Counterfeit parts

Company Confidential

Registration Management Committee (RMC)

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Counterfeit Parts Prevention & AS9100

Atlanta, GAJuly 23, 2010

Kevin Beard

Auditor WorkshopAtlanta, GA

July 22-23, 2010

Atlanta, GAJuly 22-23, 2010

• Presentation Intent– Discuss Industry Problems with Counterfeit

Parts– Discuss Industry Efforts On Counterfeit Part

Prevention– 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 Auditing Counterfeit Parts Prevention (CPP) within AS 9100» Internal Audits» Supplier Audits

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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.

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Counterfeit Parts Origin

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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.

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Atlanta, GAJuly 22-23, 2010 6

Counterfeit Overview


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How Counterfeits Enter The Supply Chain

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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

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Due Diligence Is Essential

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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.


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)

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Industry Working TogetherG-19

SAEG-19

NASAJPL

DOD

ERAIIDEA

GIDEPAIA

Certification Bodies

Internat.Expansion

Accreditation Bodies

Distributor Community

IndustryPrimes


G-19 The Way Forward

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AS 5553

AS 6081

AS TBD


AS5553 Focus

• Parts Availability

• Purchasing Process

• Supply Chain Traceability

• Procurement Contract Requirements

• Product Assurance

• Material Control

• Reporting

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AS 5553 -Purchasing Process

• Assess sources of supply

• Assess risk – Interview

– Audit

– Alerts

• Make Risk Based Decisions

• Maintain approved supplier list

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BrokersIndependent

Franchise

CommercialDefenseSpace

InspectionTest

The Way Forward


Auditing Counterfeit Parts Prevention within AS 9100

• Can We Audit For Counterfeit Parts Prevention within– AS9100b?

– AS9100c?

• Explicit/Implied?– What Parts of the Standard?

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Counterfeit Parts & The Industry Model

• 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

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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 Design R

esp

Not D

esign Re

sp

Counterfeit Parts Entering the Supply Chain

More Complex Procurements In

Supply Chain

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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

Lowest Risk

Highest Risk

Supplier with

GIDEP & ERAI

Alerts_

___

OCM

Source of Supply

100%__

___

Small %

Life Test ____

_

1X Visual Inspection

In Business < 1 Year

& Unknown Financials

_

__

Supplier Audited & Approved

LifeDependent

__

___

Non-Critical

Test / InspPopulation

Test & Insp Level

Supplier Assessment

Product & Application

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

Desig

n Life

cycle

Appro

ach

Configura

tion

Managem

ent

ID/Tra

ceability

SC

M S

trate

gy

Risk Hierarchy in AS 9100c

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• AS9100 Applicability– Parts Qualification Concept

» Creation of Design Baseline

– Configuration Management Concept» Control of Design Baseline

– Application In Supply Chain» Robust Procurement Strategy

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• 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 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

Component

Sub-Component

Parts OCMs &

Aftermarket



• Stocking• Broker• Independent

Other Sources

• Surplus• Open Market• Recyclers• Etc.

Scenario 1

Direct Purchase of OCM Parts


Where Are The Risks?

Where Do We Focus The Audit

Control



Sub-System

Component

Sub-Component

Parts OCMs &

Aftermarket




Other Sources


Scenario 2

Purchase From Franchised Distributor




COTC

CM?

CM?

Control



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

Control

No COTC


Common QMS Areas of CP 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

• Control of Subtier Suppliers for CM and Parts Qualification

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

• Production Planning

• Inspection & Test of Components

Does AS9100 Have Wording in These Areas??

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Audit Approach to CP Prevention

• Themed Approach to Audits– Parts Qualification

– CM & Traceability Controls

– Outsourcing/Supply Chain Control

– Others??

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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.

• Lot Control Against Know Qualified Part

• 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

• Inspection Against Qualification Unite

Where in AS9100 can you audit these activities??

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CM & Traceability Control Focused 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

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

Where in AS9100 can you audit these activities??

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Outsourcing/Supply Chain Control Focused 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

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Sub-System

Component

Sub-Component

Parts OEMs &

Aftermarket



• Stocking• Broker

• Independent

AS

9100 & A

S 5553

AS9120 & AS6081

Other Sources

• Surplus• Open Market• Recyclers

• Etc.


AS Standards Used for CP Prevention

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Challenge to Organization’s Auditors

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

» Supply Chain Structure Influence On Product

– The Challenges Facing the Industry» Counterfeit Part Risk In Organization’s Supply Chain

– Our Ability to Interact with Organization’s during Audits with Regards to Counterfeit Parts Prevention» Appropriate Interpretations & Application Of AS9100 In

Our Audits

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Linking AS9100c to AS5553 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

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Linking AS9100c to AS5553

Attribute AS9100 AS 5553

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

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Linking AS9100c to AS5553 Attribute AS9100 AS 5553

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

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Linking AS9100c to AS5553

Attribute AS9100 AS 5553

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……

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In 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!

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Counterfeit Part Prevention

Counterfeit Known Good Part

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

Questions?45

Counterfeit parts

Technology

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