counterfeit parts prevention & as9100 conference october 11, 2010 kevin beard –pres. nqa, inc....

SII ConferenceOctober 11, 2010

Kevin Beard – Pres. NQA, Inc.

Counterfeit Parts Counterfeit Parts Prevention Prevention & AS9100& AS9100

�Presentation Intent

– Discuss Industry Problems with Counterfeit Parts

– Discuss Industry Efforts On Counterfeit Part Prevention

– Discuss Role of G-19, AS5553 and Other Standards

Counterfeit OverviewCounterfeit Overview

– Discuss Role of G-19, AS5553 and Other Standards

– Discuss the Roles of Various Groups within an Organization in

Preventing Counterfeit Parts From Entering Product

– Discuss Methods for Implementing Counterfeit Parts Prevention

(CPP) within AS 9100 & Your QMS

2

What is a Counterfeit?What is a Counterfeit?

a. Parts which do not contain the proper internal construction consistent with the ordered part. (die, manufacturer, wire bonding, etc.)

b. Parts which have been used, refurbished or reclaimed, but are represented as new product.

c. Parts which have different package style or surface plating/finish than the c. Parts which have different package style or surface plating/finish than the ordered parts.

d. Parts which have not successfully completed the Original Component Manufacturer’s (OCM)’s full production and test flow, but are represented as completed product.

e. Parts sold as upscreened parts which have not successfully completed upscreening.

f. Parts sold with modified labeling or markings intended to misrepresent the parts’ form, fit, function, or grade.

3

So what is a counterfeit component? As defined by SAE Standard AS5553 a counterfeit is a copy or substitute altered or made by someone who does not have the legal right or authority to do so. Counterfeit material is material whose physical or performance characteristics have been knowingly misrepresented. Examples of counterfeit parts include, but are not limited to: a.Parts which do not contain the proper internal construction consistent with the ordered part. (die, manufacturer, wire bonding, etc.) b. Parts which have been used, refurbished or reclaimed, but represented as new product. c. Parts which have different package style or surface plating/finish than the ordered parts. d. Parts which have not successfully completed the Original Component Manufacturer’s (OCM)’s full production and test flow, but are represented as completed product. e. Parts sold as upscreened parts, which have not successfully completed upscreening. f. Parts sold with modified labeling or markings intended to misrepresent the part’s form, fit, function, or grade. *Parts which have been refinished, upscreened, or uprated and have been identified as such, are not considered counterfeit.

Counterfeit OverviewCounterfeit Overview-- Impact Impact --

US Department of Commerce Study� Counterfeiting accounts for more than 8% of global merchandise trade and is equivalent to lost sales of as much as $600B and will grow to $1.2T by 2009.

� Counterfeit Present in Many Global Locations

4 4

This data compiled by the US Department of Commerce Bureau of Industry and Security shines a bright light on the seriousness of the counterfeiting issue. “The number of incidents rose dramatically, more than doubling from 3,369 incidents in 2005 to 8,644 incidents in 2008. BIS stated this large increase can be attributed to a number of factors, such as a growth in the number of counterfeit parts, better detection methods, and/or improved tracking of counterfeit incidents.

How Counterfeits Enter The Supply ChainHow Counterfeits Enter The Supply Chain

5 5

So how do these parts make their way China to the US? The vast majority of counterfeit parts are sold by Brokers and Independent Distributors. While most of these resellers do not intentionally trade in counterfeit material some do and others simply do not have the quality standards in place to weed out nonconforming material.

EE--WasteWaste

6

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 pick up chips which go into various buckets. The boards are then tossed into a pile for open burning.

© Basel Action Network 2006.

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Many if not most of the counterfeits that are detected originate from salvaged materials. Each year the majority of the world’s electronic waste is illegally transported to China, India and other parts of Asia. This ‘trash’ is transformed into millions of dollars in profits for China. These pictures fairly and honestly depict how electronic components are quite literally plucked from circuit boards. These same parts are then refurbished and are often times remarked and are sold throughout the global supply chain as new and genuine parts.


7

Seg Market Place Material Sorting – Prepping for resurfacing / refurbishing / resale The consequences of failing to identify nonconforming product could be catastrophic.


88

Please note the number of incidents involving Critical Safety, High Reliability Industrial & Automotive & QPL QML and QPL parts are typically used in defense and national security systems. Counterfeits could therefore impact critical defense end-users and infrastructure. The rise of counterfeit parts in the supply chain is exacerbated by demonstrated weakness in inventory management, procurement procedures, recordkeeping, reporting practices, inspection and testing protocols, and communication within and across industry and government organizations. So where do counterfeits coming from?

Counterfeit Parts & The Industry Model Counterfeit Parts & The Industry Model

DOD, NASA, Civil Aviation, Etc.

Primes Primes Primes

Sub-System

Industry Supply Chain D

esign Resp

Not D

esign Resp

More Complex

Component

Sub-Component

Parts OCMs &

Aftermarket

Franchised Distributor

Other Type Distributor

•Stocking•Broker

•Independent

Other Sources

•Surplus•Open Market•Recyclers

•Etc.

Not D

esign Resp

Counterfeit Parts Entering the Supply Chain

Procurements In Supply Chain

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Discuss the industry Supply Chain Model & The Needs of the Industry Historically Fasteners Raw Materials Now with outsourcing, moving to more complex Procurements at Lower Points in the Supply Chain Aerospace Industry Challenges Complex Products Complex Processes Small Quantity Purchases Long Duration Product Lifecycles Ever Changing Supply Chain Many OCMs Go Out Of Business Prior to the End of the Product Lifecycle Supply Chain Roles In Counterfeit Parts Prevention System Integrator Design Responsible Middle Tier Organizations Non Design Responsible Middle Tier Organizations Distributors

Industry Working TogetherIndustry Working TogetherGG--1919

NASAJPL

DODIndustryPrimes

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SAEG-19

ERAIIDEAGIDEPAIA

Certification Bodies

Internat.Expansion

Accreditation Bodies

Distributor Community

Since 2004 Brian Hughitt has served as the Manager of Quality Assurance for NASA’s Office of Safety and Mission Assurance. He is responsible for Quality Program policy and requirements; he chairs NASA’s Quality Leadership Forum and Joint Audit Planning Committee; and manages the Agency’s Supplier Assessment System. It was Brian’s vision to rally representation from all sectors of the supply chain in an effort to counteract the threat of counterfeit electronic components. In 2007 Industry Associations, Independent Distributors, Authorized Distributors, OEM’s, Test labs and Government Prime Contractors all came together to form the SAE G-19 Counterfeit Electronic Parts Technical Committee.

BrokersIndependentFranchise

CommercialDefenseSpace

InspectionTest

G19 - The Way Forward

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G19 – AS 5553

AS 5553 Control Process

• Assess sources of supply

• Assess risk

• Make Risk Based Decisions

• Maintain approved supplier list

AS 5553 Focus• Parts Availability • Purchasing Process• Supply Chain Traceability • Procurement Contract Requirements • Product Assurance• Material Control • Reporting

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The outcome of this initiative was the development and subsequent release of SAE Aerospace Standard AS5553 which was published by in April 2009.

AS 5553 and Risk AS 5553 and Risk

� Risk in the Aerospace Supply Chain– Design Responsible Organizations– Manufacturing Responsible Organizations– Warehousing and Distribution Organizations

� Common Areas of Risk– Source Selection– Obsolescence– Loss of Traceability– Piece Part Configuration Changes without Notification– Many Others

� Risk Model in AS5553 – Categorization of Risk– Hierarchy of Risk Inputs & Mitigations per Category– Application of Mitigations Based on Risk Input Hierarchy

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SAE AS5553 & Risk Hierarchy

Highest Risk

Supplier with

GIDEP & ERAI Alerts

100%__

Life Test __

In Business < 1 Year

& Unknown Financials

LifeDependent

__

Lowest Risk

ERAI Alerts_

___

OCM

Source of Supply

_

___

Small %

__

_

1X Visual Inspection

Financials_

__

Supplier Audited & Approved

_

___

Non-Critical

Test / InspPopulation

Test & Insp Level

Supplier Assessment

Product & Application

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Risk Terminology Much More Prevalent in AS9100c As Appropriate and Criticality Based Terminology also supports this process

Counterfeit Parts & The Industry ModelCounterfeit Parts & The Industry Model

� Needs of the Industry– Ensure QMS Promotes Acquisition of Acceptable Parts for Integration into the Organizations Product

– Engineering� Good Risk Identification, Analysis & Mitigation Decision Processes

� Design Specifications that identify parts from suppliers that provide parts with a high degree of Supply Chain Assurancedegree of Supply Chain Assurance

– Purchasing & Receipt Inspection� Proper Source Usage to Prevent Inadequate Parts from entering the Organization’s Supply Chain

� Supplier Assurance of Proper Sub-Tier Source Usage

� Proper Evaluation Techniques to Prevent Inadequate Parts from entering the Production Process

– Production Planning & Inspection� Proper Production Planning that Ensures Adequate I&T of Supplier Parts at the appropriate points in the Production Process

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Sub-System

Scenario 1Direct Purchase of OCM Parts


Cont

Component

Sub-Component

Parts OCMs &

Aftermarket



•Stocking•Broker•Independent

Other Sources

•Surplus•Open Market•Recyclers•Etc.

Where Are The Risks?

Where Do We Focus The Audit

trol

17


Sub-System

Scenario 2Purchase From Franchised Distributor


Con

Component

Sub-Component

Parts OCMs &

Aftermarket




Other Sources




COTC

trol

18


Sub-System

Scenario 3Purchase From Other Type of Distributor


Contro Component

Sub-Component

Parts OCMs &

Aftermarket




Other Sources




Complian

ceVerificatio

n

ComplianceVerification

ol

No COTC

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Sub-System

Component

AS 9100 &

AS 5553


AS Standards Used for CP Prevention

Component

Sub-Component

Parts OEMs &

Aftermarket



•Stocking•Broker

•Independent

AS 9100 &

AS 5553

AS 9120 & AS 6081

Other Sources

•Surplus•Open Market•Recyclers

•Etc.

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In ClosingIn Closing

� Industry Challenge to Use QMS for CP Prevention– Requirements Definition at Proposal/Contracts Phase– Design Planning For Production and Full Life of Components

� Current Need, Future Need, Obsolescence, Etc.– Purchasing Strategy to Support Production and Full Life of Components

� Reliability, Material Baselining, Etc.� Lot Control Against Know Qualified Part� Lot Control Against Know Qualified Part

– Control of Subtier Suppliers for CM and Parts Qualification� Configuration Management, Change Notification, Sub Tier Supplier Sources, etc.

– Identification & Traceability Requirements� In House & Through Out Supply Chain

– Production Planning– Inspection & Test of Components based on Risk

� Significant Challenges

� Industry Focus Ramping Up.

� What Part will We Play in Solving this Industry Problem? 21

Counterfeit Part Prevention

Which Device Do You Want In The Airplane you are flying on?

Counterfeit Known Good Part

Questions?

counterfeit parts prevention & as9100 conference october 11, 2010 kevin beard –pres. nqa, inc....

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