The Counterfeit Challenge - Elysium · 2012-11-27 · Counterfeit Material Awareness and Prevention Training Counterfeit Control Plan Verification Training Sector Counterfeit Communications

The Counterfeit Challenge

Preventing & Detecting CounterfeitComponents In Global Supply Chain

Steven Kuritz PhD

Quality, Safety and Mission AssuranceNorthrop Grumman Aerospace Systems

Copyright 2012 Northrop Grumman Systems Corporation. All rights reserved.Approved for Public Release: Northrop Grumman Case 12-1994, 10/30/12

Customs Seizures in 2011

2Counterfeiting is a Broad ProblemCounterfeiting is a Broad Problem

Source CBP.gov


Electronics Counterfeiting

• 2011- > 1300 Incidences ofCounterfeit Electronics reported toERIA

– Double the number in 2010– Quadruple the number in 2009

• Defense industry is particularly at riskdue to budget driven serviceextensions

– System lifecycles are measured indecades

– Electronics in those systems havelifecycles of 5-10 years

– Electronic part lifecycles aremeasured in months

• Driven by commercial uses

Source GAO-12-375Source: AIAA Counterfeits Report


Counterfeit Material AwarenessWhat is Counterfeit Material?

• A copy or substitute without legal right or authority to do so

• Item whose material, performance, or characteristics are knowinglymisrepresented by the vendor, supplier, distributor, or manufacturer

• Non-conforming supplies tendered with intent to deceive

• Used or reclaimed parts misrepresented as new

• Parts suspected to be counterfeit are rigorously evaluated todetermine if material is authentic

4

Differences in marking Differences in textureindicates overspray

All photos courtesy of GIDEP


Typical Counterfeit Examples

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Authentic Part but Reclaimed

Counterfeit part

New leads butt welded onto reclaimed part – Only identified because of change of metal

Comparing two parts above a “dimple” is missing from one of the parts. X-ray analysis of the two partsshows that the top one had the wrong die inside

All photos courtesy of GIDEP


Preventing & DetectingCounterfeit Components HasBecome A Critical Challenge:

• GAO Sting Operation demonstratesavailability of counterfeit parts in theSupply Chain

• Testimony Before the Senate ArmedServices Committee RevealingCounterfeit Content Within The DoDSupply Chain (Nov 8th, 2011)

• NDAA Section 818 Requires DoD andContractors to develop systems toeliminate counterfeit parts

• Debarment Global IC & Hong DarkFor Counterfeit Parts (Jan 13th, 2012)showed how intertwined we all are

• Overarching DoD CounterfeitPrevention Guidance (Mar 2012)Expands concern to “mission criticalcomponents, critical safety items andload-bearing mechanical parts”

Counterfeit Components –Jeopardizing The Performance & Reliability Of Defense Hardware

Bagging For Sorting

Inside Market Place Ready for Packaging

Drying In The StreetsRemoving Components

How Is All ThisCounterfeit ElectronicsPossible?

e-Waste — Feedstock forCounterfeiters

Internet – Allows GlobalDistribution


FY 2012 National Defense Authorization Act

SEC 818 “Detection and Avoidance of Counterfeit Electronic Parts” Requires

Purchasing

• Requires contractors to buy electronic parts from original component manufacturersand their authorized dealers or trusted suppliers who meet established standards fordetecting and avoiding counterfeit parts.

Detection

• Requires DoD to adopt policies and procedures for detecting and avoiding counterfeitparts in its direct purchases

• Requires contractors to establish systems for detecting and avoiding counterfeit parts

Reporting

• Requires contractors who learn of counterfeit parts in the supply chain to provide writtennotification to the contracting officer, the DoD Inspector General and to GIDEP within 60days

Correction

• Makes Contractors Responsible for any rework required as an unallowable expense


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Northrop Grumman Aerospace SystemsCounterfeit Material Prevention Implementation

NGAS Counterfeit Material Prevention Strategy

Processes Training Surveillance Obsolescence ReportingNGAS Counterfeit

Material PreventionPolicy P0-016

Review/Revise SectorProcedures andT&C’s

Audit ExistingSupplier FlowdownRequirements

Counterfeit MaterialAwareness andPrevention Training

Counterfeit ControlPlan VerificationTraining

Sector CounterfeitCommunications

TPM-16 SupplierAudit ChecklistImplemented

Supplier Quality AuditTeams In Place

Supplier CounterfeitPlan Verification toAS5553

DiminishingManufacturingSources and MaterialShortages (DMSMS)Handbook

NGAS ObsolescencePolicy & Control Plan

Life Cycle Logisticsand Support

GIDEP – ReportingEvaluation andTracking

NGAS “Space Alert “and “Sentinel Alert“Tracking System

NGAS CounterfeitWebpage Information


RequiresException Below

This Line

Managing Counterfeit VulnerabilityChanges to Procurement Priorities

Level Authenticity Assurance

A • Original Component Manufacturer (OCM)

B • Franchised/Authorized Distributor, with pedigree from OCM

C • “Trusted” Distributor, with pedigree from the OCM

D • Approved Independent Distributor, with pedigree from OCM

E • Approved Independent, with broken OEM/OCM chain of custodybut with “Authenticity” testing

F • Open market (i.e., COTS), with rationale/justification and fullCustomer notification

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• Start At Level A , Move Down Only When Materiel Not Available at Higher Level

Lowest Risk

NGConcurrence

Probability of receiving counterfeit hardware increases with each levelProbability of receiving counterfeit hardware increases with each level


Risk Based Approach To Mitigation

Cost Effective Solutions Must Consider RiskCost Effective Solutions Must Consider Risk

Mitigation plans must consider complexity and criticality ofthe application

Considerations• Mission criticality• Safety-of-Flight• Redundancy• Line Replaceable Units

Mitigation may include:• Assessment of paperwork• Inspection of parts• Non-destructive and destructive testing

1 2 3 4 5

Consequence Factor

1

2

3

4

5

Pro

babi

lity

Fac

tor


Obsolescence & RedesignDMSMS Tracking & Management

• Counterfeiting is Putting Added Pressure onManaging Obsolescence Obsolescence/ DMSMS is a driver for counterfeit risks

• GSC Supplier Manufacturing Engineering Teams Close coordination with IPT’s, Engineering & Life Cycle

Logistics and Support

Consideration of obsolescence earlier in design cycle

• Authentic parts may not be available from a trustedsource

Redesign May Be NecessaryRedesign May Be Necessary


Communication and Training

• Counterfeiting is not just a supply chain issue– Supply Chain, Engineering, Quality, Logistics &

Program Management all have a role

Driving Awareness of Counterfeit RiskDriving Awareness of Counterfeit RiskCopyright 2012 Northrop Grumman Systems Corporation. All rights reserved.

Approved for Public Release: Northrop Grumman Case 12-1994, 10/30/12

Look ahead – Lessons from the Past

• Lessons from the fastener industry– In the 1980s, defective fasteners on Army tanks, Navy ships, and interstate

highway bridges caught the attention of Congress.– A study of the U.S. fastener industry by the House Subcommittee on Oversight and

Investigations documented inadequate standards and quality control. It also foundthat imported, low-grade parts were being passed off as high-strength fasteners.

– The end result was the 1990 Fastener Quality Act (FQA), which set guidelines forinspecting and labeling fasteners and accrediting test facilities.

• Today, counterfeit fasteners are not a big problem in the U.S. but ittook about 15 years

• As an industry we need to move quickly, get all parties involved fromthe distributors through the entire supply chain to the end users

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We Are Just Getting StartedWe Are Just Getting StartedCopyright 2012 Northrop Grumman Systems Corporation. All rights reserved.

Approved for Public Release: Northrop Grumman Case 12-1994, 10/30/12

Summary

• Counterfeit electronic parts Is a growing problem

• Most effective prevention is buying directly from OriginalComponent Manufacturer or their franchisee

– Only as good as weakest supplier– Must flow down similar requirements to lowest rung of supply chain

Preventing Counterfeits Requires an Enterprise WideApproach

Preventing Counterfeits Requires an Enterprise WideApproach

• NGAS is taking proactive steps to mitigate risk ofcounterfeit parts

• Prioritizing Purchases from OCM• Flowing Same Requirement to Suppliers• Aggressive management of Obsolescence• Training throughout the organization


Documents

The Counterfeit Challenge - Elysium · 2012-11-27 · Counterfeit Material Awareness and Prevention Training Counterfeit Control Plan Verification Training Sector Counterfeit Communications