Reducing the risk of fakes entering the supply chain

 Jean-Louis Evans

Jean-Louis Evans

Pressures of demand and supply are fuelling the dramatic rise in counterfeit products and so companies buying product from outside the EU must take steps to ensure compliance, rather than rely on their supply chain to take on the burden of proof, writes Jean-Louis Evans, managing director at test and certification organisation, TÜV SÜD Product Service.

While it is now simple to source electronic components and finished goods from anywhere in the world, companies that buy directly from manufacturers outside the European Union (EU) need to be aware that this changes their responsibilities as they cut out the traditional supply chain. By law, whoever is placing a final product for sale anywhere in the EU is responsible for its compliance.

Companies buying directly from outside the EU must therefore take steps to ensure compliance, rather than rely on their supply chain to take on the burden of proof.

With the laws of demand and supply fuelling the dramatic rise in counterfeit products, which are particularly prevalent in the consumer electronics market, this complicates the situation further.

Products that fall under a CE marking directive cannot be imported into the EU unless they show the mark, which is simply a manufacturer’s self-declaration that the product complies with the relevant European legislation.

Less scrupulous manufacturers may not bother to test products and simply affix the CE marking and sign the declaration of conformity. Due to language issues, other manufacturers who mean well are misunderstanding the requirements of a complex set of directives – giving a CE marking to products that would fail tests.

 Stamping out fakes

There is an increasing problem in the supply chain with counterfeit goods. Figures from the European Commission’s annual report on customs actions to enforce intellectual property rights show that EU Customs detained almost 40 million products suspected of violating intellectual property rights (IPR) in 2012, with the value of the intercepted goods representing nearly €1bn.

In terms of where the fake goods originated, China continued to be the main source, accounting for 64.5% of all IPR infringing goods.

Some manufacturers are deliberately choosing to disregard standards and directives in Europe, applying arbitrary short-cuts. Consequently the number of counterfeit goods that we have seen in our laboratories over the last eighteen months has increased significantly. Not only does this have major implications for the safety of end-users, but also for reputable brand owners and manufacturers who, while they take product safety and compliance seriously, may be caught out by a failure within their supply chain.

This is particularly becoming an issue for UK and European manufacturers which design and develop products in their own country, but outsource the manufacture to the Far East.

While they may have checked the quality of their immediate Asian supplier’s operations, can they be assured that the various component manufacturers further down the supply chain are as rigorous in their quality control and as honest in their approach?

Not only can electronic products and components be counterfeit, their testing and compliance documentation can be too. It is therefore essential that those importing electronic products and components go beyond just gathering evidence to ensure that their supply chain complies.

They must validate that the evidence is correct – ensuring that reports and certificates have been issued by recognised testing laboratories, that they match the product; are properly dated and signed, are relevant to the current requirements and do not use out of date standards.

A signed declaration of a product’s conformity against the requirements of all applicable EU Directives, which is mandatory when CE marking a product for the European market, can also be faked.

Any declaration of conformity needs to be backed up by a technical file, which is the evidence that a product has been tested correctly, demonstrates compliance, and justifies the CE marking on a product.

The ideal scenario of fully and regularly auditing all the suppliers in the chain often cannot be justified financially.

A more realistic approach is to create a supply chain matrix, and focus the audits on the high-risk suppliers with which a manufacturer has had issues with in the past, and on those in the supply chain responsible for supplying safety-critical parts such as fuses, plugs or electrical cables.

Another issue in the supply chain is that very often the final products supplied are not the same as those ordered. For example, a product exhibited at a trade show may subsequently require a reduction in production costs to win a big order and this leads to an adaption of the final product and its components, and a degradation in the quality of the final product compared to the original sample.

Ideally, testing should be done before the product is shipped to provide the evidence that it complies with all functional and regulatory requirements, and the buyer should insist that this be a condition of sale. Factory inspections can also be carried out to check the authenticity of manufacturing facility as sometimes the quality of products in mass-production are not of the same standard as those submitted for testing and certification.

One important tip is to save valuable time by selecting products which have already been tested and certified, asking for pre-production samples and compliance documentation for evaluation. Such products may carry a price premium, but they will help to protect brand reputation and save costs further down the line when validating the evidence becomes more burdensome.

It is also important to ensure that any factory you deal with outside the EU has a quality management system in place and is regularly audited by an independent third-party. Do consider pre-shipment and post-shipment inspections, taking random samples from boxes to ensure that the goods meet expectations before taking delivery of them.

Before the products are sold in the EU, send samples for a ‘spot-check’ so that they, and their test and certification evidence, can be verified as being compliant. Ensuring the correct testing and inspections are completed at an early stage minimizes the risk of customers complaining about a product and enforcement authorities insisting on it being withdrawn from the market.

Ensuring compliance and avoiding fake goods across the supply chain may at first appear a daunting and complex task. However, investing in the validation of products will reassure importers, distributors and retailers that their supply chain complies with applicable legislation and that consumers are protected.

 

Tags: supply chain

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1 Comment

  1. April 01, 2014 17:54

    You make some great points here, Jean-Louis Evans. Lack of knowledge, communication and collaboration about ever changing part availability, good and bad suppliers, and instances of counterfeit spreads not only across the supply chain but deep inside of it.

    I agree that we need auditing, rating, and reviewing suppliers and when something goes wrong, we need suppliers to step up to the plate. If they do not do it, we need buyers on the short end of the stick to share that experience so that others do not get burned.

    Radical. Disruptive. Whatever it takes at this point to get buyers and engineers to connect, collaborate, and learn from one another when parts are purchased from unauthorized suppliers.

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