How To Address Counterfeit Parts In The Supply Chain

Republished By Plato

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Consumers and businesses alike buy millions of counterfeit products every year, worth billions of dollars. These products pose a serious threat to the supply chain, not only in terms of product value, but also customer health and safety. To keep counterfeit parts out of their supply chains, organizations must focus on the right goals and reduce manufacturing costs.

Realignment of Goals and Due Diligence

Supply chain challenges have sparked a surge in counterfeit goods as fraudulent companies rush to profit from shortages and price spikes. Businesses are increasingly falling victim to counterfeit goods. For example, studies have found the counterfeit goods market in the EU alone was valued at 2.13 billion USD in 2020, equivalent to EUR 2 billion. Counterfeit goods seized in the U.S. in 2021 were worth over 3.3 billion USD, with 33% of counterfeit products originating from China.

What can organizations do about the prevalence of counterfeit goods? They pose serious threats to the supply chain, including health and safety risks for end users. Supply chain management expert Rosemary Coates notes businesses need to shift goals to address counterfeit products in the supply chain.

Counterfeit companies are betting on the incentive to save money. They know businesses are incredibly strained right now due to supply chain delays and higher shipping costs. Everyone loves a good deal on a product, too, which may be enough to motivate someone to buy a counterfeit product without examining it closely enough to tell it is fake. Organizations must prioritize buying only authorized, rather than the cheapest ones possible.

Additionally, keeping supply chains free of counterfeit products requires significant due diligence regarding suppliers. Businesses must go above and beyond today to make sure their suppliers are only using legitimate products and parts. Otherwise, counterfeit components can easily slip into products without anyone noticing.

This is the exact problem U.S. Defense Department suppliers Lockheed Martin and Honeywell encountered in 2022. Honeywell engineers discovered a magnet in the engines of F-35 fighter jets was sourced in China, which federal procurement regulations prohibit. This magnet had been in use for years before anyone realized it was an unauthorized component.

Incidents like this prove all organizations should closely examine their supply chains, no matter what industry they are in or what size they are. Counterfeit businesses hope their customers will put in less time or effort required to realize they have a fake product. So, companies must look closely at every supplier, part, and product before buying.

Reimagining the Manufacturing Process

One clear takeaway from the surge in counterfeit products is the financial strain of many businesses, driving a widespread desire to save money. Every legitimate enterprise wants to give its end customers the best experience possible, so buying less expensive parts or choosing less costly suppliers is mainly motivated by a need to save money, not sacrifice quality.

The core of lean manufacturing is reducing waste in the production process, particularly wasted materials and resources. This is good for the environment since it reduces created waste but also lowers the demand for raw materials. With waste minimized, manufacturers don’t have to purchase excess materials, lowering their manufacturing costs. It’s a perfect example of the old adage, “too poor to buy cheap.”

In fact, shifting to sustainable manufacturing practices may increase profits and customer loyalty. Research shows 85% of consumers have switched to buying more sustainable products over the past five years. Young people in particular are enthusiastic about buying from companies that are environmentally friendly.

By reimagining the manufacturing process itself, businesses can stick to buying only high-quality, authentic materials and goods and waste less of those materials. The savings are the result of maximizing the value of every unit of materials purchased rather than spending money on materials that ultimately do not end up in finished goods.

Stopping Counterfeits and Improving Manufacturing

Counterfeit goods result in a sub-standard customer experience and even pose a threat to health and safety. These illegal products are thriving in today’s supply chain because enterprises need to find ways to save money. However, transforming the manufacturing process and focusing on authenticity are more robust solutions to reducing production costs.