Registration Management Committee (RMC)
Counterfeit Parts Prevention
& AS9100
Atlanta, GA
July 23, 2010
Kevin Beard
Company Confidential
Auditor Workshop
Atlanta, GA
July 22-23, 2010
1
• 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
Atlanta, GA
July 22-23, 2010
2
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.
Atlanta, GA
July 22-23, 2010
3
Counterfeit Parts Origin
Atlanta, GA
July 22-23, 2010
4
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.
5
Atlanta, GA
July 22-23, 2010
5
Counterfeit Overview
Atlanta, GA
July 22-23, 2010
6
How Counterfeits Enter The
Supply Chain
7
Atlanta, GA
July 22-23, 2010
7
Counterfeit Overview
8
Atlanta, GA
July 22-23, 2010
8
Counterfeit Overview
9
Atlanta, GA
July 22-23, 2010
9
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
Atlanta, GA
July 22-23, 2010
10
Due Diligence Is Essential
11
Atlanta, GA
July 22-23, 2010
11
12
12
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.
Atlanta, GA
July 22-23, 2010
13
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)
Atlanta, GA
July 22-23, 2010
14
Industry Working Together
G-19
NASA
JPL
Industry
DOD
Primes
Distributor
Community
SAE
G-19
ERAI
IDEA
GIDEP
AIA
Certification
Bodies
Accreditation
Bodies
Internat.
Expansion
Atlanta, GA
July 22-23, 2010
15
G-19 The Way Forward
AS TBD
AS 6081
AS 5553
Atlanta, GA
July 22-23, 2010
16
Atlanta, GA
July 22-23, 2010
17
AS5553 Focus
• Parts Availability
• Purchasing Process
• Supply Chain Traceability
• Procurement Contract Requirements
• Product Assurance
• Material Control
• Reporting
Atlanta, GA
July 22-23, 2010
18
AS 5553 -Purchasing Process
• Assess sources of supply
• Assess risk
– Interview
– Audit
– Alerts
• Make Risk Based Decisions
• Maintain approved supplier list
Atlanta, GA
July 22-23, 2010
19
20
21
The Way Forward
Brokers
Independent
Franchise
Commercial
Defense
Space
Atlanta, GA
July 22-23, 2010
Inspection
Test
22
Auditing Counterfeit Parts
Prevention within AS 9100
• Can We Audit For Counterfeit Parts
Prevention within
– AS9100b?
– AS9100c?
• Explicit/Implied?
– What Parts of the Standard?
Atlanta, GA
July 22-23, 2010
23
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
Atlanta, GA
July 22-23, 2010
24
Counterfeit Parts & The Industry Model
DOD, NASA, Civil Aviation, Etc.
Primes
Primes
Design Resp
Industry Supply
Chain
Primes
More Complex
Procurements In
Supply Chain
Component
Not Design Resp
Sub-System
Sub-Component
Parts OCMs
&
Aftermarket
Franchised
Distributor
Other Type
Distributor
•Stocking
•Broker
•Independent
Other
Sources
•Surplus
•Open Market
•Recyclers
•Etc.
Counterfeit Parts Entering the Supply Chain
Atlanta, GA
July 22-23, 2010
25
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
Atlanta, GA
July 22-23, 2010
26
SAE AS5553 & Risk Hierarchy
Risk Hierarchy in
AS 9100c
Highest Risk
_
_
_
OCM
Supplier
Assessment
_
_
Supplier
Audited &
Approved
Test _/ Insp
Population
_
_
Small %
Life Test
_
_
_
_
Test & Insp
Level
_
1X Visual
Inspection
SCM Strategy
NonCritical
Source of
Supply
100%
_
_
ID/Traceability
Product &
_
Application
_
_
In Business
< 1 Year
& Unknown
Financials
_
Configuration Management
_
_
Supplier
with
GIDEP &
ERAI
Alerts
_
Design Lifecycle Approach
Life
Dependent
Lowest Risk
?? How Can This Approach Be Applied in AS 9100b/c ??
Atlanta, GA
July 22-23, 2010
27
Counterfeit Parts & The Industry Model
• AS9100 Applicability
– Parts Qualification Concept
» Creation of Design Baseline
– Configuration Management Concept
» Control of Design Baseline
– Application In Supply Chain
» Robust Procurement Strategy
Atlanta, GA
July 22-23, 2010
28
Counterfeit 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 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
Atlanta, GA
July 22-23, 2010
29
Scenario 1
Direct Purchase of OCM Parts
DOD, NASA, Civil Aviation, Etc.
Primes
Parts OCMs
&
Aftermarket
Primes
Primes
C
o
n
t
r
o
l
Franchised
Distributor
Sub-System
Component
Sub-Component
Other Type
Distributor
•Stocking
•Broker
•Independent
Other
Sources
•Surplus
•Open Market
•Recyclers
•Etc.
Where Are The Risks?
Where Do We Focus The Audit
Atlanta, GA
July 22-23, 2010
30
Scenario 2
Purchase From Franchised Distributor
DOD, NASA, Civil Aviation, Etc.
Primes
Primes
C
o
n
t
r
o
l
Parts OCMs
&
Aftermarket
COTC
Primes
Franchised
Distributor
Sub-System
Component
Sub-Component
Other Type
Distributor
•Stocking
•Broker
•Independent
Other
Sources
•Surplus
•Open Market
•Recyclers
•Etc.
Where Are The Risks?
Where Do We Focus The Audit
Atlanta, GA
July 22-23, 2010
31
Scenario 3
Purchase From Other Type of Distributor
DOD, NASA, Civil Aviation, Etc.
Primes
Primes
Parts OCMs
&
Aftermarket
Primes
C
o
n
t
r
o
l
Sub-System
Component
Sub-Component
Compliance
Verification
Franchised
Distributor
Where Do We Focus The Audit
Compliance
Verification
Where Are The Risks?
Other Type
Distributor
•Stocking
•Broker
•Independent
Atlanta, GA
July 22-23, 2010
No COTC
Other
Sources
•Surplus
•Open Market
•Recyclers
•Etc.
32
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??
Atlanta, GA
July 22-23, 2010
33
Audit Approach to CP Prevention
•Themed Approach to Audits
– Parts Qualification
– CM & Traceability Controls
– Outsourcing/Supply Chain Control
– Others??
Atlanta, GA
July 22-23, 2010
34
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??
Atlanta, GA
July 22-23, 2010
35
CM & Traceability Control Focused Audits
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
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
Where in AS9100 can you audit these activities??
Atlanta, GA
July 22-23, 2010
36
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
Atlanta, GA
July 22-23, 2010
37
AS Standards Used for CP Prevention
DOD, NASA, Civil Aviation, Etc.
Primes
Primes
Sub-System
Component
AS 9100 & AS 5553
Primes
Sub-Component
Parts OEMs
&
Aftermarket
Franchised
Distributor
Other Type
Distributor
•Stocking
•Broker
•Independent
Other
Sources
•Surplus
•Open Market
•Recyclers
•Etc.
AS9120 & AS6081
Atlanta, GA
July 22-23, 2010
38
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
Atlanta, GA
July 22-23, 2010
39
Linking AS9100c to AS5553
Attribute
Planning of
Product
Realization
AS9100
AS 5553
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 Plan
4.1.1 – Obsolescence Control Plan
7.1.2 – Process for managing Risk
App A.1-Parts Availability
App 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 Availability
App A.2 - Obsolescence
Management
7.2.2.d – SR of the product are determined
Atlanta, GA
July 22-23, 2010
40
Linking AS9100c to AS5553
Attribute
Design
AS9100
7.3.1 – D&D planning shall consider ability
to produce, inspect, test and maintain
product
AS 5553
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
Atlanta, GA
July 22-23, 2010
41
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
App B – Procurement Approach
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.
App B – Procurement Approach
7.4.2.a – Req’ts for approval of prod, procedures, processes &
Equip.
Verif of Purch
Product
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
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
Atlanta, GA
July 22-23, 2010
42
Linking AS9100c to AS5553
Attribute
Production
Planning
AS9100
AS 5553
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
Inspection
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.
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……
Atlanta, GA
July 22-23, 2010
43
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!
Atlanta, GA
July 22-23, 2010
44
Counterfeit Part Prevention
Which Device Do You Want In The
Airplane you are flying on?
Counterfeit
Known Good Part
Questions?
Atlanta, GA
July 22-23, 2010
45