In my first post, I described how counterfeits can be found anywhere and that Keysight can no longer ignore this fact. Our customers know this too, which is why they pressure their suppliers to put systems in place to avoid the introduction of any suspect material into their supply chains. Keysight solved this customer challenge by working with one of our most demanding customers—the Aerospace Defense Industry. By working together in a transparent manner, we ended up developing a government-grade counterfeit avoidance and response system to meet the US Department of Defense’s exacting DFARS (Defense Federal Acquisition Regulation Supplement) requirements.
- Ensure traceability. It’s imperative to be able to trace a product back as far as possible to the raw material. Lack of traceability is a huge risk indicator. Electronic components typically use date or lot codes, and if available, certificates of conformance.
- Buy from authorized channels. This may seem like a no-brainer, but some deals appear too good to pass up. And if you find yourself in a line-down situation, you may find yourself considering the grey market. Buying direct from the original component manufacturer or from one of their franchised distributors is the best upfront mechanism to vet suspect material. Once you move outside of these spaces, you enter the Open Market, which is fraught with risk and bad actors looking to make a quick buck. The best thing you can do is “know your supplier.”
- Put a response system in place.What data must be collected and who needs to be informed if a suspected counterfeit problem pops up? This response system must address internal concerns (failure in a Keysight instrument; evidence of rogue procurement from a bad actor), as well as industry alerts (GIDEP alert notifying industry that counterfeits have been found). Ownership of the issue from beginning to end is critical.
- Qualify a few reputable independent distributors. In the electronics world, independent distributors play a unique role in helping to locate and test for legitimate material. Strong independents differentiate themselves from pure brokers with membership to electronics organizations such as ERAI. They are typically set up with labs to perform robust visual and often electrical inspections. Force your purchasing arm to use only these qualified independents when facing a shortage. Keysight actually allowed one of our most demanding Aerospace Defense customers to audit our approved independents.
- Design for supply chain. This should go without saying, but do not design a product with components that are nearing the end of their lifecycle. This leads to large lifetime buys and exposure to the grey market. Along similar lines, consider buffering inventory for strategic sole-sourced material.
- Flow requirements down through your supply chain. You can add multiple layers of security by flowing counterfeit avoidance and response requirements down through your supply chain, whether to a contract manufacturer, semiconductor manufacturer, vineyard, or stockyard. Don’t assume anything. Trust but verify.
- Consider a tabletop exercise and be willing to go through a customer audit. Keysight performed an extensive internal walkthrough process and then volunteered to go through a three-day customer audit of our counterfeit avoidance and response system. This was followed by visits to two of our Independent distributors. This process demonstrated to our customer that we were serious about keeping the supply chain clean and serious about caring for our customers.
Although these practices were developed for the demanding Aerospace Defense industry, they can apply to a range of industries, from food to wine to pharmaceuticals to clothing and many more. Most industries deal with counterfeits in one way or another, and every competitive company on the planet takes its reputation and its relationship with customers seriously. With apologies to Groucho, that’s something you can’t afford to fake.