Just one counterfeit incident poses risk ranging from catastrophic brand damage to costly halts in production or unnecessary design and development. Your supply chain is under assault and may already be infiltrated.
It's time to act. Join Supply & Demand Chain Executive magazine as they host experts from ERAI and IHS and L-3 Communications who will share best practices, tools, and technique for mitigating electronics value chain risks.
Original event date: 2-23-11
Avoiding Counterfeit Risk: How to mitigate part and supplier risk
1. Avoiding Counterfeit Risk
Hosted by Supply & Demand Chain Executive
and featuring IHS, ERAI Inc, and L-3 Communications
February 23, 2011
2. A Global Supply Chain Problem
We’ve Entered a Generation of Counterfeiting & Piracy
“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
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3. Today’s Speakers
Recognized Industry Experts
Moderator
Andrew K. Reese
• Editor, Supply & Demand Chain Executive
Panelists
Mark A. Snider
• President, ERAI, Inc. and IHS Partnership Executive Sponsor
Kristal Snider
• Vice President, ERAI, Inc. and G-19 Committee Member
Rick Roelecke
• Director of Quality Assurance for L-3 Wescam Sonoma Operations
• L-3 Communications Corporate Counterfeit Parts Lead
4. We want your feedback!
Win 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.
5. 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.
• Actively involved in a number of committees and task forces addressing the
counterfeit issue.
6. IHS and ERAI Combat Counterfeits
Exclusive Partnership Providing Market Intelligence
“ENGLEWOOD, Colo. (January 12, 2010)
- IHS Inc. (NYSE:IHS), a leading global
source of critical information and insight,
today announced an agreement with ERAI,
Inc. to be its exclusive worldwide partner
for delivering products and services
designed to mitigate the risks associated
with counterfeit, substandard and high-risk
parts found throughout global supply
chains…”
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7. 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
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23. Counterfeit
-What is Being Counterfeited?
All types of
components are
being counterfeited,
even passives.
% of reported counterfeits from ERAI database, 2004 to present
29. SAE G-19 Committee Members & Liaisons
Representation from Government, Aerospace, Military, & Commercial
US Government Members … Industry Members …
• DCMA • 3M
• Defense Logistics Agency, DSCC • Boeing
• MDA • General Dynamics
• NASA/JPL • Honeywell
• Navy-Crane • L-3 Communications
• NSWC Crane • Lockheed Martin
• SUBMEPP • PerkinElmer
• Tinker Air Force • Plexus
• US Army – AMRDEC • Raytheon
Participating Industry Associations …
• AIA
• ERAI Inc.
• Independent Distributors of Electronics Association (IDEA)
Participating Test Laboratories …
• Center for Advanced Life Cycle Engineering (CALCE)
• Evans Analytical Group
• Hi-Reliability Microelectronics
• Integra Technologies
• Premier Semiconductor Services
• Process Sciences
• Silicon Cert Laboratories
• White Horse International
33. AS5553
-Requirements: 4.1.1 Parts Availability
Design, Proposal, and Program Planning
Obsolescence Management (DMSMS)
34. AS5553
- Requirements: 4.1.2 Purchasing
Assess potential sources of supply to determine the risk of receiving counterfeit
parts
Has the organization/part been reported by ERAI
Maintain a register of approved suppliers
Do not buy from sources not identified on your AVL
Specify a preference to procure directly from OCMs or authorized suppliers
Audit suppliers to ensure they are maintaining effective processes for mitigating
risk
Coming Soon: ARP6178
Ask for supply chain traceability
Be Careful - Paperwork can also be counterfeited
Flow down your requirements.
In the event that one or more supply chain intermediaries do not have a counterfeit
part control plan compliant to this document, a risk analysis shall be required for
every application of the part.
35. AS5553
-Requirements: 4.1.3 Purchasing Information & 4.1.4 Verification of Purchased Product
APPENDIX D - PROCUREMENT CONTRACT REQUIREMENTS
APPENDIX E - PRODUCT ASSURANCE
36. AS5553
-Requirements: 4.1.5 In Process Investigation & 4.1.6 Material Control
…shall address the detection, verification,
and control of suspect counterfeit parts.
…shall prevent suspect counterfeit parts
from entering the supply chain / use.
…shall preclude suspect counterfeit parts
from re-entering the supply chain.
37. AS5553
-Requirements: 4.1.7 Reporting
The documented processes shall assure that all
occurrences of counterfeit parts are reported, as
appropriate, to internal organizations, customers,
government reporting organizations (e.g., GIDEP),
industry supported reporting programs (e.g., ERAI),
and criminal investigative authorities.
ERAI maintains a database of counterfeit and high-risk items. Data can
be submitted by anyone on the public domain of their website
(www.erai.com). Companies do not need to be members to report
counterfeit and high-risk items. Submitting companies remain
anonymous in the reporting of counterfeit/high-risk items.
Companies must be ERAI members to view this database.
However, virtually all electronics-related companies/organizations,
not just resellers, are candidates for membership.
41. G-19
-ERAI Involvement
ERAI Serves On: Meeting Schedule:
Tuesday 10:00am–12:00pm EST
• Original Member of G-19CI – AS5553 Re-write
G-19 (AS5553) Bi-Weekly
• Member of G-19D Thursday 11:00am-1:00pm EST
(AS6081) G-19D – AS6081 Development Team
Weekly
• Member of G-19DR
Other
• Member of G-19CI G-19DR – Distributor Assessment
(Continuous Improvement/AS5553 Rewrite Manual/Survey Team
to ensure document is applicable in both US
and foreign markets) As Required
42. Summary
Employees need clear direction from
management on combating
counterfeits as well as written guidance
on how to: avoid purchasing
counterfeit parts; test, handle and track
incoming and outgoing parts; and
manage and dispose of suspected
counterfeit components.
44. Counterfeit Parts
Program at L-3
Rick Roelecke
Director of Quality Assurance
L-3 WESCAM Sonoma Operations
February 23, 2011
45. Background
The L-3 Counterfeit Parts Team was established in September 2007
Originally influenced by Orbital Sciences and BAE Systems
Requirements
Both companies have requirements for:
– C of Cs from Original Equipment Manufacturers or their authorized distributors
– Approval of the procurement process if OEM certifications can not be obtained
– Burdensome liability clauses for counterfeit escapes
It is especially difficult to manage these requirements for COTS
hardware or production lines that feed multiple customers
We needed to control our own destiny by emphasizing prevention
Define our own procurement guidelines
Identify our own approved Independent Distributors
Define our own risk mitigation processes to prevent counterfeit or
substandard parts from reaching our customer community
Protect our liability
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46. L-3 CPT Mission Statement
To define and provide guidelines for
managing and controlling the risks
associated with Counterfeit Parts
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47. Team Objectives
Establish procedural guidelines for all divisions that address:
Procurement practices
Supplier/Distributor controls
Part screening requirements
Identify and survey Independent Distributors that have systems
and processes to screen for counterfeit parts
Includes identifying approved independent test facilities
Define purchase order and subcontract flow-down requirements
Develop inspection and test guidelines to screen for counterfeit
parts
Communicate government, industry, and customer
requirements/issues via intranet and share lessons learned
Control Your Own Destiny Or Someone Else Will
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48. The L-3 10 Counterfeit
Thou Shall
Commandments
1. Implement A Strict DMSMS Program
2. Load Your Obsolescence BOM Into A
Counterfeit Hit Database (ERAI)
3. Control Independent Distributor Purchases For
Obsolescence Only
4. Screen All P.O. Transactions For Counterfeit Hits
5. Control Your Independent Distributors
6. DPA, X-Ray, Permanency Test, At A Minimum, All
Lots Purchased from Independent Distributors
7. Track and Document Lessons Learned
8. Impound and Report All Counterfeit Parts
9. Influence Your Customers To Support Re-Design Efforts
10. Educate Your Workforce And Subcontractors
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49. 1. Implement A Strict DMSMS Program
2. Load Your Obsolescence BOM Into A
Counterfeit Hit Database (ERAI)
L-3 Companies,
IHS Parts
Management ERAI BOM Tool
One Combined Obsolescence List
Automated
Counterfeit
Notifications to
Each Division
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50. 3. Control Independent Distributor Purchases
For Obsolescence Only
4. Screen All P.O. Transactions For Counterfeit Hits
Assure that your Buyers are not placing orders to Independent
Distributors for Cost & Schedule
Obsolescence Only
Run all Purchases through ERAI for Counterfeit Hits
Every procurement, every time
Screen your Distributor even if they are on your approved list
Screen your part number
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51. 5. Control Your Independent Distributors
Desk and Physical Surveys
IDEA Member
ERAI Member
AS9120 Certified
ISO9001:2000 Certified
ESD S20.20 Compliant
Certified Inspectors to IDEA 3000
Supplier controls and flow-down of counterfeit mitigation requirements
Test and inspection processes and equipment
Names of third part test facilities used and services performed
Purchasing Policy, No China, India, Africa, etc.
Have they ever delivered a counterfeit or substandard part to a customer
– If so, how did they resolve the issue
Do they have a die library and will they share it
Do they offer escrow services
What is their policy upon discovery of counterfeit or suspect parts
– Impounding
– Reporting
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52. 6. DPA, X-Ray, Permanency Test, At A Minimum, All
Lots Purchased from Independent Distributors
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53. 7. Track and Document Lessons Learned
8. Impound and Report All Counterfeit Parts
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54. 9. Influence Your Customers To Support
Re-Design Efforts
10. Educate Your Work Force And Subcontractors
Share your DMSMS system results with your Customer
Consider using authorized re-manufacturers of parts vs.
procuring from Independent Distributors
Analyze the risk and liability of the part type on the Independent
Market
Train your incoming inspection and production personnel on
counterfeit and substandard part visual characteristics
Implement a system to educate your Major Subcontractors and
Critical Assembly Suppliers
Approve their counterfeit risk mitigation control plans
Audit their procedures and processes
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56. We want your feedback!
Win 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.
57. * Complimentary BOM risk
analysis for today’s viewers *
• You send a Parts / Materials List…
– AVL, AML, BOM, Parts List of more than 500+ records
• You’ll get a free Counterfeit Risk Analysis
– Counterfeit and High Risk Parts on your BOM
• Register via email
– Subject: “ERAI Webcast Offer”
– Email: ERAI@IHS.com
58. Questions?
Thank you for attending today’s webcast.
All other inquiries, please email:
ERAI@IHS.com