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Counterfeit risk mitigation 06 21 2011 (2)


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Counterfeit risk mitigation 06 21 2011 (2)

  1. 1. Counterfeit Risk Mitigation <br />Bob Braasch, Sr Director Technical Support, IHS <br />June 22, 2011<br />
  2. 2. Dynamic Nature of Supply ChainsSupply chains operate in the dynamic context of external forces…<br />Part Trends<br /><ul><li>Technology
  3. 3. Demand
  4. 4. Supply
  5. 5. Obsolescence
  6. 6. PCNs
  7. 7. Counterfeits</li></ul>Unique Market<br />Trends & Pressures<br /><ul><li>A&D
  8. 8. Consumer
  9. 9. Medical Dev.
  10. 10. Telecom</li></ul>Regulations:<br /><ul><li>RoHS
  11. 11. Export
  12. 12. REACH
  13. 13. ConflictMinerals</li></ul>Product Trends:<br /><ul><li>Technology
  14. 14. Features
  15. 15. Cost
  16. 16. Energy Efficiency
  17. 17. Competitive</li></ul>Demand<br />Material Mfrs.<br />Component Mfrs.<br />Product Mfrs.<br />(OEMs and EMS) <br />End Users<br />Supply<br />Materials<br />Products<br />Components<br />Economy<br /><ul><li>Market volatility
  18. 18. Product demand</li></ul>Supply<br /><ul><li>Natural Disasters
  19. 19. Raw Materials</li></ul>Costs<br /><ul><li>Supply
  20. 20. Energy and Shipping costs</li></ul>Corporate Product Stewardship <br />Dynamic Context<br />
  21. 21. IHS Design & Supply Chain SolutionsParts, Materials and Environmental Offerings<br />4DOnline Products<br />Parts Universe & BOM Manager<br />Regulation Tracking<br />Content Services<br />ERAI Counterfeits<br />Teardown, <br />Price Tracker<br />PCNAlert<br />PCNAlert: acquired 2007<br />ERAI (exclusive):partnership 2011<br />EIATrack: acquired 2011<br />iSuppli: acquired 2010<br />
  22. 22. Obsolescence & Counterfeit Correlation Where we see Counterfeits we see Discontinued Parts <br />
  23. 23. Senate Armed Services Committee is seeking information from defense contractors and subcontractors regarding the extent of suspect counterfeit electronic parts…<br /><ul><li>Spreadsheet listing each suspect counterfeit part identified in 2009 & 2010 intended for use by DOD…
  24. 24. Policies related to record keeping, handling, reporting & disposition of suspect counterfeit electronic parts…</li></ul>“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.”<br />Carl Levin, D-Michigan, and Sen. John McCain, R-Arizona<br />March 2011<br />Congress Investigation LaunchedMarch of 2011 top senators launch investigation <br />
  25. 25. Manufacturers ResponsibilityFake Parts in U.S. Military<br />June 16th 2011, CNN broadcast<br />Counterfeit parts impact 40% of Pentagon’s Supply Chain according to U.S. Commerce Dept study<br />Senator Brown (OH) recommends DOD cancel supplier contracts when counterfeits are found in their supply chain <br /><br />
  26. 26. Costs can be ExtremeHard & soft costs add up<br />Hard costs in millions are not uncommon<br />Unrecoverable supplier payments<br />Entire product immediately taken off line or out of service<br />Soft costs can include<br />Brand damage<br />Product rollout delays<br />Rework delays<br />Urgent reprioritization<br />Possible loss of life<br />
  27. 27. Industry Standards & ReportsNew & updated standards expected in 2011<br />IDEA 1010B update <br /><ul><li>Standard for electronic part inspection
  28. 28. Released April 2011</li></ul>AS5553A update intended for OEMs<br /><ul><li>Expected in balloting by end of 2011</li></ul>AS6171 intended for Test Providers<br /><ul><li>Standardize practices to detect counterfeits & ensure consistency of test techniques
  29. 29. Expected in balloting by end of 2011</li></ul>AS6081 intended for Distributors<br /><ul><li>Counterfeit avoidance requirements
  30. 30. Currently in balloting
  31. 31. ARP6178 tool to access counterfeit risk of Distributors
  32. 32. Expected in 2011</li></ul>SAE AS5553 issued April 2009<br />
  33. 33. Where does it come from?E-Waste<br />The vast majority of product being sold in the China Open Market originates from e-waste. <br />Unknown quantities of e-waste are exported from China to component buyers around the world.<br />Nearly 75 million dollars in revenue is generated for the local Chinese Government in the city of Shantou alone. <br />What incentive does the government have to control the import or export of this product?<br />Much of the e-waste is remarked and counterfeited.<br />Most of the distributors operating in and around Shenzhen have no experience in handling, storing or selling electronic components.<br />
  34. 34. Source: % of reported counterfeits from ERAI, 2004 to present<br />What’s Being Counterfeited?All types of components are being counterfeited, even passives...<br />
  35. 35. Industry Standards & ReportsGIDEP and ERAI are the counterfeit reporting entities<br />
  36. 36. Exclusive Partner to Only IHSOne provider of counterfeit alerts and supply chain risk mitigation <br />12<br />
  37. 37. Who is ERAI Inc?<br />Founded in 1995<br />ERAI is an information services organization that monitors, investigates and reports issues affecting the global electronics supply chain<br />ERAI provides tools to mitigate risks on substandard parts, counterfeit parts and vendors<br />Subscribers include OEMs, CMs, Distributors, OCMs, government agencies and industry associations<br />Founding & active participant in SAE International G-19 Counterfeit Electronic Components Committee and several sub-groups<br />
  38. 38. How Risk Enters Your Supply Chain Intended and unintended ports of entry for counterfeits<br />Many unsafe part & supplier “sources”<br />Online Broker Search Engines <br />Ease & convenience of Googling potential valid parts <br />Engineers who make maverick purchases<br />Counterfeit Suppliers have large audience of clients<br />Professional looking websites <br />Rapid access to millions of parts<br />Minimal supplier validation<br />Quick & easy access to a large audience of buyers<br />Request for Quote<br />Request for Quote<br />Request for Quote<br />…<br />…<br />…<br />…<br />Request for Quote<br />
  39. 39. 15<br />But No Supplier is Immune from RiskLack of accountability and traceability allows counterfeits to enter<br />“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. <br />Specifically, 47 percent of authorized distributors procure parts from independent distributors, 29 percent procure from brokers, and 27 percent procure from Internet-exclusive sources.”<br />Source: U.S. Department of Commerce, <br />Office of Technology Evaluation,<br />Counterfeit Electronics Survey, <br />November 2009.<br />
  40. 40. Best Practices to Avoid RiskStay Within Your Trusted Supply Chain<br />Buy direct from the Factory<br />Purchase from Approved Vendor / Manufacturer<br />Procure from Franchised and Authorized Sources<br />Leverage only Approved Independent Distributors<br />ERAI Members<br />Validate Parts and Sources<br />Aftermarket Sources<br />Alternate Parts<br />Leverage U.S. Government QML/QPL<br />Leverage other qualifying authorities<br />Test appropriately<br /> Contractually define your expectations.. <br />
  41. 41. How do IHS and ERAI help?Market Intelligence to Mitigate Counterfeit Risk<br />AUTHORIZATION REQUIRED<br />AUTHORIZATION REQUIRED<br />ERAI notices<br />GIDEP notices<br />
  42. 42. Example: Infineon BTS716G Alerts are accessible via the IHS product<br />
  43. 43. Example: Infineon BTS716G Customers alerted to counterfeit incident<br />Alert!<br /><ul><li>Subscribers of IHS 4DOnline BOM Manager, COMET, and Parts Universe have access to alerts from ERAI, GIDEP, and other sources.
  44. 44. Subscribers to the IHS-ERAI solution provides ERAI membership, giving them access to ERAI’s comprehensive market intelligence community, tools, and services.</li></li></ul><li>Provides Access to Complete DetailsMembership provides comprehensive market intelligence<br />
  45. 45. Example: Rockwell R6502APReported Parts Detail<br />
  46. 46. Example: Rockwell R6502APAll Available Images, Test Reports, Inspection, etc.<br />
  47. 47. Ability to View Supplier Report CardExample<br />
  48. 48. Example: AAOK ElectronicsPast due invoices, wire fraud, faulty product for example…<br />
  49. 49. View Real Stock on Available PartsLimit risk exposure from fake sources and price games<br />
  50. 50. BOM Risk Analysis & Monitoringvia ERAI BOM Scrubber<br />
  51. 51. BOM Analysis: Risk IdentifiedProvides counterfeit details on your BOM<br />
  52. 52. Questions?<br />28<br />
  53. 53. Appendix<br />29<br />
  54. 54. Access to Counterfeit IncidentsOver 10 years of counterfeit part and supplier report history<br />