@Risk

The US Department of Defense has concerns about counterfeit parts in its supply chain and is now taking additional steps to ensure that its equipment and parts are authentic.

According to the American Forces Press Service, the DOD has implemented a quality assurance process to identify material that doesn’t conform to standards and determine which ones are counterfeit.

For the DOD, most of the problem appears to center on previously used parts sold as new. As Senator Carl Levin (D-Mich.) explains in a statement:

In some industries, the term “counterfeit” suggests an unauthorized fake, a knock-off of an original product. The definition of counterfeit, as it relates to electronic parts, which has been endorsed by the Department of Defense and defense contractors alike includes both fakes and previously used parts that are made to look new, and are sold as new. Previously used parts sold as new parts present a significant risk because, while they may pass initial screening, they are far more likely than new parts to exhibit reliability and performance problems later on when deployed in the field.

Sen. Levin chairs the Senate Armed Services Committee (SASC) which this year began an investigation of counterfeit electronic parts in the DOD supply chain. In his statement, made at a SASC hearing last week, he goes on to describe how e-waste is shipped into Chinese cities like Shantou in Guangdong Province where the electronics are disassembled by hand. Then, they undergo a sophisticated unsecured counterfeiting process. Again, from Sen. Levin: (more…)

A report last year by the Commerce Department’s Bureau of Industry and Security, Office of Technology Evaluation found that counterfeit electronics are present in troubling amounts in the Department of Defense supply chain.

Then, in March, the Senate Armed Services Committee launched an investigation into this growing problem.

Now, the National Intellectual Property Rights Coordination Center (IPR Center) has announced “Operation Chain Reaction,” a new comprehensive initiative to target the counterfeit and pirated goods entering the supply chains of the DOD and other US government agencies.

This is the first time that IPR Center participants have come together to collectively address the threat posed by fake parts in government supply chains. The list of IPR Center participants includes:

• US Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI)
• US Customs and Border Protection (CBP)
• Federal Bureau of Investigation
• Naval Criminal Investigative Service
• Defense Criminal Investigative Service (DCIS)
• US Army Criminal Investigative Command, Major Procurement Fraud Unit
• General Services Administration, Office of Inspector General
• Defense Logistics Agency, Office of Inspector General
• US Air Force, Office of Special Investigations

In a press release, ICE revealed a few examples of recent investigations involving counterfeit products entering the federal supply chain. Check out these cases, which illustrate the need for immediate attention to this critically important issue: (more…)

An earlier study showed us that the US auto industry is poised for growth over the next few years.

Now, a new analysis concludes that the aerospace and defense industry can expect growth, too –although it’s likely that any gains on the commercial side will be counterbalanced with the burden of tightened national defense budgets.

Last week, the global business-advisory firm AlixPartners released a study which forecasts a 25 percent jump in commercial-aircraft deliveries by 2014, driven in large part by increasing air-traffic demand globally.

At the same time, however, the defense sector will be focused on affordability.

What will these contradictory challenges mean to supply chains? David Fitzpatrick, managing director at AlixPartners and co-leader of the firm’s Global Aerospace and Defense Practice, anticipates a bumpy ride.

“While bruised, the aerospace and defense industry emerged from the economic downturn in better shape than most industries, due largely to increased demand in the defense sector, plus some pretty vigilant cost-cutting overall,” he said. “However, the industry now faces the ‘big squeeze’ – the contradictory challenge of quickly ramping up production for expected growth in the commercial sector coupled with the need to address expected cuts and therefore a sharpened focus on affordability in the defense sector.  And those squeezed the most will be the supply chain.”

More specifically, the AlixPartners study predicts that global aircraft production is expected to increase 30 percent to 50 percent over the next three years. However, original-equipment manufacturers (OEMs) will face several challenges as they ramp up to meet this demand.  For instance, OEMS will need to: (more…)

Last week, the Senate Armed Services Committee announced that it has launched an investigation into counterfeit electronic parts in the Department of Defense’s supply chain.

According to a statement by Senators Carl Levin (D-Mich.) and John McCain (R-Ariz.), chairman and ranking member of the Senate Committee on Armed Services, the presence of counterfeit electronic parts in the Defense Department’s supply chain is a growing problem, and both government and industry share a common interest in solving it.

From the statement:

Counterfeit electronic parts pose a risk to our national security, the reliability of our weapons systems and the safety of our military men and women. The proliferation of counterfeit goods also damages our economy and costs American jobs.

A report last January by the Commerce Department’s Bureau of Industry and Security, Office of Technology Evaluation, found that counterfeit electronics are already present in troubling amounts in the DOD supply chain. The report, which covered 2005 to 2008, revealed that:

• More than one-third (39 percent) of the companies and organizations included in the study had encountered counterfeit electronics during the four-year period.

• The number of incidents grew from 3,868 in 2005 to 9,356 in 2008.

OTE made several recommendations in the report. For example, in order to inhibit the circulation of counterfeit electronics, the OTE wants the US government to: (more…)

On Monday, Aon Corporation, a leading global provider of risk management services, released its 2009 Defense Industry Benchmarking Report.

This annual report addresses the key issues and concerns of defense industry clients and is designed to allow these organizations to benchmark their risk management and risk financing practices against those of their peers and competitors, while identifying practices or approaches that may improve the effectiveness of existing risk management strategies.

(more…)