Avoiding Counterfeit Risk: How to mitigate part and supplier risk
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Avoiding Counterfeit Risk: How to mitigate part and supplier risk

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Just one counterfeit incident poses risk ranging from catastrophic brand damage to costly halts in production or unnecessary design and development. Your supply chain is under assault and may already ...

Just one counterfeit incident poses risk ranging from catastrophic brand damage to costly halts in production or unnecessary design and development. Your supply chain is under assault and may already be infiltrated.

It's time to act. Join Supply & Demand Chain Executive magazine as they host experts from ERAI and IHS and L-3 Communications who will share best practices, tools, and technique for mitigating electronics value chain risks.

Original event date: 2-23-11

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    Avoiding Counterfeit Risk: How to mitigate part and supplier risk Avoiding Counterfeit Risk: How to mitigate part and supplier risk Presentation Transcript

    • Avoiding Counterfeit RiskHosted by Supply & Demand Chain Executiveand featuring IHS, ERAI Inc, and L-3 CommunicationsFebruary 23, 2011
    • A Global Supply Chain ProblemWe’ve Entered a Generation of Counterfeiting & Piracy “We estimate that, based on 2008 data, the total global economic value of counterfeit and pirated products is as much as $650 billion every year… …estimates imply that the global value of counterfeit and pirated products could be up to $1.77 trillion by 2015.” Frontier Economics, February 2011 2
    • Today’s SpeakersRecognized Industry Experts Moderator Andrew K. Reese • Editor, Supply & Demand Chain Executive Panelists Mark A. Snider • President, ERAI, Inc. and IHS Partnership Executive Sponsor Kristal Snider • Vice President, ERAI, Inc. and G-19 Committee Member Rick Roelecke • Director of Quality Assurance for L-3 Wescam Sonoma Operations • L-3 Communications Corporate Counterfeit Parts Lead
    • We want your feedback!Win for completing today’s webcast survey At the end of today’s survey… Everyone who completes the survey at the conclusion of today’s live event will be entered into a drawing for to win an Amazon Kindle.
    • ERAI Inc.A World of Information at Your Fingertips • Founded in 1995, ERAI is an information services organization that monitors, investigates and reports issues affecting the global hi-tech electronics supply chain. • ERAI provides tools to mitigate risks on substandard parts, counterfeit parts, vendors and even customers. • Subscribers include OEMs, CMs, Distributors, OCMs, government agencies and industry associations. • Actively involved in a number of committees and task forces addressing the counterfeit issue.
    • IHS and ERAI Combat CounterfeitsExclusive Partnership Providing Market Intelligence “ENGLEWOOD, Colo. (January 12, 2010) - IHS Inc. (NYSE:IHS), a leading global source of critical information and insight, today announced an agreement with ERAI, Inc. to be its exclusive worldwide partner for delivering products and services designed to mitigate the risks associated with counterfeit, substandard and high-risk parts found throughout global supply chains…” 6
    • IHS Inc.A Leading Information Provider • Founded in 1959, IHS is a leading source of information and expert analysis in pivotal areas shaping today’s global businesses • Employs 4,400 colleagues in 30 countries who speak 50 different languages • IHS customers include nearly 70% of the US Fortune1000 and 80% of the Global Fortune 500 • Tens of thousands of customers and hundreds of thousands of end-users in over 100 countries • Public (2005) NYSE: IHS • FY10 revenue $ 1,075 million 7
    • Why IHS?Opportunity to Help Thousands of IHS Global Customers Avid
    • Problem: How the Market Sees ItProactive Mitigation to Resolution when Counterfeits DetectedChallenge Economic downturn… …shortage… …fake parts… …mission failure!Customer Workflow Needed Qualify Manage Validate Report Redesign + Approve + Avoid + Detect + Resolve + Resupply Establish infrastructure to Update processes, tools, and Validate, sample and test Procedures to notify Maintain controlled mitigate risk through qualified information to avoid components for authenticity. stakeholders, report design/redesign cycles of and approved designs, counterfeit and high risk Quarantine suspected occurrences, and resolve products. Optimize parts, suppliers, & parts. parts. counterfeits. incidents. inventory, and suppliers. KPI: EOL / Lifecycle Planning KPI: Shortages KPI: Price/Lead KPI: Counterfeit Time IncidentsCopyright © 20011 IHS Global Inc. All Rights Reserved. January 2011 9
    • Solution: IHS-ERAI Market IntelligenceUnrivalled Solutions from IHS iSuppli, PLC, and ERAIChallenge Economic downturn… …shortage… …fake parts… …mission failure!Customer Workflow Qualify Manage Validate Report Redesign + Approve + Avoid + Detect + Resolve + Resupply Establish infrastructure to Update processes, tools, and Validate, sample and test Procedures to notify Maintain controlled mitigate risk through qualified information to avoid components for authenticity. stakeholders, report design/redesign cycles of and approved designs, counterfeit and high risk Quarantine suspected occurrences, and resolve products. Optimize parts, suppliers, & parts. parts. counterfeits. incidents. inventory, and suppliers.Products & Services IHS iSuppli IHS PLC IHS ERAI* Market Trackers Standards Expert BOM Scrubber Management Suite Teardown Analyses Haystack Company Search Forecasts & Measures 4DOnline Product Family Reported Company Search Analyst Inquiry Time PCMS Reported Parts SearchCopyright © 20011 IHS Global Inc. All Rights Reserved. January 2011 * Our Exclusive Alliance Partnership 10
    • * Complimentary BOM risk analysis for today’s viewers * • You send a Parts / Materials List… • AVL, AML, BOM, Parts List of more than 500+ records • You’ll get a free Counterfeit Risk Analysis • Counterfeit and High Risk Parts on your BOM • Register via email • Subject: “ERAI Webcast Offer” • Email: ERAI@IHS.com Copyright © 20011 IHS Global Inc. All Rights Reserved. January 2011 11
    • Best practices and techniques for mitigating risks Date: Wednesday, February 23, 2011 Time: 8:00 am PT | 11:00 am ET | 4:00 pm London | 16:00Counterfeit Avoidance - Yesterday, Today, Tomorrow... Kristal Snider Member, SAE G-19 Committee Vice President, ERAI Inc. 3899 Mannix Drive, Ste. 421-422, Naples, FL 34114 Tel: 239-261-6268, Fax: 239-261-9379 Email: ksnider@erai.com
    • Meeting ObjectiveReview available solutions/resources that canreduce the potential of acquiring a counterfeitelectronic component.
    • ERAI -Overview • Founded in 1995 • Mitigate Risk of Parts, Customers & Vendors • Provide up to date information on Counterfeit, Faulty & High-Risk Parts • Real-time Industry Monitoring & Reporting Services • Real-time High-Risk and Counterfeit Part Reporting • BOM / Assembly Cross Checking against High-Risk Parts Database • Vendor & Customer Analysis • Proactively Prevent Losses & Reoccurring Problems • Access to Search Risk Mitigation Tools • Fair & Impartial Investigation Services • Stay Informed on Current Issues Affecting the Supply Chain© 2011 ERAI Inc.
    • Counterfeit -Origin2001 – China Admitted to WTO
    • Counterfeit -Origin
    • Counterfeit --Origin
    • Counterfeit -E-Waste Laborer de-soldering circuit boards over a coal- fired grill. Rock in the box is where boards are hit to remove solder. Pliers are used to pluck off chips which go into various buckets. The boards are then tossed into a pile for open burning. © Basel Action Network 2006.18
    • Counterfeit -E-Waste
    • Counterfeit -E-Waste
    • Counterfeit -Portals of Entry
    • Counterfeit -Portals of Entry • Rapid access to millions of parts • Minimal membership requirements • Quick & easy access to a large audience of buyers© 2011 ERAI Inc.
    • Counterfeit -What is Being Counterfeited? All types of components are being counterfeited, even passives.% of reported counterfeits from ERAI database, 2004 to present
    • Counterfeit -Impact
    • Counterfeit - Impact Impact of using counterfeit parts or materials • Potential loss of life • Espionage • Monetary loss • Liability • Lack of availability of products for customer use • Loss of customer/public trust • Brand damage© 2011 ERAI Inc.
    • Counterfeit -Where the industry has fallen short • Lack of dialogue between all organizations in the U.S. supply chain. • Companies and organizations assume that others in the supply chain are testing parts. • Lack of traceability in the supply chain. • Insufficient chain of accountability within organizations. • Recordkeeping on counterfeit incidents by organizations has been limited. • Stricter testing protocols and quality control practices for inventories are required. • DOD organizations have not had policies in place to prevent counterfeit parts from infiltrating their supply chain.© 2011 ERAI Inc.
    • G-19
    • Formation of G-19 (Sept. 2007) -Industry Working Together To Craft A Solution ERAI IDEA AIA Orbital SMT Sciences AERI Arrow Jabil Electronics NASA JPL G-19 Northrop Boeing Grumman Integra Honeywell Technologies 28© 2011 ERAI Inc.
    • SAE G-19 Committee Members & Liaisons Representation from Government, Aerospace, Military, & CommercialUS Government Members … Industry Members …• DCMA • 3M• Defense Logistics Agency, DSCC • Boeing• MDA • General Dynamics• NASA/JPL • Honeywell• Navy-Crane • L-3 Communications• NSWC Crane • Lockheed Martin• SUBMEPP • PerkinElmer• Tinker Air Force • Plexus• US Army – AMRDEC • Raytheon Participating Industry Associations … • AIA • ERAI Inc. • Independent Distributors of Electronics Association (IDEA) Participating Test Laboratories … • Center for Advanced Life Cycle Engineering (CALCE) • Evans Analytical Group • Hi-Reliability Microelectronics • Integra Technologies • Premier Semiconductor Services • Process Sciences • Silicon Cert Laboratories • White Horse International
    • G-19 - A Multilayered Counterfeit Risk Mitigation Initiative Brokers Commercial Inspection Independent Defense Test Franchise Space© 2011 ERAI Inc.
    • AS5553 Rationale
    • AS5553-Requirements: 4.1 Counterfeit Electronic Parts Control Plan Risk Mitigation Disposition Reporting
    • AS5553 -Requirements: 4.1.1 Parts AvailabilityDesign, Proposal, and Program PlanningObsolescence Management (DMSMS)
    • AS5553 - Requirements: 4.1.2 PurchasingAssess potential sources of supply to determine the risk of receiving counterfeit parts Has the organization/part been reported by ERAIMaintain a register of approved suppliers Do not buy from sources not identified on your AVLSpecify a preference to procure directly from OCMs or authorized suppliersAudit suppliers to ensure they are maintaining effective processes for mitigating risk Coming Soon: ARP6178Ask for supply chain traceability Be Careful - Paperwork can also be counterfeitedFlow down your requirements. In the event that one or more supply chain intermediaries do not have a counterfeit part control plan compliant to this document, a risk analysis shall be required for every application of the part.
    • AS5553-Requirements: 4.1.3 Purchasing Information & 4.1.4 Verification of Purchased Product APPENDIX D - PROCUREMENT CONTRACT REQUIREMENTS APPENDIX E - PRODUCT ASSURANCE
    • AS5553 -Requirements: 4.1.5 In Process Investigation & 4.1.6 Material Control…shall address the detection, verification,and control of suspect counterfeit parts.…shall prevent suspect counterfeit partsfrom entering the supply chain / use.…shall preclude suspect counterfeit partsfrom re-entering the supply chain.
    • AS5553 -Requirements: 4.1.7 ReportingThe documented processes shall assure that alloccurrences of counterfeit parts are reported, asappropriate, to internal organizations, customers,government reporting organizations (e.g., GIDEP),industry supported reporting programs (e.g., ERAI),and criminal investigative authorities. ERAI maintains a database of counterfeit and high-risk items. Data can be submitted by anyone on the public domain of their website (www.erai.com). Companies do not need to be members to report counterfeit and high-risk items. Submitting companies remain anonymous in the reporting of counterfeit/high-risk items. Companies must be ERAI members to view this database. However, virtually all electronics-related companies/organizations, not just resellers, are candidates for membership.
    • Reporting
    • G-19
    • AS5553 Adopted By DoD
    • G-19 -ERAI InvolvementERAI Serves On: Meeting Schedule: Tuesday 10:00am–12:00pm EST• Original Member of G-19CI – AS5553 Re-write G-19 (AS5553) Bi-Weekly• Member of G-19D Thursday 11:00am-1:00pm EST (AS6081) G-19D – AS6081 Development Team Weekly• Member of G-19DR Other• Member of G-19CI G-19DR – Distributor Assessment (Continuous Improvement/AS5553 Rewrite Manual/Survey Team to ensure document is applicable in both US and foreign markets) As Required
    • SummaryEmployees need clear direction frommanagement on combatingcounterfeits as well as written guidanceon how to: avoid purchasingcounterfeit parts; test, handle and trackincoming and outgoing parts; andmanage and dispose of suspectedcounterfeit components.
    • Thank YouKristal SniderMember, SAE G‐19 CommitteeVice President, ERAI Inc.3899 Mannix Drive, Ste. 421‐422, Naples,  FL  34114Tel:  239‐261‐6268, Fax: 239‐261‐9379Email: ksnider@erai.comwww.erai.com
    • Counterfeit Parts Program at L-3 Rick Roelecke Director of Quality AssuranceL-3 WESCAM Sonoma Operations February 23, 2011
    • BackgroundThe L-3 Counterfeit Parts Team was established in September 2007Originally influenced by Orbital Sciences and BAE SystemsRequirements Both companies have requirements for: – C of Cs from Original Equipment Manufacturers or their authorized distributors – Approval of the procurement process if OEM certifications can not be obtained – Burdensome liability clauses for counterfeit escapesIt is especially difficult to manage these requirements for COTShardware or production lines that feed multiple customersWe needed to control our own destiny by emphasizing prevention Define our own procurement guidelines Identify our own approved Independent Distributors Define our own risk mitigation processes to prevent counterfeit or substandard parts from reaching our customer community Protect our liability 46
    • L-3 CPT Mission StatementTo define and provide guidelines formanaging and controlling the risksassociated with Counterfeit Parts 47
    • Team ObjectivesEstablish procedural guidelines for all divisions that address: Procurement practices Supplier/Distributor controls Part screening requirementsIdentify and survey Independent Distributors that have systemsand processes to screen for counterfeit parts Includes identifying approved independent test facilitiesDefine purchase order and subcontract flow-down requirementsDevelop inspection and test guidelines to screen for counterfeitpartsCommunicate government, industry, and customerrequirements/issues via intranet and share lessons learned Control Your Own Destiny Or Someone Else Will 48
    • The L-3 10 CounterfeitThou Shall Commandments 1. Implement A Strict DMSMS Program 2. Load Your Obsolescence BOM Into A Counterfeit Hit Database (ERAI) 3. Control Independent Distributor Purchases For Obsolescence Only 4. Screen All P.O. Transactions For Counterfeit Hits 5. Control Your Independent Distributors 6. DPA, X-Ray, Permanency Test, At A Minimum, All Lots Purchased from Independent Distributors 7. Track and Document Lessons Learned 8. Impound and Report All Counterfeit Parts 9. Influence Your Customers To Support Re-Design Efforts 10. Educate Your Workforce And Subcontractors 49
    • 1. Implement A Strict DMSMS Program 2. Load Your Obsolescence BOM Into A Counterfeit Hit Database (ERAI) L-3 Companies, IHS Parts Management ERAI BOM Tool One Combined Obsolescence List Automated CounterfeitNotifications to Each Division 50
    • 3. Control Independent Distributor Purchases For Obsolescence Only 4. Screen All P.O. Transactions For Counterfeit HitsAssure that your Buyers are not placing orders to IndependentDistributors for Cost & Schedule Obsolescence OnlyRun all Purchases through ERAI for Counterfeit Hits Every procurement, every time Screen your Distributor even if they are on your approved list Screen your part number 51
    • 5. Control Your Independent DistributorsDesk and Physical Surveys IDEA Member ERAI Member AS9120 Certified ISO9001:2000 Certified ESD S20.20 Compliant Certified Inspectors to IDEA 3000 Supplier controls and flow-down of counterfeit mitigation requirements Test and inspection processes and equipment Names of third part test facilities used and services performed Purchasing Policy, No China, India, Africa, etc. Have they ever delivered a counterfeit or substandard part to a customer – If so, how did they resolve the issue Do they have a die library and will they share it Do they offer escrow services What is their policy upon discovery of counterfeit or suspect parts – Impounding – Reporting 52
    • 6. DPA, X-Ray, Permanency Test, At A Minimum, AllLots Purchased from Independent Distributors 53
    • 7. Track and Document Lessons Learned 8. Impound and Report All Counterfeit Parts 54
    • 9. Influence Your Customers To Support Re-Design Efforts 10. Educate Your Work Force And SubcontractorsShare your DMSMS system results with your CustomerConsider using authorized re-manufacturers of parts vs.procuring from Independent DistributorsAnalyze the risk and liability of the part type on the IndependentMarketTrain your incoming inspection and production personnel oncounterfeit and substandard part visual characteristicsImplement a system to educate your Major Subcontractors andCritical Assembly Suppliers Approve their counterfeit risk mitigation control plans Audit their procedures and processes 55
    • So, Remember! 56
    • We want your feedback!Win for completing today’s webcast survey At the end of today’s survey… Everyone who completes the survey at the conclusion of today’s live event will be entered into a drawing for to win an Amazon Kindle.
    • * Complimentary BOM riskanalysis for today’s viewers *• You send a Parts / Materials List… – AVL, AML, BOM, Parts List of more than 500+ records• You’ll get a free Counterfeit Risk Analysis – Counterfeit and High Risk Parts on your BOM• Register via email – Subject: “ERAI Webcast Offer” – Email: ERAI@IHS.com
    • Questions?Thank you for attending today’s webcast.All other inquiries, please email:ERAI@IHS.com