Recently EPS and Verical.Connect have focused on the issues of counterfeit mitigation and the recent (9/21/2015) proposed amendments to the 2012 Defense Federal Acquisition Regulation Supplement (DFARS). Among the amendments is a proposal to extend DoD sourcing practices from the traditional military/aerospace specification standards to include COTS components. To consider the impact of these issues on the semiconductor and electronics industry, EPS asked a few central questions of Matt Hartzell, chief administrative officer for leading independent distributor, Smith & Associates, as well as Kirk Wehby, chief operations officer also for Smith & Associates. Here’s part 2 of that discussion.
EPS: The 2015 DFARS proposals extend flow-down requirements to now be required of all contractors and subcontractors. What are the challenges and opportunities of this extension?
Hartzell: Will it actually transpire that every COTS piece pulled throughout the supply chain to DOD has flow down, traceability and is sourced in accord with the new sourcing rules? I have strong doubts. The added costs and paperwork will be huge.
This is regulation as it often starts, with a fully supported common goal of maintaining safety, but that for expediency in attempting to forge a global uniform solution snowballs, pulling perhaps too much into its purview. I believe in this arena it’s always preferable to err on the side of safety, which we fully support. But when it comes to the commercial electronics industry, this sort of regulation just doesn’t seem to fit the market.
In the strictly commercial market, this regulation would be cumbersome; think of the example of the little old ladies, the parents and the toddlers taking off shoes, moving walkers and strollers slowly through the x-rays at a security line for a bus, not a plane. Not exactly that, but maybe it’s close. It will be interesting to see if there is significant pushback to the proposed rule. There was tremendous pushback on the artificial/genetic marking program as the costs were perceived to far outweigh the benefits. If implemented, as far as the whole supply chain is concerned, I think this might result in further segmentation of the defense/commercial markets.
Additionally, I don’t think this flow down extension is possible, at least not until OEMs and CEMs get together and say it is okay. When manufacturers sell excess, they don’t necessarily provide traceability to independents. It is really a huge issue though. Something will have to give at the excess level. It is just that until the part manufacturer puts their own traceability into it, all the other attempts to provide provenance are just that, they’re just attempts. So, you can get statements and you will have to depend on the veracity of who is making or providing those statements, just as you do today, but without the requirements of testing.
In the DFARS 2015 requirement of providing tests and inspections when “traceability is not feasible for a particular part,” there you have the real bottom line: testing trumps traceability – it always has to. The reason testing trumps traceability is because, as I mentioned, you are having to depend on the trust of someone’s statement, trust in the paperwork, which in the end can be questioned itself as to if that part did come from here or there. All of these questions and trusts become moot when you test the product, see it, see it work, put it next to a gold sample product. Testing IS the real traceability moment.
Wehby: Testing services are gaining in demand. At Smith, it goes back to Smith Secure™ which is not just a testing piece, not just one prong. Testing and real quality assurance is a process. It starts with the vendor and understanding the vendor base and the history that company provides of dealing with vendors – that experience and knowledge becomes part and parcel of testing and the internal corporate knowledge and experience that, along with industry certifications, guides the people conducting the tests.
In many ways, that aspect of corporate history and time, depth in quality and functional testing know-how is a major differentiator that has to be included when requiring testing – it’s not just performing tests, it’s having the background and the deep expertise to conduct the tests and check the results against a history of results to ensure quality to the most rigorous specifications and gold standards for those particular components in those particular environments on the board and in the field. At Smith, we have this type of a strong system in place; we can use our 30-plus year database of information and capture current information to compare against all these historical data. So, while I agree that testing is central, especially about traceability because of all that can happen to parts during storage, handling, etc., testing alone is not the silver bullet either. It is the people, the expertise and history to make the good decisions before the parts are bought and then throughout the testing process.
EPS: What testing standards do you see as taking a leading role in setting standards, whether for the industry writ large or specifically for DoD?
Hartzell: We see AS 6171 coming soon as a critical standard. Testing was taken out of AS 6081 because AS 6171 is going to be really rigorous and very, very tough to meet, just as it should be. It will be coming soon and I think it will be a testing gold standard.
I think that AS 6081 and its testing companion AS 6171 will be perfectly situated to provide independents with a metric, a framework to be measured against, for the skillsets required to achieve “Trusted Supplier” status under the DFARs. Those standards will be the culmination of many years of weekly work of a few dozen companies representing contractors, franchised and independent distributors cooperating to write, rewrite and revise again after industry comments each of the standards to best mitigate against escape of counterfeit product into the aerospace supply chain.
Testing capabilities will become vital for the chain, especially for independents; because traceability just will not be there 100% of the time, no matter how much we all want it to be. The DoD supply chain is well served to have the resources of these two standards available. Those Independents, such as Smith & Associates, that have spent a great deal of time and attention creating and maintaining rigorous quality control programs will thrive.
Click here for Part 1.