At EBN we love hearing about best-practices in the high-tech supply chain. So when we got a tip about Spectral Response LLC and its counterfeit parts risk-mitigation strategy, I decided to give them a call.
A while back, I wrote about the impact counterfeit, suspect, and high-risk parts were having on independent distributors and the steps they were taking to keep their reputations intact. (See: Independent Distributors: New Standards, New Image?) This time, I wanted to hear how an electronic manufacturing services (EMS) company was handling similar issues when sourcing and buying hard-to-find or obsolete components in what's often called the “gray market.”
Spectral Response, a Lawrenceville, Ga.-based EMS company that makes complex and high-reliability products for the military, aerospace, video, audio, RF, satellite, medical, point-of-sale, and industrial markets, has long had visual inspection practices for inbound shipments and troubleshoots issues that have been identified through in-house inspection and testing methods. But, in the last couple of years, it's focused on improving the purchasing process for sourcing and buying parts in the gray market, sharing information with distributors and customers, and developing a more comprehensive way of identifying suspect parts before they end up in a device.
Here are excerpts of a conversation I had with Bobby Driggers, Spectral Response's quality manager, about the company's approach:
JB: Can you tell me more about the company's anti-counterfeiting and risk-mitigation program?
Driggers: We put in place two procedures. The first one started more as an internal plan. The other is what we call “Procurement With Independent Distributors,” and that is focused on our supply chain and how we inform our distributors about the practices we have in place. Our purchasing department conveys information about compliance requirements, risk mitigation, and notifies distributors — non-franchised, independent distributors and brokers — about our inspection, testing, and traceability requirements. We include all of this information on our purchase orders as well.
JB: When did you start working on this, and why?
Driggers: It was all in-house when we first started. We would perform inspection and testing [of parts and devices], and if we found anything that appeared suspect, we would troubleshoot the issue. At times, we would find that the problem came from a part that was bought from the gray market. Rework or scheduled impact would result in additional cost; sometimes the distributor would reimburse us for the extra labor. But even so, you never get the full time or costs back, often because the schedule would have been negatively impacted.
Informally, we started a couple of years ago with brokers that were deeper in the gray market for some of the projects we had. Those projects required components that were obsolete for several years. Those brokers were finding components, but sometimes the components did not appear authentic and were considered suspect. We started requiring those brokers to do things like additional testing and provide inspection reports.
With the government mandates that have recently come out, this is forcing the issue — and this is a good issue to force. We started formalizing our procedures and now are requiring all of our independent distributors to follow these plans. Last year, we also started pursuing AS9100 certification, and customers who want this certification must have much higher risk-mitigation requirements. So, we started reviewing the customer AS9100 requirements and added those requirements into our system, too.
Initially, it was an internal decision to put these procedures in place, but as customers' requirements changed and government mandates are adopted, we're taking the opportunity now to fine-tune the process.
JB: Has the company had a lot of problems with components coming from the gray market?
Driggers: I've been here for a little more than two years, and we've had issues with only a couple of suspect components.
JB: What was the reaction to the new practices you put in place?
Driggers: At first, it was questioned because it was new, and we were asking for things we didn't ask for before. People asked questions — and that's natural — because it involves additional costs and additional lead-time issues. We also have to account for those same things when we put a bid in, too. So, there are risks in using the risk mitigation plan. It's worth it, though, when you consider the risk of putting a suspect part in a unit or the risk associated with downtime or rework time.
Me: How have the practices you put in places helped so far?
Driggers: It's been mutually beneficial for us internally and for our customers. It's also broadening the field of who we can take on as a customer. It's an advantage when bidding on a project to say to a customer we already have this in place instead of saying we'll add it because they asked for it. It means you're on top of your game. I can't say we have won projects because of it, but it has solidified relationships and business ventures we have entered.
Ultimately, it improves accountability along the supply chain. If a project needs obsolete parts or parts that can only be bought on the gray market, we include the [risk mitigation] requirements in the RFQ. If we win the order, we'll have a better idea of what the lead times will be, and how much time it will take to test. The more accurate information we receive from our distributors and brokers, the more accurate information we can share with our customers regarding the initial quotation.