Bogus Goods Still Dogging Manufacturers

Counterfeiting is an ongoing problem for manufacturers of everything from CDs to supercomputers. In some industries, the incidence of counterfeiting ebbs and flows with the supply and demand cycle. One such industry is electronics, which seems to be running counter to the trend these days.

By most accounts, there doesn’t seem to be a shortage of electronic components in the supply chain. In fact, both component makers and distributors report business has been soft, and market analysts are comfortable with the levels of inventory in the component supply chain. Yet, when I talk with folks in the electronics industry, “counterfeiting” comes up as one of their biggest problems.

Here’s one gauge on how big a problem this is becoming: when components are returned to manufacturers for reasons other than failure, the parts are frequently re-tested and put back into circulation. A colleague of mine in the consulting business told me today that manufacturers are now scrapping returned parts right away. There could be a number of reasons for this: maybe re-testing isn’t economically viable or there is an oversupply of parts in the market. But another reason could be that these components are being tested and too many of them are turning out to be substandard or counterfeit. Returned parts are “batch-tested,” meaning one out of every 10, 20 or x-number of parts are double-checked. Even if one part is faulty, it casts doubt on the rest of the batch.

There are a lot of things businesses of all sizes can do to thwart counterfeiting. Check out a series of blogs we did, starting with "Dealing with the problem of counterfeiting, Part I." If it’s becoming that easy to counterfeit computer components, what other kind of products are out there?