Clamping down on counterfeits

The risk of counterfeit items entering the MRO supply chain needs to be taken seriously

When it comes to supply chain risk, some threats are outside of an organisation’s control – as the coronavirus pandemic demonstrated. The impact of Covid-19 has now eased significantly, with only 2% of respondents in the latest Indirect Procurement Report from RS and the Chartered Institute of Procurement and Supply (CIPS) citing pandemic recovery as a big issue in the year ahead.

Organisations can, however, mitigate against other risks that may affect the maintenance, repair and operations (MRO) supply chain. Counterfeit products are one example, but the same Indirect Procurement Report found that 57% of procurement professionals in the UK do not believe this is an issue for indirect materials.

Under the radar risk
Are they right that this is not an issue or are they simply unaware of its likelihood? Probably the latter, argues Helen Alder, Head of Knowledge at CIPS, because fake goods are a much bigger problem than the industry recognises.

“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 product from a trusted supplier and have the assurance that it meets all quality standards, than to take a risk with an unknown trader.”

Paying the price
If and when counterfeit goods do enter an organisation’s supply chain, the impact can be significant. MRO parts are crucial for keeping operations running but using counterfeits (however inadvertently) may lead to more downtime, which comes at a cost. According to the 2023 Maintenance Engineering Report produced by RS and the Institution of Mechanical Engineers (IMechE), the average hourly cost of plant downtime is more than £5,000.

There is also reputational risk. As Alder notes, fake products may have been made with slave labour or other unethical practices that contravene an organisation’s environmental, social and corporate governance (ESG) policies at a time when both customers and investors are looking for robust credentials in these areas.

Mitigate against fakes
It’s crucial, therefore, that organisations have a way of conducting due diligence on suppliers, says Kate Davies, Global Head of Commercial Services at RS. This could be the responsibility of procurement itself, wider compliance colleagues or a trusted partner, but whoever is in the driving seat, “As a key criterion for decision-making, it’s vital procurement teams remain engaged and proactive,” adds Davies.

Sourcing MRO products from a trusted distributor with stringent protocols in place to protect against counterfeit items helps too. “Continuous due diligence engaging across functional experts from across the business is a focus for RS,” explains Davies. “We continuously review our processes and apply continuous improvement to identify how we can improve the supplier experience.”

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