Counterfeit or unethically sourced products entering the supply chain pose a huge risk for organisations who need to treat the threat seriously
When it comes to supply chain risk, some threats are outside an organisation’s control, as the coronavirus pandemic has demonstrated. A good risk management strategy can help, but such events can’t be influenced or prevented. In contrast, in the world of MRO (maintenance, repair and operations), the quality and provenance of parts is of the utmost importance and this is a risk that can be mitigated through a good procurement strategy and management.
The 2017 Indirect Procurement Report conducted by RS Components and the Chartered Institute of Procurement and Supply (CIPS) identified that just 26% of procurement professionals are concerned about counterfeit products in their indirect supply chain. Yet Helen Alder, Head of Knowledge at CIPS, believes that fake goods are a much bigger problem than is currently recognised.
"It is better to pay more for a part from a trusted supplier than to take a risk with an unknown trader"Helen Alder, Head of Knowledge, CIPS
“While the responses to our research suggest that counterfeit products aren’t a big problem in the MRO space, it is quite possible (and I believe, likely) that procurement teams simply aren’t aware of the issue, as a lot of MRO purchases are devolved to end users,” says Alder. “Where you don’t have a purchasing process set up by the procurement function in the business, there is a risk that employees – because of the nature of MRO – will buy urgently needed parts from the quickest and cheapest supplier.
“There are highly sophisticated suppliers selling counterfeit or unethical products (which may have used slave labour) that appear legitimate,” she adds. “So it is always better to pay slightly more for a part from a trusted supplier and have the assurance that it meets all quality standards, than to take a risk with an unknown trader.”
The impact of counterfeit goods entering an organisation's supply chain is significant. First, as MRO parts are crucial to keeping machines and operations running, faulty items could cause downtime that costs money. Second, there is a reputational risk to organisations since fake products may come from unethical sources, which the government (and consumers) are scrutinising much more closely.
"All organisations should be aware of the reputational risk associated with buying counterfeit or unethically sourced products"Peter Malpas, President for EMEA, RS Components
“All organisations should be aware (from the top downwards) of increasing regulations and the reputational risk associated with buying counterfeit or unethically sourced products,” says Peter Malpas, President for EMEA at RS Components. “The procurement team has an essential role in communicating this risk to stakeholders and building relationships with trusted, contracted suppliers that act with integrity and in a legal and ethical manner.
“One of the crucial tasks of the procurement team is to identify trusted vendors that can guarantee the supply of genuine items,” he adds. “This should form part of the process of rationalising suppliers to reduce cost in the procurement process.”