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Converge protecting the supply chain


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There is a growing trend in the global electronic components distribution industry that no one likes to talk about. Yet, as the prevalence of substandard electronic components continues to grow, it has become impossible to ignore that the problem exists. This white paper discusses the overall quality challenges being faced in the electronic components marketplace, and how establishing a relationship with a quality-centric partner can help protect your supply chain.

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Converge protecting the supply chain

  1. 1. A Con verge White Title Protecting the Supply Chain • Why Quality Matters • Spectrum of Challenges • • Quality Management Programs • • Protecting the Supply Chain • Unexpected Changes. Reliable Results.
  2. 2. Quality Management Matters in the World ofElectronic Component DistributionThere is a growing trend in the global electronic componenttrade that no one likes to talk about. Several years ago,you might have even heard the words spoken in a whisper:counterfeit and substandard parts. Yet, as the prevalence ofelectronic counterfeiting continues to grow, it has becomeimpossible to ignore the problem.Counterfeiting is big business. In 2007, the U.S.Department of Homeland Security reported seizingnearly $200 million in counterfeit goods of all types, withconsumer electronics, computers, hardware and “all othercommodities” accounting for 20 percent of that total. Andaccording to a U.S. Commerce Department report releasedin January 2010, the number of known counterfeit electronic Table 1products more than doubled from 2005 to 2008 in the Different Types of Counterfeit Partsdefense industry alone. The most shocking cases typicallymake national headlines. • Components with original componentIn November 2010, a Florida woman pleaded guilty to manufacturer (OCM) markings that were stolencharges that she helped her employer sell counterfeit and are being sold without chips for use by the U.S. military. According to a • Dummy components with no die or wires inside,report in Computerworld1, prosecutors say that the woman’s but marked as authentic.employer did nearly $16 million in business over a three-year • Scrap stolen from the manufacturer, but markedperiod, doctoring and then selling counterfeit integrated as good product and sold at the normal price.circuits imported from Hong Kong and China. The fake • Rebranded parts from a low-quality manufacturerchips were sold to many companies, often destined for marked with the logo of a high-qualityuse in sensitive areas such as missile programs, radiation manufacturer and sold at a premium price.detectors and nonmilitary systems such as high-speed • Recycled component sold as new.trains, the Department of Justice said in court filings. Manyof the chips were used in situations where a system failure • Blacktopped and remarked integrated circuit (IC) with a:would be disastrous. o Newer date code;This case, and others like it, illustrates the need for a world- o Bogus part number;class Quality Management Program in any company dealingwith the buying and selling of electronic components, o Commercial part remarked as uprated or upscreened without any assessmentespecially in the open market. or testing o Recycled, reclaimed, pulled or salvagedBroad Spectrum of Quality Challenges part marked as new.Quality issues in electronic components fall into two main • Obsolete product pulled from stock of old boards and sold as new.categories: counterfeit parts and substandard parts. Anyelectronic component that is fraudulently represented when Zulueta, Philip. “Counteracting the Threat of Counterfeitsold is considered to be counterfeit. It may be a working Components.” Assurance Technology Program Office (ATPO) Newsletter. NASA/Caltech Jet Propulsion Laboratory (JPL),part, but not the right working part. Or it may be older than Issue 4, Oct. 2007.Converge Global Headquarters • 4 Technology Drive, Peabody, MA 01960 • +1-978-538-8000 • +1-800-922-6327 2 ©Copyright 2011. All Rights Reserved
  3. 3. it is represented to be. It may be the right type of part, butoriginally manufactured by a lesser-quality brand than thelogo it bears. Or the part may be completely fake.(See Table 1 for a more complete list of counterfeitpossibilities.) According to militaryaerospace.com2, allpotential counterfeiters have to do is determine which Risksparts are in the highest demand, get their hands on oneof these particular parts, and copy the packaging, pin • Product failuresouts and manufacturer’s markings. Unless the distributor • Expensive reworkmakes serious efforts to screen and rescreen parts, thesecounterfeits can easily make their way into the marketplace. • Service callsSubstandard electronic components are parts that fail to • Warranty issuespass a distributor’s quality inspections, but not necessarilybecause there was fraudulent intent. These parts were Risks of using counterfeit Table 2 and/or substandard electronic components Counterfeit Risks Manufacturer forced Products fail to remove components after being sold and replace them before to end users selling products Rework must be done by Increased field Warranty Product Injury or handmore expensive than service calls Issues recall Death original assembly line Potential lawsuits Brand DamageConverge Global Headquarters • 4 Technology Drive, Peabody, MA 01960 • +1-978-538-8000 • +1-800-922-6327 3 ©Copyright 2011. All Rights Reserved
  4. 4. likely either mishandled or damaged during the shippingprocess. Types of damage can include physical damage(lead bend, scratches, chipped edges, etc.), electrostaticdamage and moisture damage. There is a chance thatsubstandard parts may work in certain situations. They maywork just long enough to make it out of the distributor’swarehouse and into the consumer product. This is another Qualityreason why it is extremely important to have a trusted open-market distributor with a thorough inspection process to • Vendor Managementensure that such parts are weeded out. • Inspection ProcessIf counterfeit or substandard parts do find their way to an • TrainingODM (original design manufacturer), the results can beboth expensive for the manufacturer and dangerous for theend user. (See Table 2.) Once a supplier is added to an “approved vendor list,” it should be continually monitored. Smart ECDs willEven if the counterfeit or substandard parts are discovered periodically requalify each supplier based upon setat the ODM level and never make it into the consumer criteria, including product quality history, performancemarket, there can still be significant costs for the and service fulfillment. Known counterfeiters and othermanufacturer. There are no automated component removal vendors with a poor service history should be placed onsystems. Rework has to be done by hand, which is much a “do not call” list, preventing the ECD’s buyers frommore expensive than putting quality parts through the doing any future business with them.automated assembly line process to begin with. Therefore,it is in the best interest of the original design manufacturer Rigorous quality inspection process - Quality inspec-to be sure that it is buying quality electronic components tion is an essential function in the quality managementin the first place, even if it means spending a little more process to ensure that all counterfeit and substandardmoney to procure them. components are stopped before going on to design manufacturers. Best practice among distributors isWhat Does a World-Class Quality Management a zero-tolerance policy for discrepancies of any kind.Program Include? Each component should go through a series of rigor-A world-class Quality Management Program begins with ous quality inspections so that discrepancies can bea high level of quality control and inspection programs detected, as follows:designed to ensure that the right products and services Visual Inspection - Visual inspection and authenticityare delivered accurately for each and every customer verification should be conducted on all incomingengagement. materials. A thorough visual inspection review willKey components of a Quality Management Program include:include: • Manufacturer part number, quantity and date code Strict vendor management - A trustworthy ECD (elec- verification tronic component distributor) will research and prequalify its vendors to ensure that product is procured from only • Body marking inspection (faded marking, broken safe and reputable sources. This is not always easy to do text, double print, ink stamps, etc.) in the open market. If a vendor passes initial background • Physical condition inspection (lead bend, scratches, checks, it should be given only “cautionary” approval chipped edges, etc.) status until it has been proven to be a trusted supplier. • Taping condition inspection (dented packet, missing parts, etc.)Converge Global Headquarters • 4 Technology Drive, Peabody, MA 01960 • +1-978-538-8000 • +1-800-922-6327 4 ©Copyright 2011. All Rights Reserved
  5. 5. • Moisture barrier protection verification (vacuum sealed, humidity indicator within specifications) • Original factory-sealed components vs. non-factory- sealed • Any visual irregularities Engineering Review - Materials identified as questionable during the visual inspection process should be reevaluated by engineers. A thorough engineering review will include: • Visual inspection finding review • Reference and update of counterfeit databases Continual training programs • Label verification (bar code and label review) Electronic component distributors should be • Manufacturer logo and date log verification committed to the continuous improvement of • Reference of ERAI (Electronic Resellers Association their quality processes. Continual training should International) counterfeit alert program be provided to all inspectors, keeping them up to Additional Verification and Testing* -There are times date with the latest manufacturing trends, industry when a final level of review or product testing may be best practices and counterfeiting techniques. The required to ensure that any questionable materials best independent distributors also employ full- meet manufacturers’ specifications. Depending on the time component quality engineers who are certified questionable issues, thorough additional testing may to IDEA (Independent Distributors of Electronics include: Association) standards. These highly trained inspectors are experts at identifying potential quality Solderability test –done to ensure that parts will not have solderability issues in the manufacturing process issues and suspect parts. X-ray test – determines simple structural elements of Spot quality control testing - Every electronic the component, such as die presence and bond wire component distributor should be improving its presence/location quality control processes through periodic internal Decapsulation test – removes a small cutout or top audits and continual product testing. Distributors portion of the device through a chemical process, have to be “on top of their game.” The counterfeiters in order to analyze the actual die structure of the continue to develop more sophisticated ways of component under a special microscope covering up their counterfeiting techniques, so Surface contamination analysis – checks for the distributors need to keep finding new ways of presence of contaminants that can cause untimely detecting them. corrosion Certifications and affiliations - Industry affiliations *It should be noted that very few independent distributors and certifications can give electronic component actually have the ability to perform the in-depth tests buyers some level of confidence that a distributor is listed above or are willing to make the investment to adhering to strict quality standards and is working outsource these services. When you find a distributor that with organizations dedicated to improving supply does take that extra step, consider it to be indicative of chain quality and security. Meaningful certifications the company’s commitment to providing 100% quality and affiliations include ISO 9001, ISO 14001, OHSAS components. 18001, ESD S20.20 and C-TPAT.Converge Global Headquarters • 4 Technology Drive, Peabody, MA 01960 • +1-978-538-8000 • +1-800-922-6327 5 ©Copyright 2011. All Rights Reserved
  6. 6. The IDEA is considered to be the electronic componentindustry watchdog. The association’s charter is toimprove the quality of products and services through aquality certification program, educational seminars andconferences, as well as to promote the study, developmentand implementation of techniques and methods designedto improve the business of independent distributors.IDEA member businesses typically follow internal qualityprocesses that exceed industry best practices.The Supply Chain Must Be Protected About ConvergeIndependent electronic component distributors offer Converge, a wholly owned subsidiary of Arrowcritical solutions in a complex, fast-moving supply Electronics, is the premier global supply chain partnerchain – purchasing excess inventory, responding to for technology-driven companies. We provide solutionsshortages, balancing demand and bringing flexibility to that increase your bottom line and reduce your risk inthe marketplace. Neither OEMs nor ODMs could function electronic components distribution.without them. Yet, by serving in the role of “middleman,”the distributor takes on the additional job of protectingmanufacturers by stopping counterfeit and substandardparts before they make it into the supply chain and,eventually, into the hands of consumers. If you are dealingwith a distributor that does not have a rigorous QualityManagement Program, you are putting your company’sreputation on the line with every transaction.When choosing an independent electronic componentdistributor, be sure to choose one with a world-classQuality Management Program. And ask to see the details.Anyone can procure a part. Only quality-driven distributorscan guarantee parts that protect their customers and themanufacturers that they represent. 1 McMillan, Robert. “Woman Admits Aiding Firm in Selling Fake Chips to U.S. Military.” Computerworld. 23 Nov. 2010. Web, 30 Nov. 2010. <>. 2 Keller, John. “The Scourge of High Tech – Military & Aerospace Electronics.” Military & Aerospace Electronics – Military Electronic Technology, Aerospace, Avionics News. 1 July 2007. Web, 8 Dec. 2010. < volume-18/issue-7/news/trends/the-scourge-of-high-tech.html>.Converge Global Headquarters • 4 Technology Drive, Peabody, MA 01960 • +1-978-538-8000 • +1-800-922-6327 6 ©Copyright 2011. All Rights Reserved