counterfeit risk mitigation 06 21 2011 (2)
DESCRIPTION
TRANSCRIPT
Counterfeit Risk Mitigation
Bob Braasch, Sr Director Technical Support, IHS
June 22, 2011
Copyright © 2011 IHS Inc. All Rights Reserved. 2
Dynamic Nature of Supply ChainsSupply chains operate in the dynamic context of external forces…
Material Mfrs.
Component Mfrs. Product Mfrs.(OEMs and EMS)
End Users
Supply
Products
Components
Demand
Materials
Product Trends:• Technology• Features• Cost• Energy Efficiency• Competitive
Dynamic Context
Regulations:• RoHS• Export• REACH• Conflict
Minerals
Part Trends• Technology• Demand• Supply• Obsolescence• PCNs• Counterfeits
Economy• Market volatility• Product demand
Unique MarketTrends & Pressures• A&D• Consumer• Medical Dev.• Telecom
Supply• Natural Disasters• Raw Materials
Costs• Supply• Energy and Shipping costs
Corporate Product Stewardship
Copyright © 2011 IHS Inc. All Rights Reserved. 3
IHS Design & Supply Chain SolutionsParts, Materials and Environmental Offerings
Part Search & ResearchBOM Analysis• Lifecycle• Availability• Compliance• Counterfeits• Alternate
Parts
EOL / PCN Alerting and Management
Counterfeit Part Risk
ManagementSupplier Risk Management
Compliance and Lifecycle tracking for
parts outside reference
databases
Product Regulation Tracking
Electronics Supply Chain Analysis• Teardown• Compone
nt Price Tracker
4DOnline Products
Regulation Tracking
Content Services
ERAI CounterfeitsPCNAlert
Parts Universe & BOM Manager
Teardown, Price Tracker
PCNAlert: acquired 2007ERAI (exclusive): partnership
2011
EIATrack: acquired 2011iSuppli: acquired 2010
Copyright © 2011 IHS Inc. All Rights Reserved. 4
Obsolescence & Counterfeit Correlation Where we see Counterfeits we see Discontinued Parts
ANALOG IC
CAPACITOR
Conne
ctor
Consu
mer
IC
DIODE
Electro
mec
hanic
al
INDUCTOR
INTERFACE IC
LINEAR R
EGULATOR
LOGIC
IC
MEM
ORY IC
MIC
ROPROCESSOR IC
OPTOELECTRONIC
S
Oscilla
tor
Part N
umbe
r Only
PASSIVE F
ILTER
PROG LOGIC
IC
RESISTOR
RF/Micr
owav
e Com
pone
nts/
Mod
ule
SENSOR
TELECOM
/DATACOM
IC
TRANSFORMER
TRANSISTOR
TRIGGER D
EVICE
0
100
200
300
400
500
600
700
800
Obsolescence associated with Identified Counterfeit Parts
Sum of # of Counterfeit Parts Sum of # of Obsolete Parts
Copyright © 2011 IHS Inc. All Rights Reserved. 5
“The presence of counterfeit electronic parts in the Defense Department’s supply chain is a growing problem that government and industry share a common interest in solving.”
Carl Levin, D-Michigan, and Sen. John McCain, R-Arizona
March 2011
Congress Investigation LaunchedMarch of 2011 top senators launch investigation
Senate Armed Services Committee is seeking information from defense contractors and subcontractors regarding the extent of suspect counterfeit electronic parts…
• Spreadsheet listing each suspect counterfeit part identified in 2009 & 2010 intended for use by DOD…
• Policies related to record keeping, handling, reporting & disposition of suspect counterfeit electronic parts…
Copyright © 2011 IHS Inc. All Rights Reserved. 6
Manufacturers ResponsibilityFake Parts in U.S. Military
• June 16th 2011, CNN broadcast
• Counterfeit parts impact 40% of Pentagon’s Supply Chain according to U.S. Commerce Dept study
• Senator Brown (OH) recommends DOD cancel supplier contracts when counterfeits are found in their supply chain http://www.cnn.com/video/#/video/bestoftv/2011/06/16
/exp.nr.seg.fake.military.parts.cnn?iref=allsearch
Copyright © 2011 IHS Inc. All Rights Reserved. 7
Costs can be ExtremeHard & soft costs add up
• Hard costs in millions are not uncommon
• Unrecoverable supplier payments
• Entire product immediately taken off line or out of service
• Soft costs can include
• Brand damage
• Product rollout delays
• Rework delays
• Urgent reprioritization
• Possible loss of life
Copyright © 2011 IHS Inc. All Rights Reserved. 8
Industry Standards & ReportsNew & updated standards expected in 2011
IDEA 1010B update • Standard for electronic part
inspection• Released April 2011
AS5553A update intended for OEMs• Expected in balloting by end of 2011
AS6171 intended for Test Providers• Standardize practices to detect
counterfeits & ensure consistency of test techniques
• Expected in balloting by end of 2011
AS6081 intended for Distributors• Counterfeit avoidance requirements• Currently in balloting
• ARP6178 tool to access counterfeit risk of Distributors
• Expected in 2011
SAE AS5553 issued April 2009
Copyright © 2011 IHS Inc. All Rights Reserved. 9
Where does it come from?E-Waste
• The vast majority of product being sold in the China Open Market originates from e-waste.
• Unknown quantities of e-waste are exported from China to component buyers around the world.
• Nearly 75 million dollars in revenue is generated for the local Chinese Government in the city of Shantou alone.
• What incentive does the government have to control the import or export of this product?
• Much of the e-waste is remarked and counterfeited.
• Most of the distributors operating in and around Shenzhen have no experience in handling, storing or selling electronic components.
Copyright © 2011 IHS Inc. All Rights Reserved. 10
Source: % of reported counterfeits from ERAI, 2004 to present
What’s Being Counterfeited?All types of components are being counterfeited, even passives...
Copyright © 2011 IHS Inc. All Rights Reserved. 11
Industry Standards & ReportsGIDEP and ERAI are the counterfeit reporting entities
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*0
100
200
300
400
500
600
700
800
900
1000
ERAI
GIDEP
Component Mfrs
Others
Yearly Counterfeit Reports by Source
Counterfeit Reports by Source 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*ERAI 0 1 7 21 234 479 490 942 603 314 571 476GIDEP 0 1 4 8 10 16 18 30 15 19 247 13Component Mfrs 0 0 0 0 0 0 0 0 0 2 6 0Others 0 0 0 0 0 0 0 98 98 442 44 0
Source Total PercentERAI 4,138 79%GIDEP 381 7%Component Mfrs 8 0%Others 682 13%
As of May 12, 2011
Copyright © 2011 IHS Inc. All Rights Reserved. 12
Exclusive Partner to Only IHSOne provider of counterfeit alerts and supply chain risk mitigation
12
Copyright © 2011 IHS Inc. All Rights Reserved. 13
Who is ERAI Inc?
• Founded in 1995
• ERAI is an information services organization that monitors, investigates and reports issues affecting the global electronics supply chain
• ERAI provides tools to mitigate risks on substandard parts, counterfeit parts and vendors
• Subscribers include OEMs, CMs, Distributors, OCMs, government agencies and industry associations
• Founding & active participant in SAE International G-19 Counterfeit Electronic Components Committee and several sub-groups
Copyright © 2011 IHS Inc. All Rights Reserved. 14
How Risk Enters Your Supply Chain Intended and unintended ports of entry for counterfeits
1. Many unsafe part & supplier “sources”
• Online Broker Search Engines
• Ease & convenience of Googling potential valid parts
• Engineers who make maverick purchases
2. Counterfeit Suppliers have large audience of clients
• Professional looking websites
• Rapid access to millions of parts
• Minimal supplier validation
• Quick & easy access to a large audience of buyers
Request for QuoteRequest for Quote
Request for Quote…………
Request for Quote
Copyright © 2011 IHS Inc. All Rights Reserved. 15
15
But No Supplier is Immune from RiskLack of accountability and traceability allows counterfeits to enter
“It is not uncommon, however, for authorized distributors to purchase parts outside of the OCM supply chain in order to
fulfill customer requirements – 58 percent purchase parts from
other sources.
Specifically, 47 percent of authorized distributors procure
parts from independent distributors, 29 percent procure
from brokers, and 27 percent procure from Internet-exclusive
sources.”
Source: U.S. Department of Commerce, Office of Technology Evaluation,Counterfeit Electronics Survey,
November 2009.
Copyright © 2011 IHS Inc. All Rights Reserved. 16
Best Practices to Avoid RiskStay Within Your Trusted Supply Chain
1. Buy direct from the Factory
2. Purchase from Approved Vendor / Manufacturer
3. Procure from Franchised and Authorized Sources
4. Leverage only Approved Independent Distributors• ERAI Members
5. Validate Parts and Sources• Aftermarket Sources• Alternate Parts• Leverage U.S. Government QML/QPL• Leverage other qualifying authorities
Test appropriately Contractually define your expectations..
Copyright © 2011 IHS Inc. All Rights Reserved. 17
How do IHS and ERAI help?Market Intelligence to Mitigate Counterfeit Risk
AUTHORIZATION REQUIRED
AUTHORIZATION REQUIRED
ERAI notices GIDEP notices
Copyright © 2011 IHS Inc. All Rights Reserved. 18
Example: Infineon BTS716G Alerts are accessible via the IHS product
Copyright © 2011 IHS Inc. All Rights Reserved. 19
Example: Infineon BTS716G Customers alerted to counterfeit incident
• Subscribers of IHS 4DOnline BOM Manager, COMET, and Parts Universe have access to alerts from ERAI, GIDEP, and other sources.
• Subscribers to the IHS-ERAI solution provides ERAI membership, giving them access to ERAI’s comprehensive market intelligence community, tools, and services.
Alert!
Copyright © 2011 IHS Inc. All Rights Reserved. 20
Provides Access to Complete DetailsMembership provides comprehensive market intelligence
Copyright © 2011 IHS Inc. All Rights Reserved. 21
Example: Rockwell R6502APReported Parts Detail
Copyright © 2011 IHS Inc. All Rights Reserved. 22
Example: Rockwell R6502APAll Available Images, Test Reports, Inspection, etc.
Copyright © 2011 IHS Inc. All Rights Reserved. 23
Ability to View Supplier Report CardExample
Copyright © 2011 IHS Inc. All Rights Reserved. 24
Example: AAOK ElectronicsPast due invoices, wire fraud, faulty product for example…
Copyright © 2011 IHS Inc. All Rights Reserved. 25
View Real Stock on Available PartsLimit risk exposure from fake sources and price games
Copyright © 2011 IHS Inc. All Rights Reserved. 26
BOM Risk Analysis & Monitoringvia ERAI BOM Scrubber
Copyright © 2011 IHS Inc. All Rights Reserved. 27
BOM Analysis: Risk IdentifiedProvides counterfeit details on your BOM
Copyright © 2011 IHS Inc. All Rights Reserved. 28
28
Questions?
Copyright © 2011 IHS Inc. All Rights Reserved. 29
29
Appendix
Copyright © 2011 IHS Inc. All Rights Reserved. 30
Access to Counterfeit IncidentsOver 10 years of counterfeit part and supplier report history