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The Counterfeit Parts & Materials Challenge

15th Annual CQSDI

Cape Canaveral, FL

March 26-27, 2008

Lloyd Condra, Boeing Phantom WorksTony Marino, Boeing Integrated Defense Systems

Art Mester, Boeing Integrated Defense SystemsBill Procarione, Boeing Integrated Defense Systems

Bill Scofield, Boeing Phantom Works

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Engineering, Operations & Technology | Phantom Works

Outline

• Scope of the Problem

• Internal Controls

• External Activities

• Supply Chain Controls

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Engineering, Operations & Technology | Phantom Works

Scope of the Problem

Almost anything can be counterfeited• Fasteners (bolts, nuts, rivets, fluid bolts)• Electronics (capacitor, resistor, Integrated Circuits)• Materials (titanium, composite chemicals)• Anything else (Electronic Assemblies, Pumps, Actuators, Batteries, etc.)

Counterfeiters are very creative• Darwin rules• There is no “final” solution

There are many sources of counterfeit parts and materials• The supply chain is large and complex• Aerospace has limited control

Impact of using counterfeit parts or materials• Potential loss of life • Monetary loss• Liability• Lack of availability of our products for customer use• Loss of customer/public trust and image• Brand damage

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Engineering, Operations & Technology | Phantom Works

Scope of the Problem

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.

Counterfeit parts are usually ½ or less of the street price for genuine goods. The intense pressure on cost adds to the attractiveness of counterfeit parts.

Ref: Dept of Commerce

The true numbers are not known. Industry is attempting to quantify the costs.

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Engineering, Operations & Technology | Phantom Works

A “Typical COTS” Microcircuit Product Flow

μcircuit design

Fab

Avionics OEM

Ass’y

Dist.

The COTS microcircuit chain is….circuitous. The number of potential combinations of links is large, and growing. The level of “control” is shrinking.

Test

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Engineering, Operations & Technology | Phantom Works

The Electronics Supply Chain

Parts mfrs.

Distributors

Brokers

After-market

suppliers

Commercial

Aerospace captive

OEMs

Aerospace Integrators

Aerospace Operators

Aerospace repair shops

Design

Fab

Ass’y.

Test Source facilities

Commercial

Aerospace captive

Customers

Beyond aerospace control

Within aerospace control

Every arrow is a potential source of counterfeit parts!!

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Engineering, Operations & Technology | Phantom Works

Potentials Sources of Electronic Components

1. Original manufacturers2. Authorized distributors3. Unauthorized distributors4. After-market suppliers5. Third-party test houses6. Component source facilities7. Other programs (excess inventory)8. Other OEMs (excess inventory)9. Emulators, etc.10. Contract assemblers11. Etc.

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Engineering, Operations & Technology | Phantom Works

The Boeing Approach

Sup

ply

Cha

in

Inte

rnal

External

Counterfeit Product Executive Steering

Committee

Lloyd Condra/Bill Scofield

Tony Marino

Art Mester

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Engineering, Operations & Technology | Phantom Works

Internal Controls

• Requirements• Develop enterprise-wide procedures and requirements• Flow down to all appropriate links in the supply chain• Implement verification processes and criteria

• Source Selection• Lists of approved sources/ parts• Other sources by exception and with specific approvals

• Confirmation• Quality, Supplier Quality Labs

• Communication/Reporting• IBA (Inter Boeing Alert)• Legal• Reporting• Authorities (FBI) Treasury Dept• GIDEP• NASA• FAA• IP Team (if required)

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Engineering, Operations & Technology | Phantom Works

External Activities

• Develop Industry Standards and Tools• AIA (Boeing delegates)• GEIA • IAQG (International Aerospace Quality Group) • IEC (International Electrotechnical Commission)• Benchmark with Underwriter Laboratories with their Counterfeit

organization• Implement with Customers

• FAA and commercial airline customers • DoD and service operators• NASA

• Verify Compliance• Processes• Criteria

• Report Occurrences• Authorities (FBI) Treasury Dept• GIDEP• NASA• FAA

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Engineering, Operations & Technology | Phantom Works

Supply Chain Controls

At each portal of entry, we need assurance that the pedigree of a given part is traceable through all of the previous links in the supply chain to a known, credible, and “authorized” source.

That assurance must be based on:1. Aerospace industry consensus rules (documents,

etc.) that are2. Applied consistently across all programs, and3. Verified by agreed-upon processes and criteria.

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Engineering, Operations & Technology | Phantom Works

How Do We Do This?

• Involve all stakeholders• Aerospace:

– Supply Chain: OEMs, integrators, operators, repair shops, industry organizations, government, airlines and other operators, etc.

– Market Segments: commercial, military, space– Geographic regions: North America, Europe, Asia

• Non-aerospace: part mfrs., distributors, industry organizations

• Develop rules• Address issues within aerospace control• Insure a “level playing field”• Address issues unique to aerospace• Assure pedigrees of all parts

• Communicate• Within aerospace• Between aerospace and other industries

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