1. Conference on Quality in the Space & Defense Industries CQSDI
ERAI and a Risk Mitigation Strategy to Address Today’s Complex Global Marketplace
March 4, 2008
Dan DiMase
President
ERAI, Inc.
© 2008 ERAI, Inc.

2. Serving & Uniting the Industry
INTRODUCTION
Trade association that monitors, investigates, reports and mediates issues affecting the global supply chain
Risk mitigation on substandard and counterfeit parts, vendors, and customers
Founded in 1995
Over 1K members globally in over 33 countries
Members include OEMs, CMs, Distributors, OCMs, Government agencies, other industry associations
Serving & Uniting the Industry
© 2008 ERAI, Inc.

3. Working to Protect our Members
SUPPLY CHAIN HAS BEEN COMPROMISED
E-Waste is contributing to the problem
Counterfeiting is big business
RMAs from customers back to franchise or factories
Stock rotations back to factories from franchise
No one is immune in the supply chain
Create a program to address the issue – it’s not going away anytime soon
Working to Protect our Members
© 2008 ERAI, Inc.

4. E-WASTE AND COUNTERFEITING
E-WASTE AND COUNTERFEITING
© Basel Action Network 2006
Woman cooking circuit boards over pool of molten solder. Thousands of men, women and children handle imported electronic waste from North America and Japan in this way every day in China. Taizhou, China 2007.
© Basel Action Network 2006
Circuit Board being cooked. Taizhou, China 2007
© 2008 ERAI, Inc.

5. Fair & Impartial Investigation
COMPLAINT PROCESSING
Processed over $6 million incidents in 2007
Cases are investigated and reported or mediated
All incidents are thoroughly investigated & verified
Meditation efforts helped members recover over $976K in 2007
Saves time and avoids expensive litigation
Difficult or challenged cases are reviewed by voluntary grievance committees
Must fall into categories defined in Internal Processes & Policies Manual
Fair & Impartial Investigation
© 2008 ERAI, Inc.

6. Integrity in the Supply Chain
COMPLAINT & REPORTING SERVICES
Over 30 types of complaints processed including:
Sale of counterfeit and/or substandard parts
Misrepresentation of goods
Credit card or wire fraud
Bankruptcy filings
Returned checks
Unpaid invoices
Violation of purchase order terms and conditions
Contract Disputes
Unscrupulous business practices
Integrity in the Supply Chain
© 2008 ERAI, Inc.

7. Complete and Current Information
REPORTING SERVICES
Summary report of investigation
Complaint alerts
Reporting company is anonymous
Dispute alerts
Outside of Processes & Policies
Avoid repeating a problem, alert subcontractors, divisions, and other companies
Separate database for high-risk and counterfeit parts
Complete and Current Information
© 2008 ERAI, Inc.

8. Global Information Exchange
HIGH-RISK AND COUNTERFEIT
Reporting company maintains anonymity
Issues - failed function, used parts sold as new, stolen parts and counterfeit
Counterfeit items must have confirmation from OCM, test report, or sufficient visual evidence
Comprehensive non-conforming parts database
Material Scrubber available for BOMs cross checking against high-risk parts database
Non-members can submit data
Global Information Exchange
© 2008 ERAI, Inc.

9. Protecting your Investment
eraiESCROW
Industry’s first escrow service
Minimizes transaction risk, avoids hassles
Protects buyer/seller financial interests
Contract review
Funds held until buyer receives, inspects, and approves goods according to contract
Non-members are eligible
Protecting your Investment
© 2008 ERAI, Inc.

10. Providing Critical Information & Insight
ONLINE DATABASE
Access to search risk mitigation tools
Updates on counterfeit, faulty or high-risk parts
Cross check your assemblies or BOM against high-risk parts database
Search companies for complaints and disputes
Review member profiles
Update personal preferences for profile & alerts
Providing Critical Information & Insight
© 2008 ERAI, Inc.

11. Expertise, Service, and Education Combine for Unparalleled Results
RISK MITIGATION
Integrate ERAI mitigation web tools into quality & procurement practices
Review parts for reported incidents through ERAI and GIDEP
Assess vendor profile on ERAI website
ISO 9000 certified? AS9100/9120? Other quality accreditations?
Documented ESD program? ANSI/ESD S20.20?
Can your supplier provide item traceability?
Has supplier been reported through ERAI or GIDEP?
Expertise, Service, and Education Combine for Unparalleled Results
© 2008 ERAI, Inc.

12. Expertise, Service, and Education Combine for Unparalleled Results
RECOMMENDED PRACTICES
Reasonable supplier expectations
Audit all pre-approved vendors
Limit your AVL to pre-approved sources
Review supplier’s warranty & terms and conditions
Monitor vendor performance matrix
Assign ERAI and GIDEP representative
Participate in the ERAI community
Report issues immediately
Train your inspectors
The IDEA-STD-1010-A
Expertise, Service, and Education Combine for Unparalleled Results
© 2008 ERAI, Inc.

13. IDEA PROMOTES USE OF IDEA-STD-1010
IDEA PROMOTES USE OF IDEA-STD-1010
IDEA-STD-1010-A Acceptability of Electronic Components Distributed in the Open Market
Provides examples of characteristics that indicate substandard and counterfeit product
Standardized Inspection Controls and provide
When auditing
When purchasing
When inspecting
Establishing Quality Standards for the Industry Slide courtesy of

14. Designed to demonstrate objective evidence of inspector competency
IDEA INSPECTOR CERTIFICATION EXAM
IDEA-ICE-3000
Visual inspections of electronic components from the open market requires specialized knowledge to detect visual indicators of substandard and potentially counterfeit characteristics.
Designed to demonstrate objective evidence of inspector competency
Successful examination provides reason for increased confidence in the basic working knowledge and resource-ability of quality and inspector personnel.
Slide courtesy of

15. Education & Networking with Industry Peers and Professionals
EDUCATION & TRAINING
Electronic Industry Supply Chain Conference - EISCC
May 1 – 2, 2008 in Las Vegas, Nevada
Topics target common industry challenges
Counterfeit and high-risk part mitigation
Vendor selection
Part inspection
Import/Export controls
ITAR
Industry outlook
Interactive and hands-on Workshops
Education & Networking with Industry Peers and Professionals
© 2008 ERAI, Inc.

16. Solutions for Today’s Complex Global Marketplace
SUMMARY
Proactively prevent losses, recurring problems
Reduce financial losses via mediation / escrow
Mitigate risk - parts, customers and vendors
Enhance quality management and procurement practices
Educate your staff
Obtain up to date information on counterfeit, faulty, & questionable parts
Stay informed on current supply chain issues
Solutions for Today’s Complex Global Marketplace
© 2008 ERAI, Inc.

17. Solutions for Today’s Complex Global Marketplace
APPENDIX
Solutions for Today’s Complex Global Marketplace
© 2008 ERAI, Inc.

18. Global Information Exchange
REPORTED COMPANIES DATABASE
Global Information Exchange
© 2008 ERAI, Inc.

19. Global Information Exchange
COMPLAINT ALERT
Global Information Exchange
© 2008 ERAI, Inc.

20. Global Information Exchange
DISPUTE ALERT
Global Information Exchange
© 2008 ERAI, Inc.

21. Global Information Exchange
HIGH RISK PARTS DATABASE
Global Information Exchange
© 2008 ERAI, Inc.