Strategic Purchasing Update
Buying Components Should Never Be a Calculated Risk
written by James Carbone
Years ago, I interviewed a purchasing manager at an electronics manufacturing services (EMS) provider about his company’s use of electronics distributors. He told me his company used about a dozen franchised distributors and a half-dozen independent distributors. He also said his firm mostly used independent distributors when parts were in short supply and could not be sourced from franchised distributors. He added that on occasion he would also buy from independent distributors if the parts needed were priced significantly lower than authorized distributors.
I asked him if he was concerned about buying counterfeit parts when doing business with independent distributors. He said that he was, but it was a “calculated risk.” In fact, he went on to say that there were several occasions when his company purchased substandard or counterfeit parts on the open market.
Today, most buyers would not purchase components from independent distributors that they had not done business with before or had not previously qualified. Some buyers will not purchase from an independent distributor if the distributor has ever sold substandard or counterfeit part. Large OEMs and EMS providers occasionally buy from independent distributors, but have rigorous qualification processes for independent distributors before purchase orders are placed. Such robust evaluation is imperative because counterfeiters are getting more sophisticated in their techniques and bogus parts are getting harder to detect.
Many counterfeit parts are actually refurbished parts that are sold as new components. In fact, it is the most common form of counterfeiting, according to the Electronic Resellers Association Inc. (ERAI), an association that maintains a database of reports of counterfeit components.
Richard Smith, vice president of business development for ERAI, said in some cases counterfeiters are cloning parts. The fake parts look real and may have some functionality, but cannot perform to the spec of the genuine components.
In many cases the part is a legitimate part, often made by an Asian manufacturer. It could be a low-value, low-functioning chip that is supposed be used in a toy. It is sold through a legitimate channel and purchased by counterfeiters.
A counterfeiting operation then re-marks the component with the logo of a major electronics component manufacturer and a part number of a superior part that has much higher specifications than the inexpensive part. The component is sold on the open market.
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