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Buyer Beware, Counterfeit Components Can Kill

Posted by Al Kiel on Apr 17, 2014 10:40:00 AM

As a defense and aerospace sourcing specialist, we backstop the US Military’s supply chain for obsolete and hard to find items.  We track down and procure items unavailable through authorized sources of supplygrimreaper for organizations like NASA, The Defense Logistics Agency and the nations top Aerospace and Defense contractors. Our core focuses are backstopping our clients authorized supply base, and ensure that obsolete and hard to find electronic and mechanical components do not cause a work stoppage, or a counterfeit component to pollute their supply chain. What is unique about our business is 

that the items we procure are often some of the most highly counterfeited commodities in the US Supply Chain.  Generally the material we are procuring is used in “life critical” applications 

and requires a robust counterfeit mitigation plan to ensure authentic material for our clients.  Beyond the fact that the items themselves are highly counterfeited, we are generally procuring items from sources that are not from the Authorized Distributor. 

Procuring items from sources other than the Authorized Source will increase your risk of a counterfeit component by roughly 99%.  Procuring from sources that are not directly authorized to distribute the product by the original equipment manufacturer significantly increases our chance at encountering a counterfeit component.  Our role is not to compete wi

th your authorized supply bases. We simply backstop your supply chain in the event that our clients require 

material that can only be procured from an “other than authorized” source of supply. 

What separates our business from other sourcing companies is that we have spent the past two years heavily focused on building a Counterfeit Avoidance Program which is designed to mitigate counterfeit components from entering the US militaries supply chain. Our current system is modeled after SAE’s AS6081 Counterfeit Avoidance Standard which is specifically designed for counterfeit mitigation of Electronic Components.  We are the first and only company to date that is certified to this internationally recognized standard and in June of 2013 the Department of Defense adopted the standard.  Recently our CEO, Todd Kramer appeared on CBS News, New York, as a subject matter expert on the topic of Counterfeit Electronics.

Much of our business model includes increasing awareness to the counterfeit epidemic and educating the supply chain, as well as the consumers, of the dangers associated with procuring material from sources that are not authorized or licensed to sell the component or material they are offering.  The recent rise in the rate of Counterfeiting is forcing a change in the way that procurement must be performed. The required changes generally mean that procurement professionals and consumers must, First, understand the risks, Second, commit to being diligent and, Third, accept the increased costs of doing business in a world dominated by a global economy.

The reality is that, in many cases, military systems require obsolete components that are mission critical and must be procured, yet there is not stock left from the original manufacturer or its authorized distributors.  When this happens special measures must be taken to ensure the part that is purchased is truly authentic and fully functional.  This process is much more involved than procurements from authorized distribution who procure their parts directly from Authorized Source of supply.

I thought it would be valuable to take a look outside of military supply chain to bring awareness to how dangerous this problem is for all Americans.  To solve any problem, the first step is acknowledging that there is one.  I wanted to demonstrate some areas of the commercial sector that offer some examples of DOLLAR-SIGNhow the counterfeit epidemic not only threatens our US Military’s supply chain, but innocent and unknowing civilians as well.  Whether you are a Director of Supply Chain, a Buyer, a teacher, or a parent, this information affects all of us.  I ask you to consider the fact that a US Senate Arms Service Committee Investigative report revealed more than 1 Million Counterfeit Components in the US Militaries supply chain.  Consider this, if the finest military in the world can have its supply chain infested with counterfeits, how has this impacted the commercial sector? How has this impacted the manufacturer of the car you drive, or the airplane you fly on for your summer vacation?  What about the medication you purchased online for your pet last month? Could that have been the reason your dog got sick? 

Recently our Vice President of Sales and Marketing Travis Thoman was featured in an SAE Counterfeit Video, titled “Spotlight on Design” Counterfeit Electronic Parts, the video revealed an alarming fact.  Not only were there counterfeit components found on Air Force One, but, of the 26 Million parts used by the commercial airline industry, 2% of those components are believed to be counterfeit.

Counterfeiting represents an unprecedented amount of money. Statistics vary, but according to the ATA’s Technology & Maintenance Council’s (TMC) Counterfeit Parts Task Force, of the automotive industry, the problem is nearly 12 Billion dollars annually.

According to Jane Clark, vice president of member services for National Lease, a truck leasing company, “These fakes are made to look the same as an OEM or legitimately re-engineered aftermarket component, but don’t necessarily perform the same,” Jane writes about on her blog, “They are often constructed of supply-chainsubstandard materials that easily succumb to shear and other weather and road related issues. According to the TMC, a single, counterfeit brake valve can decrease the overall performance of a truck’s brake system. In India, it is estimated that up to 20% of all road accidents are due to counterfeit parts. In Saudi Arabia, the estimate is that 50% of all traffic accident deaths are due to these fake parts.”  We must realize our society is dominated by a global economy.  Most things we buy these days come from overseas and the counterfeit problems in countries with little or no regulations can impact our supply chain greatly.  The fundamental guidance in our counterfeit mitigation program for Military transactions is the same we offer to the US Consumer. Understand who you are buying the product from, and consider what the cost of a counterfeit component could mean, depending on your application.  Failure to comply can result in server consequences and, in some cases, even death.

“Remember, using counterfeit parts unknowingly does not relieve you of responsibility should an accident occur,” Clark summarizes. “And substandard parts actually diminish the life cycle of your fleet.”

On another front:  "Counterfeit Drugs: Fighting Illegal Supply Chains"   Howard Sklamberg, Deputy Commissioner for Global Regulatory Operations and Policy, Food and Drug Administration, Department of Health and Human Services, appeared before the Committee on Energy and Commerce Subcommittee on Oversight and Investigations in the U.S. House of Representatives on February 27, 2014.

Mr. Sklamberg stated the following:  “Recent incidents of counterfeiting and adulteration have caused serious threats to public health. The consequences around the world have been tragic.  Counterfeit drugs raise significant public health concerns because their safety and effectiveness is unknown.  A counterfeit drug could be made using ingredients that are toxic to patients and processed under poorly controlled and unsanitary conditions.  Substandard drugs are also a major public health concern, especially regarding drugsinfectious disease, drugs, such as anti-HIV and anti-malarial drugs.  In the United States, a relatively comprehensive system of laws, regulations, and enforcement by Federal and state authorities has kept drug counterfeiting incidents in the United States relatively rare, and FDA continues to believe—and works to ensure—that Americans can have a high degree of confidence in the drugs that they obtain through legal channels.  However hundreds of website selling counterfeit drugs have been shut down in the past 12 months and instances have occurred.  With the dramatic increase in the complexity of the global supply chain, the FDA and its regulatory and law enforcement partners around the world face enormous challenges regarding supply chain security.”  To read more of his statement, click here:  http://www.fda.gov/NewsEvents/Testimony/ucm387449.htm

Who would think that the food we eat is counterfeit?  We are very trusting people and when our waitress brings us our dinner we assume it is what we ordered.

Whether we like it or not, fake food is here, and there is a good guess that it has happened to you.

Here are the top 7 food items most likely counterfeited. 

  1. Olive Oil
  2. Honey
  3. Fish
  4. Scallops
  5. Balsamic Vinegar
  6. Saffron
  7. Vanilla

Olive oil is one of the most expensive and also one of the most adulterated food products in recorded history.  To read more on this topic there is a very interesting article about olive oil, click on this link:  http://www.foodquality.com/details/article/6033371/Detecting_Adulteration_in_Olive_Oil.html?tzcheck=1

OLIVE_OILAnd then there is the topic of counterfeit powdered milk. Powdered milk is one of the highest traded food commodities across the globe. Although it seems like powdered milk is not very significant, its main use is in infant formula and baked goods. The protein in powdered milk is highly linked to its value. Criminals have begun to add chemicals to so it has an artificially higher amount of protein, therefore having a higher price. They already have regulations regarding the addition of these additives but they still sneak by. They have recently initiated a more effective way of detecting these variables called “fingerprinting”. It gives a “fingerprint” to each batch of milk powder using near infrared technology, therefore detecting the legitimacy of the product.

http://www.foodquality.com/details/article/5862991/Fingerprinting_Food_Augmenting_Existing_Near_Infrared_Technology_to_Fight_Dairy_.html

As you can see counterfeit issues are not just within component parts but can show up in our food, clothing, medicines, and a host of other areas in life. The solution is to be diligent in your investigation of what you buy.  Remind yourself of the consequences associated with buying material that is not authentic, and consider if saving a few bucks is worth the risk.  Understanding the new realities of procurement means that utilizing a quick internet search to save money could cost you in ways you had not imagined.  We often tell our customers who procure parts this way to consider the “cost” not the “price”.  Price is what you pay today, and Cost is what you live with forever.  In our business, when price is the leading factor in the purchasing process for an obsolete item used in a life critical application, the consequences can be fatal.  The good news is that we can all do our part.  Urge your congressman or senator to stand up and protect our country, our citizens, and the men and women who wear the uniform each day to protect us.  Counterfeiting encourages organized crime and terrorism, and funnels money towards criminals that are robbing from the companies that our economy relies on.  Do your part by passing on this article, and spreading the word that we are faced with a counterfeit epidemic that affects all of us.  To learn more about how Secure Components protects it’s aerospace and defense clients supply chain from counterfeit material please visit securecomponents.com.  To better understand Counterfeit Avoidance on a business or personnel level visit counterfeitavoidance.org, the home of CAMA the Counterfeit Avoidance Mark Alliance, an international organization designed to fight counterfeit material and educate consumers on the dangers counterfeits pose. If you have a story to share about counterfeits we would love to hear it. Please comment. Creating awareness to this epidemic is vital to winning the war on counterfeit goods waged by Criminals around the globe.

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