12. All types of components are being counterfeited, even passives. % of reported counterfeits from ERAI database, 2004 to present Counterfeit -What is Being Counterfeited?
Good Morning (actually make that Good Afternoon if you are joining us from across the pond) It’s a pleasure to be with you today. Thank you Andrew Reese - Supply & Demand Chain Executive magazine and Rory King and his team at I H S for organizing this worthwhile event and for inviting ERAI to participate. And a warm Thank YOU to all of you who have dialed in.
Today I want to bring you up to speed on what is going on out there in the supply chain that will help your organization avoid a counterfeit incident.
Before we begin let me tell you about myself and ERAI ERAI is a privately held global information services organization that monitors, investigates and reports issues that are affecting the global supply chain of electronics. Since 1995, ERAI has been the industry's primary reporting and investigation service, providing information and risk mitigation solutions to electronics professionals worldwide. We investigate issues ranging from past due invoices, credit card fraud and identity theft to today’s most prevalent risk which is the purchase and or sale of counterfeit parts. ERAI maintains the worlds largest database of known Suspect Counterfeit and High Risk Parts. Our objective is to help you mitigate risk. We give our Members the market intelligence they need to make the best decisions possible when selecting vendors and procuring allocated or obsolete parts. I am the company’s co-founder and currently serve as Vice President. I am directly in charge of and oversee all day-to-day operations relative to complaints processing, counterfeit avoidance, dispute resolution, contract review and the ERAIescrow department.
When I provide a training I like to start at the root of a problem.. Here’s what we know. China became a fully-fledged member of the international trading system in 2001. The amount of counterfeit electronic components has arisen alongside the rise of international trade. This graph demonstrates the rapid rise of Chinese Exports between 2000 - 2006
Because I know most of you here today are Members of GIDEP I am going to use their data to demonstrate how the rise of counterfeit incidents directly correlates to Chinas increase in exports.
Unfortunately counterfeiting is not viewed as a serious problem on its own; It’s really only when public health and safety are endangered that the threats of counterfeiting are taken seriously.
You’re probably all seen these pictures. Circuit boards being heated up. Solder melting Components being removed.
This is the reality of today’s open market.
This could be where your parts came from if there is no product traceability.
This could be the “Independent Distributor” your supplier just used to fill your purchase order.
Online trading platforms like these open the doors for anyone to sell anything with few or no rules or regulations. China has taken full advantage of these open trading portals and as a result the counterfeit component trade has flourished. Establishing a rigorous approved vendor process MUST be an essential part of your counterfeit avoidance program. If your organization is a Government Prime Contractor, you should have a firm policy prohibiting your procurement agents from making ANY purchases outside of your approved vendors list when obtaining parts from the Open Market (i.e.: Independent Distributors)
Anything and everything is counterfeited. While this graph demonstrates that the majority of counterfeit incidents involve integrated circuits, ERAI has proven virtually nothing is off limits.
Counterfeit have been identified in Critical Safety and High Reliability applications. 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.
Failure to overcome today’s procurement challenges is not an option.
According to the survey conducted by the US Department of Commerce: all elements of the supply chain have been directly impacted by counterfeit electronics; • 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; • most organizations do not know who to contact in the U.S. Government regarding counterfeit parts; • stricter testing protocols and quality control practices for inventories are required; and • most DOD organizations do not have policies in place to prevent counterfeit parts from infiltrating their supply chain
In September 2007, in response to the increasing volume of counterfeit electronic parts entering the aerospace supply chain, Brian Hughitt formed the SAE International G-19 Committee. The committee was tasked with developing a document that would standardize requirements, practices and methods related to counterfeit parts risk mitigation. The standards are suitable for use in aeronautic, space, defense, civil and commercial electronic equipment applications 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.
The committee is comprised of Industry Associations, Independent Distributors, Authorized Distributors, OEM’s, Test labs and Government Prime Contractors. The Chairman of the G-19 Committee is Phil Zulueta of JPL / California Institute of Technology.
Here is a representative sample of the Committees Members.
G-19 is multilayered counterfeit risk mitigation initiative. The group is addressing counterfeit Avoidance, Detection, Mitigation and Disposition at all possible points of entry. AS5553 = OEM AS6081 = Independents AS6171 – Testing/Inspection Facilities
AS5553 was created in response to a SIGNIFICANT and INCREASING volume of counterfeit electronic parts entering the supply chain.
AS5553 requires the organization to develop AND implement a counterfeit electronic parts control plan that documents its processes for: risk mitigation disposition reporting of counterfeit parts The control plan must address Parts Availability Purchasing (Vendor Analysis/Selection) Purchasing Information (i.e. Contract Requirements) Verification of Purchased Product (Inspection/Testing) Material Control(Confiscation/Destruction) Reporting (ERAI/GIDEP)
During design, proposal and program planning efforts, organizations should assess the long term availability of authentic parts and part sources for production and support of systems. When assessments indicate availability risks, organizations should take the steps necessary to reduce exposure to counterfeit parts, including, for example: Obsolescence can increase the risk of acquiring counterfeit electronic parts. To reduce the likelihood of purchasing counterfeit parts, electronic equipment manufacturers should proactively manage the life cycle of their products through the use of a Diminishing Manufacturing Sources and Material Shortages (DMSMS) management plan.
It was quickly adopted by the Department of Defense August 31, 2009.