Defense contractors, distributors, semiconductor companies, and independent brokers have taken a lot of heat over the last year on the issue of counterfeit electronics. That heat grew particularly intense last November when the US Senate Armed Services Committee, chaired by Senator Carl Levin (D-MI), held hearings and released information from its investigation into the Department of Defense (DoD) supply chain.
The final report, published in May, should be required reading for every single person working in the supply chain, from top executives on down. The report documents a shocking lack of attention to possible counterfeits in the supply chain.
What's most shocking is the fact that the DoD itself paid so little attention to counterfeits, even after they were discovered.
The Defense Logistics Agency (DLA) supplies more than 80 percent of the military's spare parts. When it suspects a part to be counterfeit, the agency of course investigates. In early 2011, the Senate committee asked the DLA for a list of counterfeit electronic parts the agency had identified in 2009 and 2010. The answer: There was no such list. To respond to the committee's request, the agency had to go back through 1,300 files to identify such parts. The committee also discovered that different DLA supply centers used different definitions of counterfeit, "with at least one DLA supply center defining parts as counterfeit only when they 'misrepresented the part's trademark.' "
Since DLA had no standard definition, it used the committee's definition to identify 202 cases involving 93 separate companies of counterfeit or suspected counterfeit parts. Of the 93 companies, 37 had provided suspect parts on more than one occasion. More than half of those 37 provided suspect parts on three or more occasions, 10 provided suspect parts on five or more occasions, and two provided suspect parts on more than 10 occasions.
The DLA is supposed to enter information on contractors that provide suspected counterfeits in a database, called the Defense Contractors Review List (DCRL). As of February 2012, only 19 of those 37 repeat offenders appeared on the DCRL. "As of March 2012, DLA was developing a revised policy and training for agency personnel on the use of the DCRL," the committee reports. Let's hope it's been developed and implemented by now.
The Government-Industry Data Exchange Program (GIDEP) is designed to allow government and industry to share technical information to improve the quality and reliability of systems and components, and they are supposed to file a report when they discover a counterfeit or suspected counterfeit. However, DLA rarely filed such reports. According to the committee, of the 202 cases, only 15 were reported to GIDEP. And only four of those reports were filed by the DLA; the rest came from "private companies or another DoD element." DLA has since changed its practices and says that it is now filing such reports.
Finally, the DLA maintains a Qualified Suppliers List of Distributors (QSLD), approved sources of parts when they cannot be obtained from a qualified manufacturer. Yet as of February 2012 there were only 26 companies on the QSLD "and DLA often purchases semiconductor devices and microcircuits from distributors who are not on the QSLD," said the report.
The 2012 National Defense Authorization Act addressed many of these shortcomings. The defense secretary is expected to issue regulations that require both contractors and government agencies to report counterfeits to GIDEP, for example. (Contractors weren't very good at reporting either -- of the 1,800 cases of suspected counterfeits identified during the Senate investigation only 271 GIDEP reports were filed.) But that law is still in the process of being implemented. Let's hope Levin and his committee continue to watch both industry and government to make sure they clean up their sloppy practices.
Not all the agency's are out of control . I provided information to the MDA (Missile Defense Agency) GMD (Ground Missile Defense) and they have been BOM scrubbing and monitoring availability obsolete material for years and placing orders for in advance for long lead-time items. They are well informed on the counterfeit issues. Sad report card for the DLA.
This is another facet of the counterfeit component problem. Buyers are reluctant to affect business relationships with suppliers, who may be unwittingly passing counterfeit components, by snitching to government agencies. I think as enforcement gets stricter, compliance will fall into line.
I would expect the situation to improve with the recent madate the DLA issued requiring botanical DNA marking of all microchips by solutions provided by Applied DNA Sciences.
obsbuyer--thanks for that information. I was ready to post a critical and outraged response to some of the points here...but just as anything with the government, there are areas where things work pretty well. Thanks for the perspective, and I'll hold off on the outrage...maybe it's just pre-election overload :-)
@Owen, I understand that there are in excess of 100 microcircuits OEMs that will have to mark each chip with the botanical DNA from Applied DNA Sciences. I called them and they have beefed up their employee count and real estate by 50% in anticipation of the business demand that arises from this DLA mandate. We should see this technology proliferating to other electronic components as well. What do you think?
Regarding the USG failing counterfeit detection 101, the story goes much deeper. Rochester Electronics and Analog Devices will be talking about this in our weblog on 9/12 coming up soon.
Please don't hold your breath for the DNA Mandate. That will be the topic for many blogs going forward. That mandate wasn't well thought out before it left DLA in my opinion. Long-term systems are low-volume systems in comparison to what drives the semiconductor manufacturers. That means a bulk of the purchases have to come through distribution of some kind and not direct sales (volumes are too low for direct sales). This mandate creates all kinds of logistics issues in exchange for what amounts to .5% or less of total semiconductor sales. The semiconductor manufacturers are not going along with the mandate, regardless of Applied DNA advertising. Like I said, not well thought out....like so many mandates.
ddelsz, "The semiconductor manufacturers are not going along with the mandate..." From the information I gathered from the DLA (not Applied DNA Sciences) it seemed that the process was inexpensive, easy to incorporate in existing work flows, extremely robust, uncopyable, and indeed going forward. I'd be interested to know which manufacturers are refusing to participate and specifically why. What alternatives do suppliers have? Opt out of doing business with the DoD?
Douglas, according to DLA Chief, Vice Admiral Mark Harnitchek, who was recently interviewed by Defence News Radio, DNA marking of microcircuits and Follow on commodities is one of four major initiatives of the DLA. His entire interview is available on the Federal News Radio website. I believe it was broadcast last Wednesday.
The official responses are coming into DLA now and I have seen some of them. They will be public soon enough. Suffice to say they are almost all negative. DLA does not represent all DoD semiconductor component purchases; actually far from it. The mandate pertains only to DLA purchases. The DLA mandate had no support from the biggest semiconductor manufacturers in the world before going out the door. That's no way to partner with industry. Applied DNA was unsuccessful at selling to the vast majority of the semiconductor companies directly. They took their story and lobbied hard for a mandate "end around" and are now advertising as fast as they can. They have burned bridges in doing so.
One must look at the original intent of this whole fiasco (eliminate and/or dramatically reduce counterfeit) to understand how such a mandate could come into being to begin with. Fantastic intent, very little industry buy-in, followed by mandate. Fortunately, there are many other ways to eliminate counterfeit sooner and with more cooperation from industry than this mandate. DNA marking is not the only way and consequently does not justify a mandate. DNA marking for DLA has supply chain logistics issues that have not been thought all the way through....and the mandate does nothing for that thought process. DNA marking is more than a bottle of special ink and a laser pen for manufacturers ladies and gentlemen. Supply chain logistics are a big problem when it comes to marking parts for DLA.
Last word on this long response....there are easy scenarios where legitimate parts in packages have mysterious handling and no CofC's. DNA marking has done nothing here. What about billions of legitimate legacy parts on shelves today that have no DNA marking? Think about it - most semiconductor components that will be purchased by DLA for the next decade have already been manufactured!
I am curious - you say "Fortunately, there are many other ways to eliminate counterfeit sooner and with more cooperation from industry than this mandate."
If industry had other easier ways to eliminate counterfeits sooner than using Applied DNA markings wy haven't they done so? What are the other methods to which you refer and why would they be so superior to DNA marking? If you tell me they have or are implementing the other methods then my question is why then has the incidence rate of counterfeits being introduced into the supply chain exploded? Perhaps it takes a mandate to force industry to get into the game and do something.
Qualcomm has launched a big push to spread its cellular technology, and thus increase its royalty income, not to mention chip sales, beyond mobile phones.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
To save this item to your list of favorite EBN content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This