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IDEA – The IndustryIDEA – The Industry
SolutionSolution
The First Step TowardsThe First Step Towards
Counterfeit MitigationCounterfeit Mitigation
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Is your organization prepared to
Mitigate
Counterfeit Electronics?
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Agenda
•Where do I begin?
•Risks of the Open VS Authorized markets
•Open Market Independent Brokers
•Why & who is the IDEA Organization
•Who is eligible to be a Member?
•Do I need to be an IDEA Member?
•Member Benefits
•Membership requirements & expectations
•Final Wrap Up
•Review and additional questions
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Where do I begin?
Open Market
Broker
Independent
Distributor(ID)
Broker
Distributor
Stocking
Distributor
Original Component
Manufacturer (OCM)
Authorized/Franchised
Supplier
FENCE
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Open Market Independent
Brokers
• Prevailing image
• Business ethics
• Substandard/Counterfeit parts
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IDEA Organization
• Independent Distributors of Electronics
Association (IDEA)
• Business ethics
• Substandard/Counterfeit parts
• Quality Independent Distributors
• IDEA-STD-1010
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Who is eligible to be a Member?
• IDofEA.org/join for specific details
• General membership
• Independent Distributors of Electronics
• Associate membership
• Test Services Companies
• Part Manufacturers – coming soon
• OEM/EMS Providers – coming soon
• Government Entities – coming soon
• Service Providers – coming soon
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Do I need to be a member?
• I
This course will provide you with:
· A comprehensive
examination of the topography of
the Open Market
· The fundamental contents of
a supplier management program of
Independent Distributors
· The basic inspection process
for components procured in the
Open Market
· Detailed inspection skills and
techniques for the visual detection
of counterfeit and substandard
characteristics
· Information about and how
to prepare for the IDEA-ICE-3000
Professional Inspector Certification
Exam
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3.0
• Approved supplier
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3.0
• IDEA
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4.0
• Documented CF electronics control plan
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4.0
• Documented CF electronics control plan
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4.0 Requirements
• Documented CF electronics control plan
• AVL/AML consideration
• Peer data; GIDEP, ERAI, IDEA
• Length of business
• Certifications (AS9100, AS9120, ISO9001…AS5553…)
• Previous audits results
• Performance results
• Memberships (SMTA, IDEA…)
• Outsourced testing
• Certified quality inspectors
• Implied warrantees
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4.0 Requirements
• Documented CF electronics control plan
• Financial stability
• JESD31 Requirements for product integrity and
traceability
• Supplier over-head costs
• Cost of quality
• Direct procurement to AVL/AML
• Review of supplier performance
• Audits (Objective evidence)
• NOT the same as an OCM/Authorized audit
• QMS integrates proactive steps for CF mitigation,
Prior to PO issuance
• Variable periodic audits
• IDEA-QMS-9090
• Performance, alerts, peer reviews
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4.0 Requirements
• Documented CF electronics control plan
• Assess, mitigate and document if not from
OCM/Authorized
• MIL-PRF-38535 & MIL-PRF-19500
• General CoC requirements for IC’s & Semiconductors
• Doc reqmts differ: Mil/Aerospace and Commercial
• Supply chain traceability
• Chain of Custody from OCM to you
• Risk assessment
• Flow down requirements
• Risk assessment
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4.1.2 Purchasing
• Procurement clause requirements
• PO’s qty and Quality requirements
• Appendix D1 - 3
• Guarantee of product source
• Supply chain traceability
• CoCT
• Test and Inspection rqmts
• QMS
• Product Impoundment
• Federal penalties
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4.1.4 Verification
• Open Market purchases
• Increased processes
and inspection
• Will not eliminate CF
parts >>> only mitigate
• Supplement existing
processes and
inspection processes –
not replace them
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•Packaging and packing material
•Lead condition
•OCM Marking
•Black topped
•Die and bonds exist
•RoHS compliance
•Decap
•Thermal cycling performance
•Continuity test >> MIL-STD-883
•Infancy burn out
•Hermicity seal
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4.1.5 In-Process Verification
• Documented process
• Detection
• Verification
• Control of suspect parts (in-process & in-field)
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4.1.6 Material Control
• Documented control
• Scrap product – segregation & destruction
• No suspect/CF parts
• Surplus product – can be resold with an
accompanying quality record
• Returned product – due diligence to determine
authenticity before acceptance
• Suspect/CF product – physical identification
• Segregate and quarantine
• May not return to supplier (preclude resale)
• CF confirmation will include OCM confirmation
• Due diligence reporting
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4.1.7 Reporting
• Documented reporting process
• Internal organizations
• Customers
• GIDEP and ERAI
• Criminal Investigative organizations
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Summary
• Publications
• Terms and definitions
• Requirements
• Counterfeit Electronics Control Plan
• Purchasing practices
• Part verification
• Material control
• Reporting requirements
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Thank You
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Further Information
For questions regarding this webinar, please
contact Mark Young at marky@eptac.com
For information on any of EPTAC’s, IPC’s or
IDEA’s Certification Courses, please visit our
website at http://www.eptac.com or contact us
directly at 800- 643-7822
Editor's Notes
Good day everyone, I appreciate your attention this afternoon.
I will be giving a short presentation with answers to your questions to follow.
Feel free to forward your questions as I proceed.
I am Mark Young and I serve as a Master Instructor on behalf of EPTAC, IPC and IDEA.
With approximately 30 years of contract manufacturing experience, including program management, quality management and supplier quality management.
For more details, feel free to visit my LinkedIn profile.
In the time allowed, we only have time to cover some of the topics concerning the implementation of AS5553 standard.
Since counterfeit mitigation is a HOT topic for many of the progressive OEMs and CMs; our goal today is to get you to think of how your organization is exposed to the risk of electronic counterfeits and how to begin or continue taking the steps necessary to limit those risks. X
This is a question I ask most organizations, and the answer I get yes, but they typically can’t tell me in details of what preventative steps have been taken.
Those of you that are participating in this webinar, believe that your organization is exposed to some degree, or that you simply find this topic intriguing.
I welcome you all, because this topic will affect each and everyone of us, personally… one way or the other. You may be operating equipment that fails due to counterfeit components or you will be paying for them…through increased costs incurred by the Original Component Manufacturer’s (OCM’s) and Original Equipment Manufacturer’s (OEM) in fighting this very battle.
Having complete processes/procedures in place, also staff that is trained with the current techniques in counterfeit mitigation is imperative to protect the trust your customers have placed in your relationship. X
As we are aware substandard/counterfeit electronics (sb/cfe) continue to be an escalating scourge of our industry. Our customers place a tremendous amount of trust with their suppliers to provide authentic electronics and electronic assemblies that meet their requirements. As their suppliers, we need to insure that we meet and exceed their requirements. The infiltration of sb/cfe's continue to erode the confidence we have in our suppliers, therefore we need to insure that we have the appropriate processes and procedures in place to mitigate this.
Here is the big picture of the market place. There is the Authorized market and the Open market. The Authorized market is just that, authorized to distribute the Original Component Manufactures (OCM) parts. You could say, just like your local Ford dealership is authorized to distribute Ford products. There are times in which the OCM will discontinue a product, like the 1958 Ford Edsel. The challenge is that there may be product in your customers hands that still needs to be serviced. No longer can you purchase the replacement parts from the Authorized market, now you have to find replacement parts from the Open Market. The risks of purchasing parts from the Open vs the Authorized market is drastically higher. The Authorized market parts Chain-of-Custody is mostly known, unlike the Open market parts Chain-of-Custody is mostly UNknown. Where Open market parts came from, who has handled them, and how they were handled is mostly UNKNOWN. This is the crux of the issue when purchasing parts from the Open market. Therefore the thoroughness of the Open Market parts inspection, MUST far exceed that of the Authorized parts inspection process.
Those Independent Brokers that may be on this webinar. I ask that they hold their judgment of what I am going to say until they hear ALL that I have to say. Most will agree with me of the picture that I am going to paint for you at this time. The historical threshold of beoming a ID, has been extremely low. All you need is a computer with internet access and a subscription to a electronic search engine. You don’t even have to have any inventory of parts, that is because you can search other ID’s part inventory, and sell theirs. Due to this low entry cost, there has been some individuals that aren’t of the most upstanding character. The fallout from these individuals, is that they are looking for a one-time sale, rather than to partner with their customer. The whole Open Market has been tainted with some general assumptions. Like “you can’t trust them”, “all they want is money” to “they are guilty until proven innocent”. Due to this fallout, there are some of the ID’s that wanted to set themselves apart from the ‘others’.
In doing so, the forward thinking ID’s formed an organization: The Independent Distributors of Electronics Association (IDEA). This group was formed to attack two primary enemies: 1. Substandard/Counterfeit parts and 2. The business ethics of the Open Market. This group of ID’s, have not only raised the business ethics of the Open Market, but also brought a desire to partner with their customers, not only a source for those hard to find parts, but also to be a long-term solution provider. Don’t get me wrong, it is not only the IDEA members that are raising the business ethics and proactively fighting the sb/cf issue. There are Quality ID’s that are doing the same, but it is an uphill battle against the prevailing image.
In pursing the battle of sb/cf’s parts, IDEA has published the IDEA-STD-1010 standard which is a deliberated collection of criteria, current methods and numerous visual references to aid and assist all those attempting to validate electronic part authenticity. In 2006 this standard was first published, and revision B was released in 2012. To my knowledge, this is the ONLY sb/cf industry accepted visual standard published world wide. National and international sales for this standard are brisk. For Open Market part authenticity, this is the measuring stick that the industry has adopted. Progressive CM’s and OEM’s are requiring IDEA membership and the 1010 standard implementation. Any time you are in sales, like the Open Market, it is imperative that you throw your net wide, to include any potential customers. The IDEA membership credentials, do just that. It sets the ID’s apart in the Open Market, in a very positive light.
For all of the membership requirements please click to IDofEA.org/join
Some of the general membership requirements are:
Company must be in business or be owned by a parent company that has been in business for at least three years
Compliance with IDEA-QMS-9090 (can get it from the IDofEA.org website)Product Liability Insurance
Abide by the IDEA Code of Ethics
Fulfill a minimum of forty (40) hours of contribution to IDEA activities per year
Company and Owners must pass a thorough background check
ERAI membership in-good standing
May not use multiple business aliases
State and municipal business licenses and certificates
Minimal inspection equipment
Cannot appear on a number of governmental and industry lists or data bases with disparaging information
1 IDEA-ICE-3000 certified inspector at each ship from location
You can see that the IDEA membership raises the bar quite high and sets them apart from the Open Market. That is the point.
As you can see there are a number of memberships available. The most common is the General Membership for ID’s. There are a number of memberships coming for OCM, OEM, CM, Government and Service providers. Please click the above link for updates on membership and their respective requirements.
This course will provide you with:
· A comprehensive examination of the topography of the Open Market
· The fundamental contents of a supplier management program of Independent Distributors
· The basic inspection process for components procured in the Open Market
· Detailed inspection skills and techniques for the visual detection of counterfeit and substandard characteristics
· Information about and how to prepare for the IDEA-ICE-3000 Professional Inspector Certification Exam
AND MORE
Reasons; Why should I care?
1. Prevent legal trouble for buying, selling, or incorporating a counterfeit part into assemblies.
a. Government – prosecution
b. Customer – retribution for losses
2. Prevent financial loss for the purchase of counterfeit parts
a. Loss for time to re-procure
b. Rework costs
c. Loss of customer
d. Loss of industry reputation
3. The cost to educate, set mitigation policies and procedures is a fraction the cost of potential financial losses resulting from counterfeit scandal.
How to do it
1. Ongoing education to stay abreast of counterfeiters’ variation in their counterfeit practices and evolvement.
2. Minimize financial, legal, and reputational liabilities stemming from the unintended acceptance, purchase, use, and sell of counterfeit parts by designing efficient procurement, inspection and detection processes for key visual attributes that indicate evidence of counterfeiting.
3. Ensure the result of specialized knowledge and skills applied to a comprehensive enterprise wide Counterfeit Mitigation Program within a distributor, contract manufacturer, and OEM business
The Approved Vendor List (AVL) or Approved Manufacturer List (AML) consideration is the next step. There are a number of areas and sources of information that need to be considered when evaluating a supplier for either of these lists. When procuring parts from the Open Market, you can obtain information about a ID from the ERAI and GIDEP database as to their performance. The suppliers length of business is a strong consideration because the longer they have been in business the more their reputation has been built, their peers and the industry talk. Are they looking to ‘partner’ with their customers? Are they already or will be in the process of obtaining the industry accepted standards like AS9120, ISO-9001, etc.. What are their current industry memberships? An IDEA membership, speaks volumes of their desire to stay informed on the industry needs and trends. What are their capabilities and infrastructure: certified inspectors, diagnostic equipment; xray, xray fluoresce, sem microscope, decap equipment, testing equipment, or do they utilize outside sources for this. What about continual training for their inspector, quality and purchasing personnel. Would they notify you of any change in management, inspection or procurement personnel?
On a personal note: IDEA has recently published a standard, QMS9090, that is being using as a ‘check list’ to consistently qualify and audit new members applicants. It is a very thorough list looking for objective evidence of membership requirements implementation. It can be obtained from the IDEA website, IDofEA.org.
An old saying comes to mind; “What you DO speaks so loudly, that I cannot hear what you say.” X
Figure B3 is directly from AS5553. This flow chart is provided to help you implement AS5553 requirements into the procurement process. Often time we get buried in the implementation details, hopefully this will aid in navigating the procedural processess, in a logical fashion.
Let me give you some back ground. A couple of slides ago, I mentioned that the chain of custody was ‘MOSTLY’ known, for your Authorized supply, and ‘MOSTLY’ unknown for the Open Market.
Allow me to share with you a story of what can, and has happened in the Authorized side of the supply.
Lets say you are a CM and your customer has demand for 10,000 parts, but your Authorized supply can only provide 5,000 pieces. So, 5,000 more need to be procured from the Open Market; all 10,000 go into the same bin in your stock room. Some time later, your customer calls and reduces their demand to 8,000 pieces. So to minimize the excess inventory you, return 2,000 pieces to your Authorized supplier for credit. If the Authorized supplier is not diligent in re-inspecting the returns, they may restock 2,000 pieces that were purchased from the Open Market and that could be substandard/counterfeit (not their inventory). In turn re-sell those 200 pieces, to another unsuspecting CM. The chain of custody from your Authorized supply, for the MOST part, is known. To insure that your customer doesn’t get any non-authentic parts, inspection need to be increased for the Authorized supply also, maybe not to the degree of the Open Market parts, but it still needs to increase.
I hope you can see that this could happen and believe me it has happened. Hopefully this flow chart will assist you in bolstering your procurement processes to mitigate substandard/counterfeit mitigation for both sides of your supply. X
One of the items to check for is the financial stability of the supplier under review.
One of my responsibilities, in my previous lives, was in the Supplier Quality Assurance group. On a regular basis I would evaluate each of our suppliers against pre-established criteria, report my findings and initiate corrective action as necessary. By appyling the 80-20 rule you will find that a very select group of suppliers will occupy 80% of your time, and not in a positive light. There comes a point in which you cut them loose, because they were taking way too many resources, to stay qualified, than their quality. The cost of their quality was much higher than a competitor. X
When it comes to audits and supplier surveys; your Open Market suppliers vs your Franchise suppliers need to be audited differently. Differently, as in, more frequently and at a higher level of detail. Keep in mind the Open supplier audits, needs to be on-their-site! There is a standard that IDEA has recently published, IDEA-QMS-9090. This standard was implemented so that all of IDEA’s prospective members could be measured by the same stick. It is a check list of items to obtain objective evidence as to their implementation of IDEA-STD-1010 and their membership requirements. One of the many items to check for during the on-site audit is: 1. Does the address exist? You laugh!... And 2. Does the business actually sport a sign for their business? If they have been in business for any length of time, their peers will be talking about them – is it positive? Do they show up in the ERAI or GIDEP database for any issues? X
Obviously if you are purchasing parts from the Authorized side of the supplier, then the chain of custody is mostly known and the risk of a substandard/counterfeit part is minimal. From the Open Market side of supply, it is a very different scenario. This is when the absence of any chain of custody needs to be replaced by Quality documentation and your documented mitigation steps. Above all, the trust your customer has placed in your hands, cannot be compromised. It takes sooo long to develop a trusting relationship, a ‘partnership’ with our customers, and it only takes a word or the last delivery to compromise that relationship. We are only as good as our last delivery. I can talk until I am blue in the face to convince my customer to trust me again; but they simply don’t hear you. The only way you can regain trust is through your consistent follow through, your performance. Only through performance will the relationship begin to trust again, and that takes time. That is ifyour customer gives you the ‘time’ to re-perform.
For general CofC requirements for Military, Aerospace and Commercial reference Mil-Prf-38535 and 19500. X
Our goal is to have a chain of custody for your parts that can be back tracked from the OCM to you. The Open Market typically falls way short of this target. Hence the need for this standard, to do a risk assessment, trying to get our arms around how big this nut is and how to crack it. Part of the risk assessment is flow down requirements to your subs, subs ,subs. How far do we go? That is all part of your risk mitigation plan and you and your customers level of confidence in the authenticity of the parts. X
The clauses of the PO is a critical part of this mitigation effort, because this is where the purchasing expectations are in black and white. You can specify that you will only accept factory sealed containers, or not; only full tubes are acceptable, or not; electrical test data will be included in the shipment, or not; that payment may not be issued until your customer has approved the purchase. This is an area of the PO that you can be as specific as you need to, to minimize the risk of any substandard/counterfeit parts arriving at your back door. Keep in mind, these clauses DO NOT eliminate the risk, they simply could make the risk acceptable to you and your customer. X
Appendix D1-3 identifies some specific verbiage that can be utilized in your PO, to do just that, mitigate. The verbiage examples cover topics such as product traceability, required tests and inspections, supplier QMS requirements, financial liability, length of your suppliers obligation, required documentation, and any penalties associated with fraud. By your supplier shipping against your PO, whether they read all of the fine print or not, they have accepted the terms of your PO. Now it becomes a legal issue. I can’t caution you enough that what is listed on your RFQ or PO needs to be as clear and specific as you can be. It is imperative that your and your customers expectations be met, if not exceeded. X
Keep in mind that substandard/counterfeit mitigation doesn’t begin when the parts arrive at your dock. This effort begins way before the PO is even placed.
The physical verification of authenticity begins when the parts arrive at your facility. At any time during the inspection process that there is suspicion of substandard or counterfeitism, then the documentation of any findings begins. In the back of the IDEA-STD-1010 is a very thorough Inspection Step List. I recommend implementing this list of steps into your inspection process. It is very thorough and complete.
The inspection process starts at the condition of the shipping box, how many times was taped, to any damage, the validation of the labels, bar codes included. I can’t tell you how many times when a bar code was scanned, that what was displayed on the screen was different than the label. It could simply be a spelling issue, Sinapoop vs Sinapore. The inspection process continues to step by step, in a very disciplined manner, to the point that destructive physical testing is needed. If you remember nothing else, remember this, all open market parts are GUILTY until there is overwhelming evidence of authenticity. Let me repeat myself, all open market parts are GUILTY until there is overwhelming evidence of authenticity.
The receiving inspection steps that you perform on all Open Market parts is supplemental to your normal processes, it doesn’t replace them. X
This is taken directly from AS5553 to aid you in seeing the big picture of the inspection and mitigation process.
This whole process can become very lengthy and expensive, very quickly. X
Be sure that any process you embark on, your customer is involved, so that you can meet their expectations also. Because of how expensive and cumbersome this can get it would behoove us to have all of our expectations of authenticity stated in the RFQ/PO. Begin the process early with an approved and trusted source of supply. This early start will minimize the costs and overhead involved in the inspection and screening process. X
Now it is time to look under the hood.
In this next section we will be looking at the processes necessary for validation of authenticity AFTER the parts have received and may actually be in deliverable products. This is a scary time, because some of the suspect parts may be in our customers end product. Trying to get our arms around how big the challenge, is sometimes a project in it self. The escapes during this process could end up in your customers hands, if so, then we don’t have a leg to stand on. As a OEM/CM we need to be as proactive as possible, so that we bolster the trust we have developed with our customers. It is ok to deliver bad news, what would be detrimental to the relationship, is not to also present a solution or solutions to recover. X
Control of substandard/counterfeit parts is critical. There are some parts that years ago had been documented as counterfeit parts, and we are still seeing them raise their ugly heads again and again in the market place. The root cause of this is because proper methods and processes were not employed to insure that they would not re-enter the supply. So now we have to deal with them time and time again. A waste of resources.
Any parts that have been determined to be suspect/counterfeit shall be controlled. There are guidelines in Appendix F to aid in developing effective procedures/processes.
Scrap parts are found to be nonconforming and not usable in production. These parts should be physically identified, segregated and physically destroyed. Scrap parts are NOT the same as suspect/counterfeit parts.
Surplus parts is just that, excess material. A partial reel or tube. Parts that are left over, after the customer requirements have been met. This product can be resold only to external organizations that understand the importance of a chain of custody and that hold themselves accountable to a high level of business ethics. One organization in the Open Market that does this well is the IDEA members.
Returned parts are typically returned to the Authorized suppliers, once an Return Authorization is obtained. The Authorized suppliers play a role in mitigating substandard/counterfeit parts also. They need to confirm that the returning parts are indeed theirs and has a valid chain of custody, BEFORE they restock them. In the past this inspection of returned parts was not consistent and therefore has tainted the Authorized supply credibility. X
Now how to deal with suspect/counterfeit parts. Physically label, segregate, and should be place in a secure quarantined area. Do not return the parts to the supplier, unless under controlled conditions. The relationship you have with your supplier will dictate whether all or just some of the parts will be returned to them. If they are a supplier that you are ‘partnering’ with, you will want to allow them to do their own investigation, so that this hole in the boat is plugged by them. Part of your and their investigation may include destructive testing methods and will include OCM confirmation. As I mentioned before, historically there has not been a lot of OCM cooperation with the Open Market to validate authenticity. As a contract manufacturer or OEM, you have a lot more pull to obtain the OCM’s cooperation. I encourage all party's to continue knocking on the OCM’s door for assistance. Upon confirmation of any counterfeit attributes, the supply line shall be purged, controlled. X
Now that we have OCM confirmation that we do have counterfeit parts, the documentation continues and communications start. Processes, a plan of action, shall be in place to communicate to internal staff and organizations, affected customers, entries into the GIDEP and ERAI databases need to be completed. This communication may involve criminal investigative efforts.
The documentation and communication step of this whole process helps all affected individuals stay informed and remain proactive in the methods necessary for counterfeit mitigation. Without these steps the left hand doesn’t know what the right hand is doing. We have all been in that position, and I know you will agree, it is a very uncomfortable position. X
In summary, your electronic substandard/counterfeit mitigation plan is not that difficult, but it is critical that you have examined, asked the tough questions, found compliant solutions to insure that the parts that are procured are from a audited and ‘trusted’ source. Whether that be from the Authorized or the Open Market supply. By what you have heard today, I trust you understand that when parts are purchased from the Open Market that there is a higher risk than your Authorized supply. Don’t get me wrong, your Authorized is not risk free, but it certainly carrys more confidence.
Now, when someone asks you what specific steps your organization took to mitigate counterfeit electronics, YOU can tell them AND show them. You will be taking a quantum leap to protect your customer, increase their trust in your Teams ability to deliver and taking proactive steps to protect your supply lines.
We covered a number of areas from publications, terms and definitions, to purchasing practices, to reporting substandard/counterfeit parts.
You, as an OEM/CM play a role to insure that the electronic supply lines remain authentic. You are not alone. The OCM, the Independent Brokers and the Authorized supplies, ALL play a critical role in doing their due diligence. Those roles and responsibilities is a whole nother webinar. X
Discover all of the details for the next EPTAC/IDEA Counterfeit Mitigation seminar at EPTAC.com or call 800-643-7822 X
I appreciate the investment of your time and trust that this session has encouraged you to ask some tough questions about your Teams counterfeit mitigation measures and plan. I want to thank EPTAC for hosting this webinar.
Until next time: Educate, take Action, and you will find Success. X
As long as time allows, I will take the opportunity to answer some of your email’d questions.
