Parts Counterfeiting: A Problem for Everyone

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Source: The following is excerpted from a blog post by Authentic Vision sounding the warning as to the impact of parts counterfeiting for the entire automotive industry.

SALZBURG, Austria – Automotive parts counterfeiting is a global problem with an estimated value of more than $2.2B annually. And despite efforts by governments and industry groups, counterfeiting continues to rise across all automotive categories.  Automotive parts counterfeiting is lucrative, and the problem of counterfeit brake components is especially troubling.

For consumers, counterfeit brakes create both safety and performance problems.  For manufacturers of brake systems and components, counterfeiters take advantage of investments in research, innovation and testing done by legitimate manufacturers and damage their brands and reputations. Counterfeiters are only concerned with their profits.

The inferior quality and performance of counterfeit brake components has been tested and proven by several OEMs, so there’s little question that genuine brake parts offer better performance and safety characteristics compared to counterfeits.  The challenge facing manufacturers and consumers are the difficulties identifying counterfeit components.

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Fake Brakes: A TBR Investigation into Counterfeit Brake Parts

How counterfeiting impacts your firm

The impact of counterfeit brake components on your business includes:

Financial Costs to your Organization. The primary near-term impact is the economic costs of counterfeiting on your organization. Financial losses come in many different forms, including lost sales due to counterfeiting, wasted advertising and promotional expenses, and the legal costs of defending your company against counterfeiters.

Damage to your Company’s Brand and Reputation. Over the long term, counterfeits damage your company’s brand and reputation, leading to a loss in trust and perceived product quality by your customers and channel partners.

Increased Legal Liability. Did you know your company can be sued for failure to protect your brand from counterfeiters?  The legal liability and costs of ignoring counterfeiting can be significant in the short and long term and damage the trustworthiness of your organization.

Loss of Industry Trust – Counterfeit products can also lead to loss of industry trust for your company and have both customers and potential partners wondering if your organization can assure them your products are authentic. And no company wants to be in the news headlines because they failed to take reasonable steps to protect their market from counterfeit products.

Wasted Investment in Innovation and Product Development – Counterfeiters copy the best features of your products after you’ve invested time and money in product development and innovation making it difficult or impossible to earn a return on your investment, and leaving customers and partners with the perception that your organization cannot innovate or bring “leading-edge” products to market.

The challenge for manufacturers is how to identify counterfeit products so that they can be removed from the supply chain and provide consumers with easy-to-use tools that allow them to verify product authenticity.  Unfortunately, counterfeiters are becoming increasingly sophisticated and able to copy even complex products and packaging.

Old ways of identifying counterfeit parts fall short against today’s sophisticated counterfeits

There are a handful of guidelines for identifying fake products; however, many of these guidelines are simply outdated and are no longer useful. Let’s look at a few of these.

Significant price discounts have historically been a warning sign for consumers. However, counterfeiters have adapted their tactics and price their counterfeit goods just slightly below standard pricing. This tactic gives counterfeiters an edge when consumers search for products online yet doesn’t raise any of the alarms that price gouging might.

Sophisticated counterfeiters can manufacture brake parts that appear nearly identical to authentic components even if they lack the performance, design and operating characteristics of original parts. Thus, visual inspection has limited use in identifying counterfeits.

Many counterfeiters can also produce packaging and trademarks so close to the authentic versions that they can fool not only consumers but also channel partners.  This leads to a compromised supply chain where authentic and counterfeit products co-exist.

Some companies provide consumers with the ability to check if a seller is an authorized seller, often on the manufacturer’s website.  While this is useful, it does not protect consumer from unknowingly purchasing a counterfeit product – especially if counterfeits have infiltrated the manufacturer’s supply chain.

As counterfeiters become increasingly adept at copying genuine products these simple tests are no longer useful when trying to identify counterfeit automotive parts. This means some counterfeit brake components are discovered only after they have failed, and the end-user expects warranty or other remuneration from the manufacturer.

Advanced anti-counterfeiting technologies can help protect your profits, brand and reputation.

There are several approaches to protecting your brand from counterfeits that utilize technologies such as microprinting and laser engraving. However, these approaches do not authenticate products in real-time, allowing sophisticated counterfeiters to copy and defeat them. Real-time product authentication allows channel partners and consumers to verify that brake components are authentic at any point in the supply chain from manufacturer to end-user.

Another type of anti-counterfeiting system relies on sequences of alphanumeric, 3-D, or barcode identifiers affixed or engraved on the genuine products. However, unless channel partners and consumers can easily validate these codes as authentic, they provide little protection from counterfeit products.

“The best anti-counterfeiting solutions incorporate real-time authentication and tracking tied to backend systems that can positively authenticate products as genuine,” says Martin Steib, Vice President of Marketing at Authentic Vision.  He notes that the latest anti-counterfeiting solutions also incorporate advanced technologies such as encryption and machine learning, ensuring that product tracking codes cannot be replicated or guessed by counterfeiters.

The most advanced anti-counterfeiting solutions leverage the computing power found in the smartphone most of us carry.  Smartphone-based anti-counterfeiting solutions allow users to quickly check any product in real-time to verify it is genuine.

Everyone wins, except for the counterfeiters.

When manufacturers implement an anti-counterfeiting solution, everyone wins.  In addition to mitigating the risks of financial losses, brand and reputation damage, increased legal liability, lost trust and wasted investments in innovation and product development, manufacturers gain real-time insights into their sales channels. Channel partners also benefit because they can identify genuine products from the point of manufacture all the way to the sales floor. And, consumers win because they can be assured they are purchasing safe, high performance and  genuine brake parts.

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