The Cost of Counterfeit Parts in Manufacturing

By Beamer Laser Marking Systems

Counterfeit products are found in every industry and have been a problem for decades. While knockoff luxury items and designer merchandise first may come to mind and might seem harmless, counterfeit parts in manufacturing cause significant economic and societal damage.

According to World Trademark Review, the estimated global economic cost of counterfeiting could reach $2.3 trillion by the end of this year. That represents about 5% of world trade. Those are substantial numbers, but the real story lies in the losses suffered by individual manufacturers that fall victim to counterfeiters, which most often operate overseas and elude efforts of national oversight.

Losses for Manufacturers

Victimized manufacturers frequently see losses through excessive warranty costs and lower productivity due to back tracing manufacturing processes to identify warranty issues.

“We recently helped a manufacturing client address this very issue,” said Nicholas Kaczmarski, national sales manager at Flushing, Michigan-based Beamer Laser Marking Systems. “They were struggling with excessive warranty costs that involved claims on literally more product than they manufactured. After thorough and time-consuming internal audits and back checking of their manufacturing processes, they learned that the parts returned on these claims were not manufactured by them.”

Laser marking parts when they’re manufactured heads off problems created by counterfeit parts. This aerospace part is marked with a 2D Data Matrix and serial number indicating information about the part. Image courtesy of Beamer Laser Marking Systems”>

A manufacturer can avoid this kind of problem before it becomes costly and time-consuming.

“Direct-mark parts first,” Kaczmarski said. “This is when 2D codes and serialization become critically important. Uniquely marking parts — original equipment and replacements — when they’re manufactured heads off the problems created by counterfeit parts in an organization’s ecosystem.”

He said laser marking expertise can benefit any manufacturer, from small machine shops to the largest companies.

“Laser marking is fast, flexible, repeatable, durable, and it’s a one-button operation,” Kaczmarski said. “It saves time in the manufacturing process — in some cases as much as three minutes per part — because it relies on programmable actions that reduce operator interface. Critical information like serial numbers and other intelligent data can be created with consistency throughout production. This speeds up cycle time and improves productivity while safeguarding quality.”

Foiling Counterfeiters

Kaczmarski said counterfeiters cannot accurately duplicate coded, intelligent information.

“Counterfeiters can’t reverse-engineer unique codes, serial numbers and other intelligent information like they can the appearance of a product,” he said. “The unique coded information and data within the markings — created when the part is manufactured — are stored by the manufacturer for future verification. When a part shows up later in the pipeline, it can be verified as authentic. On the other hand, if a counterfeiter simply copies a part marking, the appearance of a duplicate in the system also is an alert to the presence of a counterfeit.”

In addition to being costly to manufacturers and their customers, counterfeits affect human safety. While there is a measurable economic cost from counterfeit parts entering the manufacturing ecosystem, there is a societal cost as well, particularly in industries like automotive and aerospace.

Compromised Safety

Aircraft generally are designed for a life cycle that may approach 30 years. Because of this, to perform regular maintenance throughout a designated life cycle, it may be necessary to use parts that are no longer produced by original equipment manufacturers but produced to OEM specifications by authorized manufacturers.