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Counterfeit Parts
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Company Confidential
Registration Management Committee (RMC)
1
Counterfeit Parts Prevention & AS9100
Atlanta, GAJuly 23, 2010
Kevin Beard
Auditor WorkshopAtlanta, GA
July 22-23, 2010
Atlanta, GAJuly 22-23, 2010
• 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
2
Atlanta, GAJuly 22-23, 2010
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.
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Atlanta, GAJuly 22-23, 2010
Counterfeit Parts Origin
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Atlanta, GAJuly 22-23, 2010
5
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, GAJuly 22-23, 2010 6
Counterfeit Overview
Atlanta, GAJuly 22-23, 2010
7
How Counterfeits Enter The Supply Chain
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Atlanta, GAJuly 22-23, 2010
8
Counterfeit Overview
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Atlanta, GAJuly 22-23, 2010
9
Counterfeit Overview
9
Atlanta, GAJuly 22-23, 2010
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
10
Atlanta, GAJuly 22-23, 2010
11
Due Diligence Is Essential
11
12
12
Atlanta, GAJuly 22-23, 2010
13
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, GAJuly 22-23, 2010
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)
14
Atlanta, GAJuly 22-23, 2010 15
Industry Working TogetherG-19
SAEG-19
NASAJPL
DOD
ERAIIDEA
GIDEPAIA
Certification Bodies
Internat.Expansion
Accreditation Bodies
Distributor Community
IndustryPrimes
Atlanta, GAJuly 22-23, 2010
G-19 The Way Forward
16
AS 5553
AS 6081
AS TBD
Atlanta, GAJuly 22-23, 2010 17
Atlanta, GAJuly 22-23, 2010
AS5553 Focus
• Parts Availability
• Purchasing Process
• Supply Chain Traceability
• Procurement Contract Requirements
• Product Assurance
• Material Control
• Reporting
18
Atlanta, GAJuly 22-23, 2010
AS 5553 -Purchasing Process
• Assess sources of supply
• Assess risk – Interview
– Audit
– Alerts
• Make Risk Based Decisions
• Maintain approved supplier list
19
20
21
Atlanta, GAJuly 22-23, 2010 22
BrokersIndependent
Franchise
CommercialDefenseSpace
InspectionTest
The Way Forward
Atlanta, GAJuly 22-23, 2010
Auditing Counterfeit Parts Prevention within AS 9100
• Can We Audit For Counterfeit Parts Prevention within– AS9100b?
– AS9100c?
• Explicit/Implied?– What Parts of the Standard?
23
Atlanta, GAJuly 22-23, 2010
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
24
Atlanta, GAJuly 22-23, 2010
Counterfeit Parts & The Industry Model
DOD, NASA, Civil Aviation, Etc.
Primes Primes Primes
Sub-System
Component
Sub-Component
Parts OCMs &
Aftermarket
Franchised Distributor
Other Type Distributor
• Stocking• Broker
• Independent
Other Sources
• Surplus• Open Market• Recyclers
• Etc.
Industry Supply Chain Design R
esp
Not D
esign Re
sp
Counterfeit Parts Entering the Supply Chain
More Complex Procurements In
Supply Chain
25
Atlanta, GAJuly 22-23, 2010
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
26
Atlanta, GAJuly 22-23, 2010
SAE AS5553 & Risk Hierarchy
Lowest Risk
Highest Risk
Supplier with
GIDEP & ERAI
Alerts_
___
OCM
Source of Supply
100%__
___
Small %
Life Test ____
_
1X Visual Inspection
In Business < 1 Year
& Unknown Financials
_
__
Supplier Audited & Approved
LifeDependent
__
___
Non-Critical
Test / InspPopulation
Test & Insp Level
Supplier Assessment
Product & Application
?? How Can This Approach Be Applied in AS 9100b/c ??
Desig
n Life
cycle
Appro
ach
Configura
tion
Managem
ent
ID/Tra
ceability
SC
M S
trate
gy
Risk Hierarchy in AS 9100c
27
Atlanta, GAJuly 22-23, 2010
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
28
Atlanta, GAJuly 22-23, 2010
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
29
Atlanta, GAJuly 22-23, 2010 30
Primes Primes Primes
Sub-System
Component
Sub-Component
Parts OCMs &
Aftermarket
Franchised Distributor
Other Type Distributor
• Stocking• Broker• Independent
Other Sources
• Surplus• Open Market• Recyclers• Etc.
Scenario 1
Direct Purchase of OCM Parts
DOD, NASA, Civil Aviation, Etc.
Where Are The Risks?
Where Do We Focus The Audit
Control
Atlanta, GAJuly 22-23, 2010 31
Primes Primes Primes
Sub-System
Component
Sub-Component
Parts OCMs &
Aftermarket
Franchised Distributor
Other Type Distributor
• Stocking• Broker• Independent
Other Sources
• Surplus• Open Market• Recyclers• Etc.
Scenario 2
Purchase From Franchised Distributor
DOD, NASA, Civil Aviation, Etc.
Where Are The Risks?
Where Do We Focus The Audit
COTC
CM?
CM?
Control
Atlanta, GAJuly 22-23, 2010 32
Primes Primes Primes
Sub-System
Component
Sub-Component
Parts OCMs &
Aftermarket
Franchised Distributor
Other Type Distributor
• Stocking• Broker• Independent
Other Sources
• Surplus• Open Market• Recyclers• Etc.
Scenario 3
Purchase From Other Type of Distributor
DOD, NASA, Civil Aviation, Etc.
Where Are The Risks?
Where Do We Focus The Audit
Co
mp
lian
ce
Ve
rifica
tion
ComplianceVerification
Control
No COTC
Atlanta, GAJuly 22-23, 2010
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??
33
Atlanta, GAJuly 22-23, 2010
Audit Approach to CP Prevention
• Themed Approach to Audits– Parts Qualification
– CM & Traceability Controls
– Outsourcing/Supply Chain Control
– Others??
34
Atlanta, GAJuly 22-23, 2010
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??
35
Atlanta, GAJuly 22-23, 2010
CM & Traceability Control Focused Audits
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
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
Where in AS9100 can you audit these activities??
36
Atlanta, GAJuly 22-23, 2010
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
37
Atlanta, GAJuly 22-23, 2010
Primes Primes Primes
Sub-System
Component
Sub-Component
Parts OEMs &
Aftermarket
Franchised Distributor
Other Type Distributor
• Stocking• Broker
• Independent
AS
9100 & A
S 5553
AS9120 & AS6081
Other Sources
• Surplus• Open Market• Recyclers
• Etc.
DOD, NASA, Civil Aviation, Etc.
AS Standards Used for CP Prevention
38
Atlanta, GAJuly 22-23, 2010
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
39
Atlanta, GAJuly 22-23, 2010
Linking AS9100c to AS5553 Attribute AS9100 AS 5553
Planning of Product Realization
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 Plan4.1.1 – Obsolescence Control Plan
7.1.2 – Process for managing Risk App A.1-Parts AvailabilityApp 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 AvailabilityApp A.2 - Obsolescence
Management
7.2.2.d – SR of the product are determined
40
Atlanta, GAJuly 22-23, 2010
Linking AS9100c to AS5553
Attribute AS9100 AS 5553
Design 7.3.1 – D&D planning shall consider ability to produce, inspect, test and maintain product
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
41
Atlanta, GAJuly 22-23, 2010
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.
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
Verif of Purch Product
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
42
Atlanta, GAJuly 22-23, 2010
Linking AS9100c to AS5553
Attribute AS9100 AS 5553
Production Planning
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 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.
Inspection 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……
43
Atlanta, GAJuly 22-23, 2010
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!
44
Atlanta, GAJuly 22-23, 2010
Counterfeit Part Prevention
Counterfeit Known Good Part
Which Device Do You Want In The Airplane you are flying on?
Questions?45