Recent information from IHS (El Segundo, CA) should raise a red flag about counterfeit parts. From 2001 through 2012, 57% of counterfeit-part reports have involved obsolete or end-of-life (EOL) components. Another 37% were active parts. These counterfeit incidents represent millions of parts in circulation. IHS reported that considerably more than 12 million parts have been involved in global counterfeit incidents in just the past five years, equating to more than one counterfeit part every 15 seconds during that period.
“Some have said that if you can avoid all obsolete parts, you can eliminate all the risk of counterfeits,” said Rory King, director, supply chain product marketing at IHS. “However, this is untrue for many reasons. Among them, obsolete parts represent only a portion of the counterfeit scourge, with active components accounting for a significant share of all counterfeits reported. Moreover, it’s unrealistic or technically infeasible to economically eliminate the use of all obsolete parts. This underscores the critical need for electronics buyers to arm themselves with the right methods and tools to manage both obsolete and active critical components.”
“Industry figures suggest that a single incident of an obsolete part can cause as much as 64 weeks of down time and $2.1 million to resolve,” King said. “On parts lists, bills of materials, or assemblies that encompass as many as 30,000 parts, it’s typical that 10 percent or more of these components are obsolete, showing what a significant cost obsolescence carries.
“And, given that more than more than one in two counterfeit parts is an obsolete component, the need to forecast obsolescence and have access to alternate part and supplier options is crucial to avoiding both obsolescence costs and counterfeit risk,” King added.
King noted that changes in the supply base, like the enactment of a regulation such as the European Restriction of Hazardous Substances Directive (RoHS) can result in diminishing manufacturing sources and material shortages (DMSMS). “When RoHS came into force in 2006, 20 percent of all components were discontinued above and beyond what buyers were expecting. Another 20 percent of components were unexpectedly discontinued in 2007. Manufacturers attributed these events specifically to the shift to lead-free components. If a product is 20 or more years old, you simply can’t avoid obsolete parts, which are a prime breeding ground for counterfeits.”
Following the Japan earthquake in 2011, 60 percent of companies that purchase electronics reported they increased their buying activities for components whose supplies were affected by the quake, according to an IHS iSuppli survey. A full 40 percent of those companies said they increased the use of the open market or other independent supply chains to source critical parts. More than half of the companies, 55 percent, said they recognized that there would be an increased risk of counterfeits from widening their supplier bases.
“The scenarios created during the Japan crisis exposed multiple companies in many more industries than ever before to the risks of counterfeit and obsolete parts,” King said. “The earthquake showed that any time there is a supply disruption, supply chain behaviors change dramatically and risk can increase very quickly for all companies.”
“Obsolete parts are unavoidable, and represent a major element of counterfeit part detection and avoidance,” King said. “Because of this, obsolescence planning is critical. Electronics buyers need to know as quickly as possible which parts are obsolete, which parts are being phased out, and when parts have become EOL in order to mitigate costly obsolescence issues. It’s critical that firms are aware of alternative parts they can use as replacements, and which suppliers can access those components.
“However, as important as it is, obsolescence management solves only part of the counterfeit equation. To explicitly address counterfeit parts head-on, organizations must understand which counterfeit parts are actually in circulation and being reported, regardless of whether they are obsolete or active,” King added. “Furthermore, constant vigilance in supply planning for parts is necessary to stay ahead of component price and supply chain health issues.