Your Risk
To avoid being duped by counterfeit components and putting your product at risk, it's essential to select a partner with the right policies, quality control systems, and component traceability measures in place. Here at Benchmark, we've invested heavily in these systems and experienced talent to protect our customers and ourselves from counterfeit parts. Our policies are based on global standards and address the unique demands of the highly regulated markets we serve. In addition, our policies are holistic, including requirements of suppliers, brokers, and customers to provide peace of mind that all components used in your product are genuine.
Since the secondary market is a significant source of risk, we implement a multi-faceted risk reduction strategy in this area. We operate a stringent broker audit system for all part brokers and only do business with routinely audited brokers in full compliance. This process ensures every broker we work with follows protocols and implements safeguards to avoid and detect counterfeit parts.
To further reduce risk, we can work with our customers on a Bill of Material (BOM) Health Assessment to identify parts that may be at risk of shortages and buy ahead of schedule to avoid using the secondary market altogether. Successfully implementing this strategy requires careful planning to meet demand and requires excellent and ongoing communication with our customers.
Don't get caught with a ticking time bomb of counterfeit electronic parts. You need a trusted partner who can provide the peace of mind of knowing that your product is built to the highest quality. We've spent years assembling systems, policies, and processes to guarantee that each component is verified correct and genuine.