Wednesday, May 27, 2009

Watch Out for Counterfeiting!

(Summary of an article in eSpeak of ISM)

Shocking statistics:
· The FBI estimates that counterfeiting and piracy of intellectual property (IP) amounts to as much as US$250 billion a year. And, according to the World Customs Organization, that figure could reach as high as US$600 billion in lost sales every year.
· Counterfeiting and piracy have resulted in the loss of 750,000 jobs in the United States, according to the U.S. Customs and Border Protection Agency.
· If counterfeiting of auto parts was eliminated, the U.S. Federal Trade Commission estimates the auto industry could hire 250,000 additional workers.
· The U.S. Department of Commerce identified more than 9,000 incidents of counterfeit electronic parts in 2008.
Among the most surprising findings was a preponderance of counterfeit electronic parts incidents in the $1.01 to $10 range, followed closely by parts in the $11 to $100 range. This indicated counterfeit electronic components were showing up in small-ticket items rather than expensive parts, such as microprocessors.
According to the OET, in 2008, 50 percent of counterfeit electronic components were bought from brokers (30 percent) and unauthorized distributors (20 percent). The remaining 50 percent came from more than 13 other sources, with no single source accounting for more than 7 percent.

Action Plan:

Good supply management practice dictates buying from authorized sources:

· Assess the seller's reputation.- Does he honor warranties Does he provide technical and customer support? Even if a seller seems reputable, do you know how reputable everyone else is in its supply chain?
· Determine the seller's financial stability. Does he have sufficient financial resources to honor refunds?
· Practice quality control. Does the seller have quality control and authenticity procedures in place? particularly with regard to functionality, proper handling and storage, chemical composition and so on. Also be skeptical of random-sample testing because counterfeiters frequently “salt” genuine product with counterfeits.
· Determine the product's traceability. Can it trace the product's route back to the original manufacturer?
· Ask for documentation. Can the seller provide documentation regarding product compliance with all laws?
· Assess legal liability. Will the seller assume product liability for penalties? Remember, buying from sources not authorized by the manufacturer might absolve that manufacturer from legal liability, even if the product is genuine. And, if the product is counterfeit, there is no manufacturer liability.


The best way to avoid counterfeiting risk is to buy exclusively from authorized sellers or resellers — either purchasing directly from the manufacturer or from a distributor or reseller contractually authorized by the product's manufacturer

Sunday, May 24, 2009

China No Longer Worth it?

Who says? AMR Research’s newest quarterly report suggests companies seeking to build or enhance outsourcing operations may to be dropping out of China, citing high risk that is no longer worth the reward.
According to the survey, manufacturers are 2-3 times more likely to decrease sourcing in China. The survey found China contributes the most risk in 12 out of 15 categories. At the top of the list is Intellectual Property(IP) infringement, with 59 percent of respondents complaining that China poses the highest risk in the world for outsourcing. 55 percent of respondents saying China poses the most risk worldwide for product quality.
Now that oil is no longer selling at $150 a barrel, manufacturers are going back to what they used to worry about. “Supplier failure is an inherent problem in all supply chains,” she said.

Do you believe this or not? I have always believed this and predict that manufacturing jobs will return to NA.