Counterfeit parts prevention kristal snider and kevin beard

Kristal Snider – ERAIKristal Snider – ERAIKevin Beard - NQAKevin Beard - NQA

Counterfeit Parts Prevention & AS9100

Introductions Introductions

Kristal– President ERAI– Member G-19– X– X

Presentation Intent– Discuss Industry Problems with Counterfeit Parts– Discuss Industry Efforts On Counterfeit Part Prevention– Discuss Role of G-19 & AS5553– Discuss Methods for Auditing Counterfeit Parts Prevention

within AS 9100

3

About ERAI

• 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

4

Objective

-Scope

-Impact

-Awareness

Key Industry Organizations

Training / Conferences

-Industry Efforts

AS5553

-Resources

5

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 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.

*Parts which have been refinished, upscreened, or uprated and have been identified as such, are not considered counterfeit.

6

Origin

7

Counterfeit Overview-Scope

88

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.

99

E-Waste

Workers extract plastics from discarded electronics in Guiyu, a few hours' drive northeast of Hong Kong. The city has 5,500 family workshops handling e-waste.

© 2006 The Seattle Times Company

10


11


2001 – China Admitted to WTO

12


13

How Counterfeits Enter The Supply Chain

14

Portals of Entry

• Rapid access to millions of parts

• Minimal membership requirements

• Quick & easy access to a large audience of buyers

• Burn customer and re-register using a new name

15

HIGH RISK AND COUNTERFEIT PARTS REPORTED BY ERAI

16


17


18

Counterfeit Overview-Impact

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.

Source: Dept of Commerce

19


Dangerous FakesHow counterfeit, defective computer components from China are getting into U.S. warplanes and ships By Brian Grow, Chi-Chu Tschang, Cliff Edwards and Brian Burnsed

The American military faces a growing threat of potentially fatal equipment failure—and even foreign espionage—because of counterfeit computer components used in warplanes, ships, and communication networks. Fake microchips flow from unruly bazaars in rural China to dubious kitchen-table brokers in the U.S. and into complex weapons. Senior Pentagon officials publicly play down the danger, but government documents, as well as interviews with insiders, suggest possible connections between phony parts and breakdowns.

In November 2005, a confidential Pentagon-industry program that tracks counterfeits issued an alert that "BAE Systems experienced field failures," meaning military equipment malfunctions, which the large defense contractor traced to fake microchips. Chips are the tiny electronic circuits found in computers and other gear.

The alert from the Government-Industry Data Exchange Program (GIDEP), reviewed by BusinessWeek (MHP), said two batches of chips "were never shipped" by their supposed manufacturer, Maxim Integrated Products in Sunnyvale, Calif. "Maxim considers these parts to be counterfeit," the alert states. (In response to BusinessWeek's questions, BAE said the alert had referred erroneously to field failures. The company denied there were any malfunctions.)

In a separate incident last January, a chip falsely identified as having been made by Xicor, now a unit of Intersil in Milpitas, Calif., was discovered in the flight computer of an F-15 fighter jet at Robins Air Force Base in Warner Robins, Ga. People familiar with the situation say technicians were repairing the F-15 at the time. Special Agent Terry Mosher of the Air Force Office of Special

Investigations confirms that the 409th Supply Chain Management Squadron eventually found four counterfeit Xicor chips.

20


It is estimated, “as many as 15% of all the spare and replacement microchips the Pentagon buys are counterfeit.”

Robert P. Ernst Naval Air Systems Command's Aging Aircraft

Program Patuxent River, MD

"What we have is a pollution of the military supply chain."

Retired four-star General William G.T. Tuttle Jr Defense Industry ConsultantFormer Chief of the Army Materiel Command

Source: Business Week

21


EE-A-06-01 Test failures at a defense contractor were found to be microcircuits containing many different chips

EE-A-06-03 Supplier of military hardware found suspect counterfeit microcircuits having dual part number markings

EE-A-06-04 Microcircuits that failed product testing were found to have chips from another source

M9-A-07-01 During manufacturing of a military product, suspect counterfeit transistors were functional failures

6E-P-07-01 Memory device supplier confirmed parts marked with their name did not contain their chips

UY7-P-07-01 Microcircuits, that failed electrical testing, were found to contain chips from another manufacturer

NB4-P-07-01 Suspect counterfeit microcircuits, from an unauthorized distributor, found during testing at an aerospace supplier

J5-A-07-01 Independent distributor supplied suspect counterfeit parts (not available from original supplier) to defense plant

J5-A-07-02 Microcircuits, supplied by an independent distributor, were suspect counterfeit (device markings not authentic)

A2W-A-07-01 Suspect counterfeit transistors failed electrical tests; found to have many different chips

J5-A-07-06 Programmable logic devices found to be suspect counterfeit (lot code was after manufacturer discontinued parts)

J5-A-07-09 Microcircuits found to be suspect counterfeit as the lot date code was after the manufacturer stopped production

UE-A-07-01 Suspect counterfeit microcircuits failed electrical tests; contained chips from another manufacturer

AAN-U-08-052 A government entity reported counterfeit circuit breakers in nuclear power plants

CE9-P-08-02 Military parts manufacturer reported U. S. authorities have recently intercepted many counterfeit parts shipments

UL-P-08-01 Distributor unable to provide test reports on suspect counterfeit microcircuits that failed during factory testing

D4-A-09-01 Military hardware manufacturer found suspect counterfeit programmable devices showed part remarking

22

Due Diligence Is Essential

24


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

25

What We Know

• There is a 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 is commonplace.

• There is an insufficient chain of accountability within organizations.

• Recordkeeping on counterfeit incidents by organizations is very limited.

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

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

26

Supply Chain Awareness

-Key Industry Associations

• Aerospace Industries Association (AIA) Counterfeit Parts Integrated Process Team (IPT)

• ERAI

• Independent Distributors of Electronics Association (IDEA)

• Semiconductor Industry Association (SIA) Anticounterfeiting Task Force (ACTF)

• US Chamber of Commerce Coalition Against Counterfeiting and Piracy (CACP)

27


AIA Counterfeit Parts Integrated Project Team Statement

Issue

Counterfeit parts and materials can jeopardize the performance, reliability and safety of aerospace, space and defense products. Over the last several years, increasing amounts of counterfeit material have been introduced into the supply chain. Due to diminishing manufacturing source issues, the aerospace, space and defense industries may have difficulty in continuing to obtain manufactured products designed years ago to support fielded and new systems. The challenge of avoiding counterfeit parts and materials occurs when defense contractors and the government are obliged to purchase both electronic and non-electronic parts and materials to support fielded and new systems from independent distributors/brokers.

28


-IDEA-STD-1010-A

29


To fight the growing threat of counterfeiting and piracy to the economy, jobs, and consumer health and safety, the business community, led by the U.S. Chamber of Commerce's Global Intellectual Property Center, organized itself through a broad-based business coalition, the Coalition Against Counterfeiting and Piracy (CACP).

Formed in 2004, the CACP has grown to more than 650 members, making it the largest business coalition of its kind. The coalition is committed to increasing the understanding of the negative impact of counterfeiting and piracy and to finding real solutions by working with governments, industry, opinion leaders, the media, and consumers. This year, the CACP is focusing on a few primary goals, which we believe will make a measurable impact in the fight against counterfeiting and piracy.

30


31

Supply Chain Awareness-Training/Conferences

• International Microelectronics and Packaging Society (IMAPS)

• NASA Quality Leadership Forum (QLF)

• CALCE• SMTA

32

Industry Working TogetherG-19

OrbitalSciences

ArrowElectronics

Northrop Grumman

Integra Technologies

Honeywell

Boeing

Jabil

SMTAERI

ERAIIDEA

GIDEPAIA

NASAJPL

G-19

33

G-19The Objective

Committee CharterSAE G-19Counterfeit Electronic Components CommitteeNovember 2007Scope:

The G-19 Counterfeit Electronic Components Committee is chartered to address aspects of preventing, detecting, responding to and counteracting the threat of counterfeit electronic components.

Objective:The objective of the SAE G-19 committee is to develop standards suitable for use in aeronautic, space, defense, civil and commercial electronic equipment applications to mitigate the risks of counterfeit electronic components. In this regard, the standard will document recognized best practices in component management, supplier management, procurement, inspection, test/evaluation methods and response strategies when suspect or confirmed counterfeit components are detected.

35

AS5553

• Parts Availability

• Purchasing Process

• Supply Chain Traceability

• Procurement Contract Requirements

• Product Assurance

• Material Control

• Reporting

36

AS5553-Parts Availability

37

AS5553-Purchasing Process

Purchase, whenever possible, directly from OCM or authorized distribution. Independent distributors should be used only after consideration of alternate parts, redesign, schedule adjustments and a reasonable search for material from authorized sources has been conducted.

38

AS5553-Purchasing Process

• Assess sources of supply

• Assess risk – Interview– Audit– Alerts

• Maintain approved supplier list

40

AS5553-Supply Chain Traceability

• Acquisition traceability consists of the name and location of all supply chain intermediaries from the part manufacturer to the direct source of the product.

• CoC – Yes/No

• If traceability is unknown or documentation is suspect, appropriate risk mitigation should be used.

41

AS5553- Procurement Contract Requirements

Procurement contract language should include requirements which will help ensure that conforming, authentic material be provided.

• Traceability• Inspection and Test• Liability• Insurance requirements• Warranty• Specific product specifications• Penalties• Confiscation/destruction

42

AS5553-Product Assurance

It should be established prior to procurement which party is responsible for product authenticity verification – Burn-In!

45

AS5553-Material Control

Control of Suspect or Confirmed Counterfeit Parts

In the event that product assurance actions, in-process inspections/tests, or product failure experiences indicate that parts may be counterfeit, the following steps should be implemented:

a. Physically identify the parts as suspect/counterfeit product (e.g., tag, label, mark).

b. Physically segregate the parts from acceptable non-suspect parts and place in quarantine.Quarantine should consist of physical barriers and controlled access.

c. Do not return the parts to the supplier for refund, replacement, etc., except under controlled conditions which would preclude resale of the suspect counterfeit parts into the supply chain, and to allow the supplier to conduct internal investigation.

d. Confirm the authenticity of the parts. This may include further part-level testing, communications with the part’s supposed OCM, third-party analysis, etc.

e. Upon confirmation that a part is counterfeit, identify and place on “Hold” all potential additional counterfeit parts in storage and installed in product pending disposition by appropriate authorities.

f. Report counterfeit parts in accordance with guidelines provided in Appendix G, Reporting.

46

AS5553-Reporting

47

AS5553 Adopted By DoD

48

The Way Forward- Accreditation/Certification –

49

BrokersIndependent

Franchise

CommercialDefenseSpace

InspectionTest

The Way Forward- Accreditation/Certification

50

Defense Industrial Base Assessment: Counterfeit Electronics -Resources

• Published January 2010

51

Resource Index

• AIA - www.aia-aerospace.org

• CACP - www.thecacp.com

• ERAI – www.erai.com

• IDEA – www.idofea.org

• SAE - www.sae.org

http://www.sae.org/

Auditing Counterfeit Parts Auditing Counterfeit Parts Prevention within AS 9100 Prevention within AS 9100

Can We Audit For Counterfeit Parts Prevention within– AS9100b?

– AS9100c?

Explicit/Implied?– What Parts of the Standard?

Counterfeit Parts & The Industry ModelCounterfeit Parts & The Industry Model

Aerospace Industry Challenges– Complex Products

– Complex Processes

– Small Quantity Purchases

– Long Duration Product Lifecycles

– Ever Changing Supply ChainMany 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 Model Industry Model

DOD, NASA, Civil Aviation, Etc.

Primes Primes Primes

Sub-System

Component

Sub-Component

Parts OCMs &

Aftermarket

Franchised Distributor

Other Type Distributor

•Stocking•Broker•Independent

Other Sources

•Surplus•Open Market•Recyclers•Etc.

Industry Supply Chain D

esign Resp

Not D

esign Re

sp

Counterfeit Parts Entering the Supply Chain

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

Risk Charts

SAE AS5553 Guidance

Lowest Risk

Highest Risk

Supplier withGIDEP/ERAI

Alerts

_

__

OCM

Source of Supply

Small %__

___

100%

1X Visual Inspection

______

Life Test

In Business < 1 Year

& Unknown Financials

_

_Supplier

Audited & Approved

LifeDependent

__

___

Non-Critical

Test / InspPopulation

Level of Test & Inspection

Supplier Assessment

Product & Application

?? How Can This Approach Be Applied in AS 9100b/c ??

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

– EngineeringGood Risk Identification, Analysis & Mitigation Decision ProcessesDesign Specifications that identify parts from suppliers that provide parts

with a high degree of Supply Chain Assurance

– Purchasing & Receipt InspectionProper Source Usage to Prevent Inadequate Parts from entering the

Organization’s Supply ChainSupplier Assurance of Proper Sub-Tier Source UsageProper Evaluation Techniques to Prevent Inadequate Parts from entering

the Production Process

– Production Planning & InspectionProper Production Planning that Ensures Adequate I&T of Supplier Parts at

the appropriate points in the Production Process


Sub-System

Component

Sub-Component

Parts OCMs &

Aftermarket




Other Sources


Scenario 1

Direct Purchase of OCM Parts


Where Are The Risks?

Where Do We Focus The Audit


Sub-System

Component

Sub-Component

Parts OCMs &

Aftermarket




Other Sources


Scenario 2

Purchase From Franchised Distributor

COTC

COTC-Segregation, Bonded Storage, etc.





Sub-System

Component

Sub-Component

Parts OCMs &

Aftermarket




Other Sources


Scenario 3

Purchase From Other Type of

Distributor

Co

mp

lian

ce

Ve

rifica

tion

ComplianceVerification

No COTC




Common QMS Areas of CP Common QMS Areas of CP Prevention Challenges Prevention Challenges

Requirements Definition at Proposal/Contracts Phase

Design Planning For Production and Full Life of Components

Purchasing Strategy to Support Production and Full Life of Components

Production Planning

Inspection & Test of Components

Audit Approach to CP Prevention Audit Approach to CP Prevention

Themed Approach to Audits–Parts Qualification

–CM & Traceability Controls

–Outsourcing/Supply Chain Control

–Others??

Parts Qualification Focused Audits Parts Qualification Focused Audits

Audit Focus - Procuring Organizations

• Part Life Planning - Engineering determination of Part meeting Design Need (Current Need, Future Need, Obsolescence, Etc.)

• Part Qualification Approach

• Reliability, Material Baselining, Etc.

• Procurement Strategy (Current Need, Future Need, Obsolescence, Etc.)

• Procurement Flowdowns for :

• Configuration Management, Change Notification, Sub Tier Supplier Sources, etc.

• Source Integrity

• Risk Impact on Initial Qualification and Acceptance Approach

• Risk Evaluation on Future Procurement Impacts to Initial Qualification

• X

• X

Where in AS 9100 can you audit these activities??

CM & Traceability Control Focused CM & Traceability Control Focused Audits Audits

Audit Focus – Franchise Distributor

Design Change with No Part Number Changes

Material Substitutions By OCM With No Part Number Changes

OCM Discontinuing Production of Specifically Qualified Component

Strength of COTC Chain of Custody

– Parts Control (Segregation, Bonded Storage, etc.)

– Lot Storage (Segregation by Lot Code

– Part Handling & Packaging

X

X

Audit Focus - OCM

Engineering

Procurement

Manufacturing

Inspection & Test

Parts Control (Segregation, Bonded Storage, etc.)

Lot Traceability

Lot Storage (Segregation by Lot Code)

Part Handling & Packaging

X

X

Where in AS 9100 can you audit these activities??

Outsourcing/Supply Chain Control Outsourcing/Supply Chain Control Focused AuditsFocused Audits

Supportive Requirements In AS9100c

7.2.2.e Risks have been identified (See 7.1.2)

7.3.1 D&D Planning Shall consider the ability to produce, inspect, test and maintain the product

7.3.3 The Organization shall Define ……. The drawings, parts lists, and specifications necessary to define the configuration and the design features of the product.

7.4.1 The organization shall ensure that purchased product conforms to req’ts. The type and extent of control applied…..Dependent on the effect….. on subsequent product realization or the final product

The Organization shall evaluate and select suppliers based on their ability to supply product in accordance with organ. Req’ts.

7.4.1.f determine and manage the risk when selecting and using suppliers

Various others


Sub-System

Component

Sub-Component

Parts OEMs &

Aftermarket




AS

9100 & A

S 5553

AS 9120 & AS 5553

Other Sources



AS Standards Used for CP Prevention

Challenge to NQA AuditorsChallenge to NQA Auditors

Review the AS9100c standard with a view towards– The Industry Structure

– The Challenges Facing the Industry

– Our Ability to Interact with Customer’s during Audits with Regards to Counterfeit Parts Prevention

Linking AS9100c to AS 5553 Linking AS9100c to AS 5553

Attribute AS9100 AS 5553

Planning of Product Realization

7.1.a - Object & Requirements for the product

7.1.c – Req’ts for V,V,M,M,I,T of product 4.1 – CP Parts Control Plan4.1.1 – Obsolescence Control Plan

7.1.2 – Process for managing Risk App A.1-Parts AvailabilityApp A.2 - Obsolescence

Management

7.1.3 – CM appropriate to the Product

Review of Req’ts

7.2.1.a – Req’ts Stated by Customer

7.2.1.b – Req’ts not stated but necessary for intended use

7.2.1.c – Statutory/Regulatory

7.2.2.a – Product Requirements are determined

7.2.2.e – Risks have been Identified App A.1-Parts AvailabilityApp A.2 - Obsolescence

Management

7.2.2.d – SR of the product are determined



Design 7.3.1 – D&D planning shall consider ability to produce, inspect, test and maintain product

App A.1 – Design, proposal and Program planning

7.3.3.b – Provide info for Purch, & Prod.

7.3.3.d – Specify product Characteristics essential for safe & proper use

7.3.3.e – Specify CI, KC and specific actions to be taken for these items

7.3.3 – Drawings, Part lists and Specs. Necessary to define config.

7.3.3 – material, process, manufact, & Assembly data needed to ensure conformity of product



Purchasing 7.4.1 – org shall ensure that product conforms……. The type and extent of control applied…. Dependent upon effect…….

4.1.3 – specify quality req’ts to minimize risk of being provided CP

App B – Procurement Approach

7.4.1 – The org shall evaluate & Select suppliers based on their ability to supply…

4.1.2.a – Assess sources to determine risks of receiving CP


7.4.1.f – Determine & Manage risk when selecting & using suppliers

4.1.2.a – Assess sources to determine risks of receiving CP

4.1.2.d – Assure that sources are maintaining effective processes for mitigating risks of supplying CP

4.1.2.e – Assess and mitigate risks of procuring CP from Sources other than ECM or Auth. Suppliers

4.1.2.g – If supplier/intermediaries do not have CP control plan, a risk analysis is req’d.


7.4.2.a – Req’ts for approval of prod, procedures, processes & Equip.

7.4.2.c – QMS req’ts Identification 4.1.2.f – Specify Supply Chain Traceability through all supplier intermediaries

App C – Supply Chain Traceability

7.4.2.g – Flowdown of applicable reqt’s including customer req’ts 4.1.2.g – flow down applicable req’ts for CP Control to contractor/sub contractors.

App D – Procurement Contract Requirements

7.4.2 – Org shall ensure adequacy of purch req’ts prior to comm. w/supplier

4.1.2.e – Assess and mitigate risks of procuring CP from Sources other than ECM or Auth. Suppliers

Verif of Purch Product

7.4.3 – Establ & Implement inspect. Activities necessary for ensuring that product meets req’ts

4.1.4 – The rigor of verification process shall be commensurate with product risk

7.4.3 – obtain evidence of conformity of product from supplier & review documentation

App C – Supply Chain Traceability

7.4.3 – Inspection of product upon receipt App E.1.1 – Documents and Packaging Inspection



Production Planning

7.5.1.a – The availability of information that describes characteristics of product

7.5.1.h – evidence that all production I&V have been completed

7.5.1.k – Criteria for workmanship

7.5.1 – Establish, impl, & maintain process for managing CI/KC

Production 7.5.3 – The org shall maintain the ID of the Config of product……

7.5.3 – Where traceability is a req’t, the org shall control the unique ID of product and maintain records.

4.1.2.f – If traceability is purchased parts is unavailable/suspect, a documented risk assessment is required.

Inspection 8.2.4 – The org shall M/M the characteristics of the product to verify that prod. req’ts are met.

App E – Product Assurance

8.2.4.a – Criteria for Accept/Reject

8.2.4 – Where CI/KC are ID, org shall ensure control and monitoring

8.2.4 – Where org uses sample inspection……

In ClosingIn Closing

Significant Challenges

Industry Focus Ramping Up.

What Part will We Play in Solving this Industry Problem?

Your Input Is Invited

Your Audit Efforts in this Area are Needed!

Counterfeit Part Prevention

Counterfeit Known Good Part

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

Questions?

Counterfeit parts prevention kristal snider and kevin beard

Education

Transcript of Counterfeit parts prevention kristal snider and kevin beard