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ERAI Executive Conference Executive Brief - “The Big Picture” of Compliance, Counterfeits, and Continuity: How obsolescence, environmental compliance, and counterfeits are all linked to potential DMSMS, price/availability, design, and supply chain dis
 

ERAI Executive Conference Executive Brief - “The Big Picture” of Compliance, Counterfeits, and Continuity: How obsolescence, environmental compliance, and counterfeits are all linked to potential DMSMS, price/availability, design, and supply chain dis

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What is the impact of disasters like the crisis in Japan, economic downturn following the collapse of Lehman, or environmental regulation EU RoHS on the availability, obsolescence, and counterfeiting ...

What is the impact of disasters like the crisis in Japan, economic downturn following the collapse of Lehman, or environmental regulation EU RoHS on the availability, obsolescence, and counterfeiting of electronic components?

See this Executive Brief and Market Intelligence overview from exclusive partners ERAI Inc and IHS Inc.
• “The Big Picture” of Compliance, Counterfeits, and Continuity: How obsolescence, environmental
compliance, and counterfeits are all linked to potential DMSMS, price/availability, design, and
supply chain disruptions.
• IHS and ERAI Partnership: How to use end-to-end supply chain, procurement, and lifecycle capabilities
to reduce risk, lower costs, improve security, and make better design decisions.
• Market Intelligence tools from IHS Haystack, Standards Expert, and BOM Manager to implement anti-counterfeit standard AS5553 from SAE for end-to-end counterfeit avoidance and resolution. Proactive qualification and approval of designs,
parts, and suppliers; mitigation of obsolescence effects with forecasting/ resolution practices;
counterfeit and high risk part reporting, resolution and redesign.

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    ERAI Executive Conference Executive Brief - “The Big Picture” of Compliance, Counterfeits, and Continuity: How obsolescence, environmental compliance, and counterfeits are all linked to potential DMSMS, price/availability, design, and supply chain dis ERAI Executive Conference Executive Brief - “The Big Picture” of Compliance, Counterfeits, and Continuity: How obsolescence, environmental compliance, and counterfeits are all linked to potential DMSMS, price/availability, design, and supply chain dis Presentation Transcript

    • The Big PictureEnd-to-End Supply Chain and Design Capabilities toMitigate Risk and Enable PerformanceRory King, Director Design & Supply Chain, IHSGlenn Bassett, VP Strategy, Design & Supply Chain, IHSMark Snider, President and Co-Founder, ERAI Inc.April 29, 2011
    • 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 2
    • Just a few of our clientsThousands of users globally Avid
    • Current Pressures: Counterfeiting a PriorityEarly in 2011 top senators launched the investigation “The presence of counterfeit electronic parts in the Defense Department’s supply chain is a growing problem that government and industry share a common interest in solving.” Carl Levin, D-Michigan, and Sen. John McCain, R-Arizona March 2011Copyright © 2011 IHS Inc. All Rights Reserved. 4
    • Current Pressures: Japan Crisis Japan produces roughly 60% of silicon wafers globally Semiconductor FabsSilicon Wafer Production 3 1 Aizu Wakamatsu, FukushimaA Shin-Etsu Kamisu, Ibaraki  ON Semiconductor (Logic)  Fujitsu (Analog, Discrete, Memory)B Shin-Etsu Nishigo, Fukushima  Texas Instruments (Analog, Optical) 2 Atsugi, KanagawaC MEMC Utsunomiya, Tochigi 6  Mitsumi (Analog, Logic)D SUMCO Yonezawa, Yamagata 3 Goshogawara, Aomori  Renesas (Logic) 13 10 9 4 Gunma 11Display Manufacturing D  ON Semiconductor (Discrete, Logic) Hitachi Displays 1 Epicenter  Renesas (Analog, Discrete) Panasonic LCD B 5 Hitachinaka, Ibaraki Tohoku Pioneer  Renesas (Logic, Micro, Memory) 6 Iwate 4 14 Fukushima  Fujitsu (Micro, Memory)Resins, Films, Chemicals, 12 C  Toshiba (Discrete)Copper Clad Laminate… 5 7 Kofu, Yamanashi 8 A 7  Renesas (Analog, Logic, Micro) 2 Tokyo 8 Miho, Ibaraki  Texas Instruments (Analog, Optical) 9 Miyagi  Fujitsu (Logic, Micro)  Rohm (Discrete, Micro) 10 Sendai, Miyagi  Freescale (Logic) 11 Shiroishi, Miyagi Source – IHS iSuppli  Sony Semiconductor (Logic) 12 Tsukuba, Ibaraki  Rohm (Discrete) 13 Tsuruoka, Yamagata  Renesas (Logic) 14 Utsunomiya, Tochigi  Matushita (Discrete) Copyright © 2011 IHS Inc. All Rights Reserved. 5
    • Current Pressures: Environmental ComplianceRegardless of exemptions these have a ripple effect on materials used Bisphenol-A “BPA Free” Customer RFP China RoHS Full Material Disclosure EU RoHS Recast Energy Priority Declarable Substances List (ASD PDSL) Toxic Substances Control Act (TSCA) Waste Greenpeace Health Canada / Canada’s Chemical SIN List - Substitute It Now! Management Plan EU REACH & SVHC Security US California Proposition 65Hazardous ISO 14064 GHG Standards DEHP-Free Norway PoHS UN Stockholm Persistent Substances Organic Pollutants (POPS) Air Safety Argentina RoHS Product Content Disclosure EU RoHS and WEEE Thailand’s “RoHS” EU Battery Directive Directives Japan Green ENERGY STAR Carbon Disclosure Project (CDP) Volatile Organic Compounds US FDA Electronic Product Environmental Natural Resources Regional Greenhouse Gas Initiative (RGGI) Assessment Tool (EPEAT) Health PCF - Product Carbon Footprint Conflict Minerals Water Lifecycle Assessment (LCA) EU Medical Device Directive Environmentally Preferred Products (EPP) US EPA Executive OrdersCopyright © 2011 IHS Inc. All Rights Reserved. 6
    • Example: Impact of Environmental Complianceon Through-Life Obsolescence Management Product Lifecycle Stages Maturity Decline Growth Phase-Out Introduction Obsolete The Supply Chain Problem Optimizing supply to meet demand. Business Pressures Influencing Products Products Drivers of innovation and lifecycle decisions. Parts/Materials Copyright © 2011 IHS Inc. All Rights Reserved. 7
    • Example: RoHS’ Unplanned Lifecycle Impact2M+ new parts. Major part changes. Cause of over 20% EOL in ‘06-07. End of Life (EOL) Specific to RoHS/Pb-free Environmental Compliance EOL 2003 2004 2005 2006 2007 2008 2009 Product Change Notices (PCN) Specific to RoHS/Pb-free Environmental Compliance PCN 2003 2004 2005 2006 2007 2008 2009 New Product Introductions (NPI ) Specific to RoHS/Pb-free Environm ental Com pliance Market Shift to EU RoHS NPI 2003 2004 2005 2006 2007 2008 2009 RoHS in Force July 1, 2006Copyright © 2011 IHS Inc. All Rights Reserved. 8
    • Economic Recession Imposed MajorLifecycle Disruptions Gross EOL by MONTH 2008 Gross EOL by YEAR ENDING 2004 - 2009 EOL by MFR due solely to EU REACH SVHC 619 demand/sales forecast. Lehman files Published Chapter 11 206 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2004 2005 2006 2007 2008 2009Economic Recession and Chemical Restrictions:The two most dominant factors in the 300% increase of End of Life (EOL) for electrical components exiting 2008. Source: IHS Component Insight, 2010 Copyright © 2011 IHS Inc. All Rights Reserved. 9 4
    • Effect: Material Shortages andIncreased Lead Time (among other things…) August 5, 2010Recession triggered large inventory reductions – primary reduction in non-compliant parts employed by medical device companiesShortages of key electronics components… became pronounced in the first quarter FY10, and continued in the second.General Electric Co. said supply constraints for electronic components used in its healthcare equipment cost the company $50 million in sales for the quarter. Copyright © 2011 IHS Inc. All Rights Reserved. 10
    • Implication: Rising Lead Time = Key indicator for Increased Counterfeit Activity"They ground aircraft and impact airplane safety.”What do counterfeits do Incidents Continue to Rise Increase warranty/maint. costs 65% Reduce expected product life 64% Inhibit sales / customer satisfaction 62% Add to individual unit costs 51% Increase development time/costs 38%What do counterfeits cause? Product quality/reliability failures 84% Customer returns/recalls 67% Production line stoppages 57% Product launch delays 36%What do counterfeits impact? Damage brand / reputation 71% Product safety / legal liability 55% Expose contractual liability 42% Compromise security 37% “Jeopardize our missions Undermine compliance claims 44% and soldiers safety.” Source: “Benchmarking Counterfeit & Inferior Grade Components”, Supply & Demand Chain Executive, 2009 Copyright © 2011 IHS Inc. All Rights Reserved. 11 11
    • Correlation: Counterfeits and EOLObsolescence and allocation pose significant risk Source: IHS Inc. 2011Copyright © 2011 IHS Inc. All Rights Reserved. 12
    • Conclusion: RoHS Was Very “Costly”Compliance is really not the issue – Obsolescence risks are… COMPLIANCE (explicit) SUPPLY CHAIN & DESIGN COST Fines, Penalties, Recalls, Data, IT, Supplier Evaluation…. Obsolescence, Supplier Viability, Material Shortages, Continuity Regulatory event = $160M+ government Japanese seizure of 1M+ product units due to high Electronics OEM cadmium concentration levels found in Recall system cables suspected to violate EU law. Design reliability = $1B+ recall logistics, US Consumer warranty extensions, excessive Products OEM rework/repair, while customer loyalty dipped Recall to resolve reliability issues causing hardware failure. Source: UK MOD SUPPLIER/MATERIAL COSTS SAFETY & SECURITY COSTS Price Variance, Manufacturing Processes, Inventory/LTB… Reliability, Tin Whiskers, Counterfeits… Tin Whisker Images Courtesy of the NASA Copyright © 2011 IHS Inc. All Rights Reserved. Counterfeits and Inferior Grade Components 13
    • And… RoHS Was Just the Beginning…The discontinuous sustainability and compliance shift Bisphenol-A “BPA Free” China RoHS Customer RFP Conflict Minerals EU RoHS Recast Energy Priority Declarable Substances List (ASD PDSL) Toxic Substances Control Act (TSCA) Waste Health Canada / Canada’s Chemical Greenpeace SIN List - Substitute It Now! Management Plan EU REACH & SVHC Security US California Proposition 65 DEHP-Free Hazardous ISO 14064 GHG Standards Norway PoHS UN Stockholm Persistent Substances Safety Organic Pollutants (POPS) Air Argentina RoHS Product Content Disclosure Thailand’s “RoHS” EU RoHS and WEEE Directives EU Battery Directive Japan Green ENERGY STAR Carbon Disclosure Project (CDP) Volatile Organic Compounds US FDA Electronic Product Environmental Natural Resources Regional Greenhouse Gas Initiative (RGGI) Assessment Tool (EPEAT) Health PCF - Product Carbon Footprint US EPA Executive Orders Water Lifecycle Assessment (LCA) EU Medical Device Directive Environmentally Preferred Products (EPP) Full Material Disclosure Copyright © 2011 IHS Inc. All Rights Reserved. 14
    • Now… EU REACH is a Huge DealEuropean Commission roadmap includes 106 priority SVHC by 2012 “Airbus UK’s director of operations and compliance, said the cost of REACH had been evaluated at several million Euro over three years, with provisions up to hundreds of millions of Euro over five years”… “…[He] said there is a level of ambiguity because it will depend ‘on the substances that will finally be added to the candidate list and in Annex XIV’. Airbus UK has set its 2009 REACH budget at some EUR12 million.” Source: “EU and industry REACH different conclusions”, Jane’s, September 2009 15 Copyright © 2011 IHS Inc. All Rights Reserved. 15
    • Why “Hundreds of Millions” in Risk?Material restrictions change the entire supply and demand picture EU REACH “Chemicals” Sectors Impacted Semiconductors Communications Energy & Utilities “Substances” “Preparations” “Articles” are individual are mixtures any object Electronic Devices chemicals or solutions produced Aerospace & Defense Consumer Goods Imported Manufactured Used Chemical & Process Medical & HealthcareCopyright © 2011 IHS Inc. All Rights Reserved. 16
    • This is NOT exclusive to Any IndustryA typical hospital setting… Deca-BDE? DEHP? Cadmium? Phthalates? Lead?Copyright © 2011 IHS Inc. All Rights Reserved. 17
    • Medical Products Are Exposed to RiskComplex Regulations  Long Cycles  Major Design & SC Analysis RequiredTop 2010 environmental compliance 50% + of all redesign and Compliance requires comprehensivedrivers include the FDA and EU certification of medical products material composition, supply chain,REACH, RoHS + Recast and MDD. would take more than a year. technical design and lifecycle data.US FDA (e.g. CFR 21) Technical Fit (e.g. Less than 1 Month 4.5% 87.5% EU REACH & SVHC Form, Fit, Function) EU RoHS/WEEE 1 - 3 Months 4.5% Material Disclosure & 79.1% EU Medical Device… CompositionEU RoHS Recast / v2 3 - 6 Months 8.0% Compliance Status 77.0% China RoHS 6 - 12 Months 30.7% Health Canada /… Reliability 72.9% RoHS - Other… 12 - 18 Months 20.5% Toxic Substances… Lifecycle Analysis & More than 18 months 31.8% 68.7% Proposition 65… Supply Continuity 0% 5% 10% 15% 20% 0% 10% 20% 30% 40% 0% 20% 40% 60% 80% 100%Entering 2010, the top 3 regulatory drivers Figure 2: Redesign or certifying your Figure 3: To evaluate new or existinginfluencing program / resource allocations? primary product/line would take? parts for material compliance, which factors play a role in part selection?Source: Benchmarking Medical Supply Chains, Supply Source: Survey of 17 of 18 Fortune 1000 Top Source: Live Audience Poll Supply & Demand & Demand Chain Executive, March 2010 (prelim. Medical Products & Equipment companies and Chain Executive Webcast "Redesigning Medical Results) 50+ other manufacturers, “Redesigning Medical Supply Chains" Supply & Demand Chain Supply Chains”, Supply & Demand Chain Executive, Thursday, October 15, 2009 Executive, Thursday, October 15, 2009 Copyright © 2011 IHS Inc. All Rights Reserved. 18 18
    • The Entire Medical Peer Group is Watching We held a Webcast called “Redesigning Medical Supply Chains”Over $80B in spend among the Fortune 1000… … and only 1 did not join our webcast… Copyright © 2011 IHS Inc. All Rights Reserved. 19
    • What Steps Can be Taken to Mitigate Risk?Buyer and Supplier must collaborate on regulations, standards, and implementation thereof Airworthy? Regulations Standards Parts 20Copyright © 2011 IHS Inc. All Rights Reserved. 20
    • Early Warning System to Avoid RiskRobust supply chain traceability and alerting methods to mitigate riskChallenge Economic downturn… …shortage… …fake parts… Environmental Compliance …mission failure!Establish the Information, Tools, and Processes to Mitigate Risk 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. Monitor Lifecycles PCN/EOL to Detect Issues Price/Lead Time Counterfeit Incidents End of Life (EOL) Specific to RoHS/Pb-free Environmental Compliance Maturity Decline Growth Phase-Out Introduction Obsolete 2003 2004 2005 2006 2007 2008 2009Copyright © 2011 IHS Inc. All Rights Reserved. 21
    • 3 Essential Steps We’ll Discuss Establish the Tools, Processes, and People… • Standards and Regulations Management • Technology Value Chain Insight • BOM and Parts Management • Counterfeit Intelligence Identify and Mitigate Supply Chain Risks Avoid, Detect, and Resolve CounterfeitsCopyright © 2011 IHS Inc. All Rights Reserved. 22
    • Best Practice Workflow 1. ESTABLISH THE TOOLS, PROCESSES, AND PEOPLE… Rory King Director, Design & Supply Chain IHS IncCopyright © 2011 IHS Inc. All Rights Reserved. 23
    • Standards – A Lead Role in Risk MitigationSAE AS5553 within IHS Standards Expert 24Copyright © 2011 IHS Inc. All Rights Reserved. 24
    • Did You Know-Standards Refer to Standards?SAE AS5553 Standard: Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition ANSI EIA MIL-STD Did you know, AS5553 refers to: -20+ primary references -300+ secondary references … a lot of critical information… JEDEC IEC ISO QMS 25 Copyright © 2011 IHS Inc. All Rights Reserved. 25
    • IHS clients get standards in one placeStandards collections, revisions, alerts to updates… 26Copyright © 2011 IHS Inc. All Rights Reserved. 26
    • Same with Technology Market IntelligenceIHS iSuppli iLibrary for clientsCopyright © 2011 IHS Inc. All Rights Reserved. 27
    • Market, Commodity, and Manufacturing InsightIHS iSuppli provides technology value chain market intelligence Source: IHS iSuppli 2011 – Do Not Use or ReproduceCopyright © 2011 IHS Inc. All Rights Reserved. 28
    • Component Supply HealthClients gain a view into health of critical components Source: IHS iSuppli April 2011 Component Health Watch (CHW)Copyright © 2011 IHS Inc. All Rights Reserved. 29
    • BEST PRACTICE WORKFLOW 2. IDENTIFY AND MITIGATE SUPPLY CHAIN RISKS Glenn Bassett VP Strategic Business Development IHS Design & Supply ChainCopyright © 2011 IHS Inc. All Rights Reserved. 30
    • Risk Identification• Some examples… • Predicted Obsolescence • i.e. Proactive Avoiding of Design Risk • Component Health Risk • i.e. Rising Costs and Lead Times, Allocation • Lifecycle Event Risk • i.e. EOL / Lifebuy Notice • Supply Chain Failure • i.e. Potential Impact of Japan Crisis • Counterfeit Incident • i.e. Suspected Counterfeit or High Risk PartCopyright © 2011 IHS Inc. All Rights Reserved. 31
    • Moving From Risk Identification To Mitigation• From Manufacturer & Commodity To End Units Impacted • Identifying Components In My Business • Linking Down To BOMS & End Devices • Prioritize Key Components/BOMS/Devices • Identifying Sources Of Inventory • Leverage Alternate Sourcing Tools • Identify Mitigation Plan Working With Suppliers • Develop Counterfeit Mitigation Plan • Longer Term ImpactsCopyright © 2011 IHS Inc. All Rights Reserved. 32
    • Moving From Manufacturer/Commodity To MPN• Leverage Reference Database To Identify MPNs At Risk• Analyze AVL For Linkage In Risk ComponentsCopyright © 2011 IHS Inc. All Rights Reserved. 33
    • Moving From MPN To BOM • Leveraging BOM Tools In PLM, PDM, Or In This Case IHS BOM Manager Helps Move From MPN To Affected BOM • With BOM Identified, End Unit Exposure Can Be Correlated Shown: IHS BOM ManagerCopyright © 2011 IHS Inc. All Rights Reserved. 34
    • Prioritize Key Components, BOM, Devices NPI Production Imminent Proto-type / Pre-Production In-production with near-term delivery• Prioritize End Unit Exposure• Calculate Time Horizon / Revenue Risk Profile• Prioritize Through End Unit Back To Component Calculate Inventory Need & PriorityCopyright © 2011 IHS Inc. All Rights Reserved. 35
    • Where can I get this? Where Does Current Inventory Exist? • Direct from the Factory • Approved Vendor / Manufacturer (AVL / AML) • Franchised and Authorized Sources • Approved Independent Distributors Shown: IHS BOM Manager • ERAI Members • Valid Alternate Parts or Sources Shown: IHS-ERAICopyright © 2011 IHS Inc. All Rights Reserved. 36
    • What alternatives exist? Equivalent Parts? Upgrades? Downgrades? Functionally equivalent options? Are they ROHS Compliant?Copyright © 2011 IHS Inc. All Rights Reserved. 37
    • Choices• AVL Or Alternate • Authorized Channel Inventory • Secondary Market• Inventory Investment • Bridge Buy • Making Bets On Near Term Recovery Or Redesign • Lifetime Buy • Mitigating Greater Risk Time HorizonCopyright © 2011 IHS Inc. All Rights Reserved. 38
    • Counterfeit Incident TrackingERAI and GIDEP are 2 sources of validated incident reports Of reports made, 9% came from GIDEP and 91% from ERAI during the period shown. Source: IHS Inc. 2011Copyright © 2011 IHS Inc. All Rights Reserved. 39
    • The Last 6-Years of Component EOL 2009 – Economic Events Drive EOL: What About 2012 Manufacturer-Issued End of Life (EOL) Distribution of EOL by Dominant Business Driver Technology100% < 25% of Change90%80% Demand-Side Drivers ~90% of EOL in 200970% Unspecified / Administrative60% Supply Side Organizational50% Innovation, Technology, and Manufacturing40% Environmental Compliance Demand-Side30%20% Impact of RoHS10% Compliance 0% 2004 2005 2006 2007 2008 2009Copyright © 2011 IHS Inc. All Rights Reserved. 40
    • Moving From Risk Identification To Mitigation• From Manufacturer & Commodity To End Units Impacted • Identifying Components In My Business • Linking Down To BOMS & End Devices • Prioritize Key Components/BOMS/Devices • Identifying Sources Of Inventory • Leverage Alternate Sourcing Tools • Identify Mitigation Plan Working With Suppliers • Develop Counterfeit Mitigation Plan • Longer Term ImpactsCopyright © 2011 IHS Inc. All Rights Reserved. 41
    • Best Practice Workflow 3. AVOID, DETECT, AND RESOLVE COUNTERFEITS Mark Snider President, ERAI Inc.Copyright © 2011 IHS Inc. All Rights Reserved. 42
    • Our Commitment is PersonalCopyright © 2011 IHS Inc. All Rights Reserved. 43
    • 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. • Founding participant in SAE International G-19 Counterfeit Electronic Components Committee and several sub-groups Copyright © 2011 IHS Inc. All Rights Reserved. 44
    • Who ERAI is not… • ERAI is not a distributor or parts broker • ERAI is not a sourcebook or online catalog • ERAI is not a component manufacturer or OEM • ERAI is not a test lab or inspection service • ERAI is not a quality We do not buy, sell, or test parts! standards organizationCopyright © 2011 IHS Inc. All Rights Reserved. 45
    • Exclusive Partner to Only IHS One provider of counterfeit alerts and supply chain risk mitigation46 Copyright © 2011 IHS Inc. All Rights Reserved. 46
    • Why? IHS ClientsThousands of users globally AvidCopyright © 2011 IHS Inc. All Rights Reserved. 47
    • What’s Being Counterfeited? Source: ERAI Inc, 2004 to YTD Feb 2011 Source: IHS Component Insight, IHS Inc, 2011 * 2011 figures are projected annual estimates based on March YTD 2011 actuals and previous annual proportions.Copyright © 2011 IHS Inc. All Rights Reserved. 48
    • What’s Being Counterfeited? Part Classes with 1.5% or more of total incidents Top Counterfeit Incidents Reported by Part Class Classes with 1.5% or Greater Proportion of Total Incidents Rank Minor or Leaf Class Major Class # Incidents % of Total 1 Operational Amplifier ANALOG IC 194 6.0% 2 Programmable ROM MEMORY IC 176 5.5% 3 Microcontroller MICROPROCESSOR IC 157 4.9% 4 Static RAM MEMORY IC 143 4.5% 5 Programmable Logic Device PROG LOGIC IC 140 4.4% 6 FET General Purpose Power TRANSISTOR 131 4.1% 7 Field Programmable Gate Array PROG LOGIC IC 109 3.4% 8 Line Driver or Receiver INTERFACE IC 100 3.1% 9 Analog to Digital Converter ANALOG IC 96 3.0% 10 Switching Regulator or Controller LINEAR REGULATOR 92 2.9% 11 Power Management Circuit LINEAR REGULATOR 80 2.5% 12 Peripheral Driver INTERFACE IC 60 1.9% 13 Digital to Analog Converter ANALOG IC 57 1.8% 14 Ceramic Capacitor CAPACITOR 56 1.7% 15 Microprocessor MICROPROCESSOR IC 54 1.7% 16 Dynamic RAM MEMORY IC 49 1.5% 52.8% Source: IHS Inc, 2011 * 2011 figures are factored projected based on March YTD 2011 and previous annual proportions.49 Copyright © 2011 IHS Inc. All Rights Reserved. 49
    • Industry’s Reported Counterfeit Incidents ERAI and GIDEP are 2 sources of validated incident reports Source: IHS Inc. 201150 Copyright © 2011 IHS Inc. All Rights Reserved. 50
    • Over 50 counterfeits in the last 14 days!Shown: ERAI Reported PartsCopyright © 2011 IHS Inc. All Rights Reserved. 51
    • How Risk Enters Your Supply ChainIntended and unintended ports of entry for counterfeits1. Many unsafe part & supplier “sources” • Online Broker Search Engines • Maverick procurement methods or spending limits • Google2. These are counterfeit ports of entry • Rapid access to millions of parts • Minimal membership requirements • Quick & easy access to a large audience of buyers Request for Quote Request for Quote3. Are you creating your own shortages? Request for Quote … … … • Multiple RFQ’s create false demand signals … Request for Quote • Leads to price increases and incentive for counterfeitingCopyright © 2011 IHS Inc. All Rights Reserved. 52
    • No Supplier is Immune from RiskLack of accountability and traceability allows counterfeits to enter “It is not uncommon, however, for authorized distributors to purchase parts outside of the OCM supply chain in order to fulfill customer requirements – 58 percent purchase parts from other sources. Specifically, 47 percent of authorized distributors procure parts from independent distributors, 29 percent procure from brokers, and 27 percent procure from Internet-exclusive sources.” Source: U.S. Department of Commerce, Office of Technology Evaluation, Counterfeit Electronics Survey, November 2009. 53Copyright © 2011 IHS Inc. All Rights Reserved. 53
    • Best Practices to Avoid RiskStay Within Your Trusted Supply Chain1. Direct from the Factory2. Approved Vendor / Manufacturer (AVL / AML)3. Franchised and Authorized Sources4. Approved Independent Distributors5. ERAI Members6. Valid Alternate Parts or Sources • Distributors, Aftermarket Sources • Alternate Parts - Upgrades, Downgrades, Equivalents… • Manufacturers and Products sanctioned by qualifying authorities • Government QML/QPL Contractually define your expectations. Test accordingly.Copyright © 2011 IHS Inc. All Rights Reserved. 54
    • Congress Investigation LaunchedEarly in 2011 senators launched the investigation “The presence of counterfeit electronic parts in the Defense Department’s supply chain is a growing problem that government and industry share a common interest in solving.” Carl Levin, D-Michigan, and Sen. John McCain, R-Arizona March 2011Copyright © 2011 IHS Inc. All Rights Reserved. 55
    • Industry’s Recognized ReportsGIDEP and ERAI are the counterfeit reporting entities Recognized by the G-19 Recognized by U.S. SenateCopyright © 2011 IHS Inc. All Rights Reserved. 56
    • IHS + ERAI WorkflowWhat it looks like to thousands of IHS users AUTHORIZATION REQUIRED AUTHORIZATION REQUIRED ERAI notices GIDEP notices
    • Example: Alert to Infineon BTS716GCustomers alerted to counterfeit incident as reported by ERAI Alert! •Subscribers of IHS 4DOnline BOM Manager, COMET, and Parts Universe have access to alerts from ERAI, GIDEP, and other sources. •Subscribers to the IHS-ERAI solution provides ERAI membership, giving them access to ERAI’s comprehensive market intelligence community, tools, and services.
    • Example: Infineon BTS716GAlerts are accessible via the IHS product
    • Users Seamlessly Navigate to ERAIIHS customers browse directly from IHS into ERAI products
    • It Provides Complete Reported Parts DetailProvides access to ERAI market intelligence
    • Vet Real Stock from “Available” PartsIt limits risk exposure from fake sources and price games
    • Ability to Vet the Open MarketExample ERAI Member Details
    • Ability to Vet Open Market SourcesQualify your suppliers ASK YOUR SUPPLIERS… Industry Membership and Reporting? Quality System and Processes? Warranty and Insurance? Supplier Qualification and Purchasing Process? Non-Conforming Material Control? Inspection and Test? Efforts made to verify a Parts’ Authenticity before use?
    • Search and Monitor Supplier RiskA wide range of incidents pose serious business problems
    • Example: AAOK ElectronicsPast due invoices, wire fraud, faulty product for example…
    • BOM Risk Analysis & Monitoringvia ERAI BOM Scrubber
    • BOM Analysis: Risk IdentifiedFile is processed in seconds; can be monitored after
    • Report and Resolve IncidentsComprehensive reporting of part and supplier complaintsCopyright © 2011 IHS Inc. All Rights Reserved.
    • Conclusion – Fight the FakesApril’s digital edition of Supply & Demand Chain Executive magazineCopyright © 2011 IHS Inc. All Rights Reserved. 70
    • Steps to Securing the Supply ChainWith market intelligence from IHS and ERAI Establish the Tools, Processes, and People… • Standards and Regulations Management • Technology Value Chain Insight • BOM and Parts Management • Counterfeit Intelligence Identify and Mitigate Supply Chain Risks Avoid, Detect, and Resolve CounterfeitsCopyright © 2011 IHS Inc. All Rights Reserved. 71
    • Thank YouQuestions?Rory King, Director Design & Supply Chain, IHSRory.King@ihs.comGlenn Bassett, VP Strategy, Design & Supply Chain, IHSGlenn.Bassett@ihs.comMark Snider, President and Co-Founder, ERAI Inc.Mark@erai.comCopyright © 2011 IHS Inc. All Rights Reserved. 72