Dive Brief:

• Existing counterfeit chip discovery methods are failing, as ersatz chips continue to make their way into the electronics supply chain, Securing Industry reported last week.
• Rather than phony chips coming mostly from independent brokers as previously believed, new awareness has led to suspicion of 'malicious insiders' knowingly substituting false chips for authentic ones. 
• One method for filtering out illegitimate chips lies in enhancing traceability from the moment of receipt to utilization, thereby limiting accessibility for potential fraudsters. 

Dive Insight:

Not every industry is subject to fraudulent ingredients or parts, but for those that are, oversight is growing increasingly important.

The  value of product or ingredient traceability can't be overstated. The ability to easily track and report the source of a phony chip is the best method of preventing an ongoing problem. The same is true of tainted pharmaceuticals, the danger of which for consumers is much greater than most electronics fraud (flammable phones excluded). 

A strong example comparing company responses to faulty or poisoned products exists between Johnson and Johnson's Tylenol and the Samsung Note. Although Samsung eventually pulled the phone, until very recently, it had not taken action to completely explain or rectify the battery issue. J & J, on the other hand, was very quick to react to the threat it unknowingly posed: within eight weeks, a triple seal anti-tampering label was installed on every package of Tylenol. And while Samsung has now apologized for the Note's failure, the timeline, not to mention the eventual recall, was anything but swift.

At the end of the day, though, it takes full corporate collaboration to ensure fraudulent parts do not enter the value chain. Procurement can do plenty to make sure suppliers meet quality controls, but then it's operation's job to make sure the product that comes in is legitimate. The shop floor and logistics provider, too, must ensure packaging and transport are secure to avoid tampering prior to the point of sale.

Finally, having strong supplier relationships is essential: after all, it may turn out a counterfeit product began further upstream than the Tier 1 supplier; being able to trust the supplier will correct and, in turn, improve quality within their chain is key to avoiding future counterfeit proliferation.