Keeping Fraudulent Parts Out of Consumer Electronics

Robert Brice
Mon, Mar 21, 2016
Counterfeit electronic parts can pass for the real thing but cause serious problems.
Counterfeit electronic parts can pass for the real thing but cause serious problems.

Counterfeit electronic parts in the military and aerospace supply chain are dangerous for national security. Weapons systems and transport vehicles need to use the best possible components so the men and women tasked with defending a country don't put their trust in second-rate equipment.

While consumers aren't piloting multi-million dollar jets, they rely on electronic devices in many hazardous situations and product failure could cause devastating effects. Manufacturers in multiple industries should investigate how defense, military and aerospace contractors deal with counterfeit risk and employ data collection procedures to monitor and secure their supply chains.

The Dangers of Counterfeit Electronic Parts
Any time consumers find counterfeit parts in the goods they purchase, it is bad news for the manufacturer. CBS News warned consumers against buying high-priced products with cheap parts. Not only is it detrimental to the consumer's wallet, the missing money often goes to criminals or other illegal operations. Consumers may sue manufacturers or at the very least spread information that damages public relations.

Being thrifty is not the only reason consumers fear counterfeit parts in their purchases. Cheap equipment pieces may break down. This is annoying for video game consoles or Blu-ray players, but could prove deadly when it occurs in medical devices, security systems and vehicles. When enough power flows through counterfeit electronic parts, cheap materials don't just stop working; they may explode or start fires.

Even when counterfeit electronic parts do the jobs of their replacements, the materials may be harmful in their own right. Toxic materials illegally used in consumer products may contain high levels of chlorine, cadmium and lead. The bottom line is counterfeit parts cause people to buy and use something different than what they expect, and this may lead to financial and physical harm.

How Counterfeits Enter the Supply Chain
Electronics are very popular. As the market grows, so does the opportunity for fraudulent companies and criminals. Manufacturing Business Technology suggested the necessity for organizations to operate with global supply chain partners makes counterfeit electronic parts a common risk.

Supply chain fraud may be caused by individuals or organizations. Some companies think they can slip low-quality supplies past partners. Other times, criminals may steal top-quality parts and replace them with low-grade options, hoping nobody will notice. Most fraudsters depend on a lack of oversight to provide them with an opportunity to get away with their crimes.

The quality of counterfeit parts varies greatly. For example, some third-world countries serve as dumping grounds for outdated products. People can remove the circuitry from old devices and build seemingly new merchandise with obsolete technology. The final product may operate slower or have small problems, but not enough to make fraud obvious. In other cases, criminals are much lazier and use scrap, garbage or dangerous materials to make up weight or construct an item that just looks right.

What to Look Out For
While defense and aerospace contractors do everything in their power to safeguard against counterfeit parts, consumer companies are just beginning to acknowledge the problem. Penton's Design Engineering & Sourcing Group performed a survey of manufacturers and found 72 percent fear the damage that could be caused by fraud, according to Global Purchasing. While 41 percent doubt there organization's ability to detect counterfeit parts.

There are some obvious tells there may be a problem with supply shipments from vendors. Manufacturers should check production parts for proper labeling or signs of tampering. If packages or items are damaged, it's a clear indication there's something wrong. More in depth tests depend on the product. Metals and chemicals can be checked through industry quality inspections.

However a company examines materials for quality, they should perform their analysis immediately upon receipt. The RFgen white paper "How to Become DFARS Compliant and Avoid Counterfeit Parts in the Defense and Aerospace Supply Chain" discussed how government contractors often use barcode software or other mobile data collection solutions to inspect incoming shipments and report findings in real-time. Automated data systems help create the speed necessary to inspect a rapidly moving supply chain.

While commercial manufacturers don't have Defense Federal Acquisition Regulation Supplement to create standards for parts, there are other government organizations designed to provide companies with information and procedures for dealing with fraud. Companies should share all relevant data collected through daily routines with regulators, and work with partners that practice similar transparency.

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