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IHS Webcast - Counterfeiting, Obsolescence, and Risk
 

IHS Webcast - Counterfeiting, Obsolescence, and Risk

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    IHS Webcast - Counterfeiting, Obsolescence, and Risk IHS Webcast - Counterfeiting, Obsolescence, and Risk Presentation Transcript

    • Welcome to Today’s WebcastCounterfeiting, Obsolescence, and RiskSolutions to mitigate cost, risk, theft and security disruptions in your supply chainApril 7, 2010
    • Survey Offer We want your feedback! Win prizes for completing today’s webcast survey At the end of today’s webcast… 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*Copyright © 2011 IHS Inc. All Rights Reserved. *Offer valid through April 8th, 2011 2
    • Supply & Demand Chain ExecutiveThe executive’s user manual forsuccessful supply and demand chaintransformation, providing analysis,viewpoints and case studies to steerexecutives and supply managementprofessionals through the world ofsupply and demand chain enablementto gain competitive advantage.www.SDCExec.comtwitter.com/SDCExecwww.linkedin.com/in/andrewkreese
    • An Era of Counterfeiting “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 4
    • Supply Chain Risk is High SC BENCHMARK STUDYWhat do counterfeits do 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% Undermine compliance claims 44% “Jeopardize our missions Source: “Benchmarking Counterfeit & Inferior Grade Components”, Supply & Demand Chain Executive, 2009 and soldiers safety.”
    • Industry Fights BackSAE International forms G-19 Committee that leads to AS5553 Purpose  This SAE Aerospace Standard standardizes practices to:  maximize availability of authentic parts,  procure parts from reliable sources,  assure authenticity and conformance of procured parts,  control parts identified as counterfeit,  and report counterfeit parts to other potential users and Government investigative authorities.
    • GIDEP and ERAI Counterfeit Reports90% of all incidents reported by ERAI SAE AS5553 Names Two Primary Sources: ERAI and Reported Counterfeit Incidents GIDEP
    • Congress Investigation Launched“The presence of counterfeitelectronic parts in the DefenseDepartment’s supply chain is agrowing problem that governmentand industry share a commoninterest in solving.” Carl Levin, D-Michigan, and Sen. John McCain, R-Arizona March 2011
    • Effects of the Japan CrisisPanic Buying, Shortages, and Pricing Issues? Source: IHS iSuppli 2011
    • Brokers Gone Wild… Already? Already, calls into brokers are finding big increases in pricing, with pricing increases of more than 100% seen by several of the sourcing pros I spoke to this past week. One of the challenges in using brokers in these emergency situations is that the initial calls themselves can serve to intensify pricing pressure. As such, VPs and Directors of Direct would be very wise to control, aggregate, and actively manage all calls to brokers in an attempt to avoid what could be called “self- competition.” Brokers Wild – Pressure on Japanese Supply Chain Intensifies Posted by Andrew Bartolini on April 1st, 2011 CPO Rising
    • Today’s Speakers Mark Snider President ERAI, Inc Daniel Bronstein Solution Engineer, Electronic Products & Solutions Group IHS11
    • Predictive Obsolescence Danny Bronstein Solution Engineer - Direct Parts Electronic Products & Solutions Phone: +1 909 481 4150 Email: daniel.bronstein@ihs.comINFORMATION + INSIGHT = KNOWLEDGE
    • What is Predictive Obsolescence? Predictive Obsolescence refers to the steps taken to mitigate the effects of obsolescence by applying predictive forecasters to component selection decisions.Copyright © 2010 IHS Inc. All Rights Reserved. 13
    • What is Predictive Obsolescence? Predictive Obsolescence refers to the steps taken to mitigate the effects of obsolescence by applying predictive forecasters to component selection decisions.It is not….• Using a Crystal Ball Copyright © 2010 IHS Inc. All Rights Reserved. 14
    • What is Predictive Obsolescence? Predictive Obsolescence refers to the steps taken to mitigate the effects of obsolescence by applying predictive forecasters to component selection decisions.It is not….• Using a Crystal Ball• Tarot Card Readings Copyright © 2010 IHS Inc. All Rights Reserved. 15
    • What is Predictive Obsolescence? Predictive Obsolescence refers to the steps taken to mitigate the effects of obsolescence by applying predictive forecasters to component selection decisions.It is not….• Using a Crystal Ball• Tarot Card Readings• Reading Tea Leaves Copyright © 2010 IHS Inc. All Rights Reserved. 16
    • What is Predictive Obsolescence? It is.… Applying objectively derived information to assist with making informed decisions.Copyright © 2010 IHS Inc. All Rights Reserved. 17
    • Predictive Forecasters• Life-cycle Code (LCC) and Years to End of Life (YTEOL)Copyright © 2010 IHS Inc. All Rights Reserved. 18
    • Predictive Forecasters• Life-cycle Code (LCC) and Years to End of Life (YTEOL)• Life-cycle Code • Similar to mortality tables used by the insurance industry which predict human life expectancy. • The LCC provides a numeric representation of the estimated position of a component within its defined Life-cycle. Copyright © 2010 IHS Inc. All Rights Reserved. 19
    • Life-cycle CodeAn electronic part typically advances throughsix life cycle stages: 1.0 – 1.99 2.0 – 2.99 3.0 – 3.99 4.0 – 4.89 4.9 5.0Introduction Growth Mature Decline Phase-out Discontinued Time Copyright © 2010 IHS Inc. All Rights Reserved. 20
    • Predictive Forecasters• YTEOL (Years to End of Life) Copyright © 2010 IHS Inc. All Rights Reserved. 21
    • Predictive Forecasters• YTEOL (Years to End of Life) • An estimated number of years before a component becomes obsolete. • Real world factors such as the number of manufacturers producing the component, the type of manufacturer, OEM versus Aftermarket, and market consumption data are taken into account. • Other considerations which are used can be changes in global availability of raw materials or manufacturing disruptions due to geo-political considerations and natural catastrophes.Copyright © 2010 IHS Inc. All Rights Reserved. 22
    • YTEOL Current 1–2 3–4 5–6 7–8 Availability Years Years Years Years Available Available Available Available Available Available Available Available Available Available Discontinued Discontinued Discontinued Discontinued Discontinued EOL Discontinued Discontinued Discontinued Discontinued End item Available Available Discontinued Discontinued Discontinued Parts Available Available Available Discontinued Discontinued Available Available Available Available Discontinued Available Available Available Available Discontinued Available Available Available Available Discontinued End item Years RequirementCopyright © 2010 IHS Inc. All Rights Reserved. 23
    • Incorporating Predictive Obsolescence Engineering and Logistics • Work with engineering, logistics, and or subcontractors to get accurate part lists on a recurring basis. Subcontractors • Establishing a relationship with subcontractors is critical. May need to create contracts, so don’t forget about funding requests. Electronic Component Database • Need an Electronic Component Library that is comprehensive, complete, and provides predictive forecasters.Copyright © 2010 IHS Inc. All Rights Reserved. 24
    • Lessons LearnedSupply Chain DisconnectIn addition to incurring additional costsand losing revenue, not practicing in apredictive obsolescence mode cancause you to lose sight of your supplychain. Copyright © 2010 IHS Inc. All Rights Reserved. 25
    • Lessons LearnedSupply Chain Disconnect Price Increases and CounterfeitsIn addition to incurring additional costs Having to source parts after they areand losing revenue, not practicing in a discontinued can add 2,000% to thepredictive obsolescence mode can purchase price, and can lead you tocause you to lose sight of your supply the Gray Market and counterfeit parts.chain. Copyright © 2010 IHS Inc. All Rights Reserved. 26
    • Lessons LearnedSupply Chain Disconnect Price Increases and CounterfeitsIn addition to incurring additional costs Having to source parts after they areand losing revenue, not practicing in a discontinued can add 2,000% to thepredictive obsolescence mode can purchase price, and can lead you tocause you to lose sight of your supply the Gray Market and counterfeit parts.chain.ReliabilityCertain countries are salvagingdiscarded computer equipment andremoving individual components. Theseparts are put back into the supply chainas “new”. Copyright © 2010 IHS Inc. All Rights Reserved. 27
    • Lessons LearnedSupply Chain Disconnect Price Increases and CounterfeitsIn addition to incurring additional costs Having to source parts after they areand losing revenue, not practicing in a discontinued can add 2,000% to thepredictive obsolescence mode can purchase price, and can lead you tocause you to lose sight of your supply the Gray Market and counterfeit parts.chain.Reliability Testing RequiredCertain countries are salvaging Expensive and time consuming testingdiscarded computer equipment and might be the only way to tell if the partsremoving individual components. These you purchased from some non-parts are put back into the supply chain franchise distributors and brokers areas “new”. the real thing. Copyright © 2010 IHS Inc. All Rights Reserved. 28
    • Lessons LearnedAdditional Costs$14M spent on procuring obsoleteparts. Decisions were not made in timeto buy these parts from the OEM orfranchise distributors. Copyright © 2010 IHS Inc. All Rights Reserved. 29
    • Lessons LearnedAdditional Costs Competing for Parts$14M spent on procuring obsolete Out in the Gray Market, part pricingparts. Decisions were not made in time became a bidding war when more thanto buy these parts from the OEM or one program wanted the same parts.franchise distributors. Copyright © 2010 IHS Inc. All Rights Reserved. 30
    • Lessons LearnedAdditional Costs Competing for Parts$14M spent on procuring obsolete Out in the Gray Market, part pricingparts. Decisions were not made in time became a bidding war when more thanto buy these parts from the OEM or one program wanted the same parts.franchise distributors.Unneeded InventoryPerceived benefit of making severalEOL purchases to support an end itemmay be negated if obsolescence drivesa redesign before the purchased partsare needed. Copyright © 2010 IHS Inc. All Rights Reserved. 31
    • Lessons LearnedAdditional Costs Competing for Parts$14M spent on procuring obsolete Out in the Gray Market, part pricingparts. Decisions were not made in time became a bidding war when more thanto buy these parts from the OEM or one program wanted the same parts.franchise distributors.Unneeded Inventory Cost AvoidancePerceived benefit of making several Employing Predictive ObsolescenceEOL purchases to support an end item practices would have lowered the costmay be negated if obsolescence drives to only $4M had the parts beena redesign before the purchased parts purchased before they went obsolete.are needed. Copyright © 2010 IHS Inc. All Rights Reserved. 32
    • Best Practices in Supplier andParts Risk MitigationMark Snider, PresidentERAI
    • My Commitment is PersonalSolving counterfeits is critical to our family
    • About 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 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.• Founding participant in SAE International G-19 Counterfeit Electronic Components Committee and several sub-groups
    • IHS and ERAI are Exclusive Partners One provider of counterfeit alerts and supply chain risk mitigation36
    • Over 50 Incidents in the last 14 Days (page 1 of 2)
    • Over 50 Incidents in the last 14 Days (page 2 of 2)
    • Example: Infineon TLE5205-2GReported Parts Detail
    • Example: Infineon TLE5205-2GScreenshot - Blacktopping
    • Example: Infineon TLE5205-2GScreenshot - Blacktopping
    • How difficult are these to detect?Let’s look at another: Asiliant Technologies M69000
    • Very difficult… and getting worse.“it wouldn’t take much more to make it perfect”
    • 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 counterfeiting
    • Best Practices to Avoid RiskStay Within Your Trusted Supply Chain1. Direct from the Factory2. Your Approved Vendor / Manufacturer (AVL / AML)3. Other 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.
    • Vet the Open MarketExample ERAI Member Details
    • Vet the Open MarketQualify 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?
    • Vet Real Stock from “Available” PartsIt limits risk exposure from fake sources and price games
    • Many Types of Supplier Risk OccurA wide range of incidents pose serious business problems
    • “Where there’s a will, there’s a way.”Past due invoices, wire fraud, faulty product for example…
    • “Where there’s a will, there’s a way.”Company aliases are changing all the time
    • “Where there’s a will, there’s a way.”Relationships exist across “new” supplier entities as well
    • BOM analysis is where our clients beginIt’s where “the rubber meets the road” to assess risk exposure
    • Risks are detected and monitoredProblems are immediately flagged and the BOM can be monitored thereafterActual Medical Devices Bill of Material (4 of 94 electronic components) “ICs were failing to boot up.” “Maxim stated in writing that they did not manufacture the product shown in the below noted photographs. The lack of a country of origin and other visual nonconformities suggest the parts in question have been remarked by an unauthorized third party.” “Test report shows parts not performing up to spec, incorrect voltage.”
    • Conclusion: Address How You BuyExplicitly tackle the difficult decisions head on1. Are all open market sources the same? No2. Does real stock versus “available stock” matter? Yes3. Will a blanket policy preventing open market source eliminate risk? Some4. Do vetted open market suppliers require less testing? No5. Is buying only from authorized distribution practical or technically feasible? Not always Stay within your trusted supply chain.
    • Free Offer for Attendees: Risk Analysis We will do a BOM risk assessment for webcast attendeesFill Out Our Survey and Specify “YES” to Free Analysis Or Send Email with Subject Line “April 7th Webcast Offer” to ProductMarketing@ihs.com Limited to qualified electronics value chain entities.
    • Reminder We want your feedback! Win prizes 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*Copyright © 2011 IHS Inc. All Rights Reserved. *Offer valid through April 8th, 2011 57
    • You’re InvitedSupply Chain and Design Strategies Live Webcast: April 21, 2011 | 8:00 AM PDT 58
    • Questions? Send questions and requests for information to: ProductMarketing@ihs.comCopyright © 2011 IHS Inc. All Rights Reserved. 59