Download - Supply & Demand Chain Executive Magazine

Best practices and techniques for mitigating risks Date: Wednesday, February 23, 2011

Time: 8:00 am PT | 11:00 am ET | 4:00 pm London | 16:00

Kristal SniderMember, SAE G-19 Committee

Vice President, ERAI Inc.3899 Mannix Drive, Ste. 421-422, Naples, FL 34114

Tel: 239-261-6268, Fax: 239-261-9379Email: [email protected]

Counterfeit Avoidance - Yesterday, Today, Tomorrow...

Meeting Objective

Review available solutions/resources that can reduce the potential of acquiring a counterfeit electronic component.

ERAI-Overview

• Founded in 1995• Mitigate Risk of Parts, Customers & Vendors• Provide up to date information on Counterfeit, Faulty & High-Risk

Parts• Real-time Industry Monitoring & Reporting Services• Real-time High-Risk and Counterfeit Part Reporting• Bill of Material / Assembly Cross Checking against High-Risk Parts

Database• Vendor & Customer Analysis• Proactively Prevent Losses & Reoccurring Problems• Access to Search Risk Mitigation Tools• Fair & Impartial Investigation Services• Stay Informed on Current Issues Affecting the Supply Chain

© 2011 ERAI Inc.

Counterfeit-Origin

2001 – China Admitted to WTO

Counterfeit-Origin

Counterfeit--Origin

7

Counterfeit-E-Waste

Laborer de-soldering circuit boards over a coal-fired grill. Rock in the box is where boards are hit to remove solder. Pliers are used to pluck off chips which go into various buckets. The boards are then tossed into a pile for open burning.

© Basel Action Network 2006.

Counterfeit-E-Waste

Counterfeit-Portals of Entry

Counterfeit -Portals of Entry

• Rapid access to millions of parts

• Minimal membership requirements

• Quick & easy access to a large audience of buyers

© 2011 ERAI Inc.

All types of components are being counterfeited, even passives.

% of reported counterfeits from ERAI database, 2004 to present

Counterfeit-What is Being Counterfeited?

Counterfeit -Impact

Counterfeit - Impact

Impact of using counterfeit parts or materials• Potential loss of life• Espionage• Monetary loss• Liability• Lack of availability of products for customer use• Loss of customer/public trust• Brand damage

© 2011 ERAI Inc.

Counterfeit-Where the industry has fallen short

• Lack of dialogue between all organizations in the U.S. supply chain.

• Companies and organizations assume that others in the supply chain are testing parts.

• Lack of traceability in the supply chain.

• Insufficient chain of accountability within organizations.

• Recordkeeping on counterfeit incidents by organizations has been limited.

• Stricter testing protocols and quality control practices for inventories are required.

• DOD organizations have not had policies in place to prevent counterfeit parts from infiltrating their supply chain.

© 2011 ERAI Inc.

17

Formation of G-19 (Sept. 2007)

-Industry Working Together To Craft A Solution

OrbitalSciences

ArrowElectronics

Northrop Grumman

Integra Technologies

Honeywell

Boeing

Jabil

SMTAERI

ERAIIDEAAIA

NASAJPL

G-19

© 2011 ERAI Inc.

SAE G-19 Committee Members & Liaisons

US Government Members …• DCMA• Defense Logistics Agency, DSCC• MDA• NASA/JPL• Navy-Crane• NSWC Crane• SUBMEPP• Tinker Air Force• US Army – AMRDEC

Industry Members …• 3M• Boeing• General Dynamics• Honeywell• L-3 Communications• Lockheed Martin• PerkinElmer• Plexus• 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

Representation from Government, Aerospace, Military, & Commercial

BrokersIndependent

Franchise

CommercialDefenseSpace

InspectionTest

G-19 - A Multilayered Counterfeit Risk Mitigation Initiative

© 2011 ERAI Inc.

AS5553 RationaleAS5553 Rationale

AS5553-Requirements: 4.1 Counterfeit Electronic Parts Control Plan

Risk Mitigation

Disposition

Reporting

Design, Proposal, and Program Planning

Obsolescence Management (DMSMS)

AS5553 -Requirements: 4.1.1 Parts Availability

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 suppliersDo 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 riskComing Soon: ARP6178

Ask for supply chain traceabilityBe 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.

AS5553 - Requirements: 4.1.2 Purchasing

AS5553-Requirements: 4.1.3 Purchasing Information & 4.1.4 Verification of Purchased Product

APPENDIX D - PROCUREMENT CONTRACT REQUIREMENTS

APPENDIX E - PRODUCT ASSURANCE

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.

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.

Reporting

AS5553 Adopted By DoD

G-19-ERAI Involvement

ERAI Serves On:• Original Member of

G-19 (AS5553)• Member of G-19D

(AS6081)• Member of G-19DR• Member of G-19CI

(Continuous Improvement/AS5553 Rewrite to ensure document is applicable in both US and foreign markets)

Meeting Schedule:Tuesday 10:00am–12:00pm EST

G-19CI – AS5553 Re-write

Bi-Weekly

Thursday 11:00am-1:00pm EST

G-19D – AS6081 Development Team

Weekly

Other

G-19DR – Distributor Assessment Manual/Survey Team

As Required

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.

Thank YouKristal SniderMember, SAE G-19 CommitteeVice President, ERAI Inc.3899 Mannix Drive, Ste. 421-422, Naples, FL 34114Tel: 239-261-6268, Fax: 239-261-9379Email: [email protected]