Military/Aerospace Forum

Experts talk about the challenges experienced by manufacturers that supply to the military, including counterfitting and reliability

CONVENED AND MODERATED BY PAUL O’SHEA

The Military Aerospace suppliers face a special challenge to provide products that meet exacting requirements for safety in rigorous environments. And yet, they must provide these products at competitive prices. Some of the issues for today’s suppliers include commercial off-the-shelf usage designed for long-term reliability and dealing with counterfeiting issues in the industry (see http://tinyurl.com/734u8h9)

Electronic Products : What does your company do to mitigate the use of counterfeit parts? For example, what is your approach to the purchasing spec AS5553 and to the upcoming AS6081?

Randy Eller (VP Sales/Marketing, Datatronics) : The issue with counterfeiting in our business has not been so substantial as I know it has for some other folks. And probably the main reason for that is that our products— roughly 90% if not even greater of our products are custom manufactured. We do very, very little of business in off-the-shelf devices.

So we are purchasing raw materials that we buy directly from the manufacturers. We do buy through distributors that are generally specific distributors to the magnetics industry. They provide basic piece parts for us and magnet wire.

So based on that the supply chain for us if fairly limited and focused in that we get from them certified test data as well as the certs that are normally required. And then we do our own due diligence about receiving inspection to make sure that what we’ve got is what we’ve specified.

Electronic Products : Is the due diligence a fairly cumbersome event for you?

Randy Eller : It can be, it really depends on the particular type of part. But as I say, we’re fortunate that our supply chain is fairly narrow-based by comparison to a lot of other folks.

Electronic Products : Yes, you know who your customers are.

Randy Eller : That’s right, we generally do. I would say on a rare occurrence we don’t— but we’re very familiar with the players in the business. It’s fairly small so even though things move around people generally go from one company to another company. And we still have a good working relationship with those folks.

Jim Ferry ( Director of Supplier Marketing, Zeus Aerospace/Defense, Arrow Electronics) : Basically we’re Arrow’s a franchise distributor and we purchase directly from the original component manufacturer. So when it comes to AS5553, we’re compliant but, it’s because of our status as an authorized distributor.

We do maintain a strict policy of buying only from manufacturers or their authorized distributor in support of our Aerospace and Defense customers. And we have formalized controls in our return process to assure that we only take back product which we can confirm as the parts we’ve actually sold.

We also strictly adhere to the requirements of JESB31, and that’s really required by a couple of MIL specifications that govern our activities— MIL-PRF-19500 for discreet components and MIL-PRF- 38535 which is more the integrated circuits.

And counterfeit is a real issue when it comes to electronic components. We’re seeing GIDEP (Government-Industry Data Exchange Program) alerts pretty much every day from the industry’s supply chain with reported instances of counterfeit parts. So it’s pertinent for us to keep our supply chain as pristine as possible.

AS5553 is really more directed at our customers who purchase parts from supply chains sources such as ourselves or the original component manufacturer— the OCM.

You mention AS6081 and that really is focused on independent distribution and doesn’t really apply to authorized distribution itself. But it’s absolutely going to be real important moving forward particularly with the National Defense Authorization Act of 2012, which is in a phased implementation period right now.

But with Section 818 of the act, trusted supplier sources are going to become even more critical going forward.

Electronic Products : What is section 818?

Jim Ferry : Section 818 is part of the National Defense Authorization Act for 2012. And it addresses some of the penalities involved if counterfeit parts are found within products that are supplied to DOD.

Electronic Products : Who is liable for this if they’re found? Is it the supplier or the user?

Jim Ferry : The user— the contract holder from DOD— whoever is supplying DOD. The contractor themselves is being held liable. There have been instances where counterfeit components have compromised DOD systems. Hearings were held on Capitol Hill and Section 818 of the Defense Authorization of 2012 is the result.

Electronic Products : I remember seeing a report from the Department of Commerce, Bureau of Industry and Security I think it was. They had something from January 2010, and there’s probably something even more updated than that, where they had recorded a large number of incidents of counterfeit products— about 3,800 in 2005 and 9,300 in 2008. I don’t know if you know of any more updated information than that but do you think that this is a trend? It seems to be a trend. And is that why this Section 818 is being implemented?

Jim Ferry : I think that the concerns about counterfeits have been around for quite some time. But there certainly is a thriving industry particularly products— most of it from all reports— seem to originate in China. And we’re seeing more and more reports of that from the Aerospace Defense Community. Whether it’s just being recognized more now or whether it is something that’s actually occurring more is hard for me to really judge.

Mike Stout ( VP of Engineering Falcon Electric): We have been doing business in Asia for 25-years. And early on our main products were manufactured in Japan. But as more and more products were manufactured in China, well, there’s a culture in China where anything you can get away with, is legal.

And it’s ingrained in their culture, maybe from communism, I don’t know. But we have— early on we saw the propensity for this. And it’s always been our practice to buy from the manufacture or buy from their authorized distributors.

Electronic Products : Do you always know?

Mike Stout : You can’t track. I think there are two problems. I think there’s the counterfeit problem. But in some cases back in 2006, 2007 the manufacturers couldn’t even tell if the parts had been counterfeited. I suspect everything is sold in China. And I think in that period of time if a lot of parts maybe didn’t meet the grade they were scrapped out the back door and ended up in the supply chain.

So I think there are two issues there. I think the manufacturers have to destroy in China anything that doesn’t make the grade. And then there is the counterfeit issue which for a smaller company like Falcon’s is very difficult, we have to depend on our suppliers.

Jim Ferry : It does sound like what Falcon is doing though is basically complying with that AS5553 spec. And that’s the one way to really safeguard your supply chain.

Mike Stout : And you can’t buy it, if it’s not an authorized distributor. Years ago in the computer industry there was a real problem even in this country with purchasing parts that really didn’t meet spec— purchasing from unauthorized resellers.

Electronic Products : Yes. It’s a significant problem that — do you think that this Section 818 will help resolve some of it or none of it? Jim, what do you think?

Jim Ferry : I absolutely think it’s a tremendous first step for DOD to take. You know, mandating AS5553 compliance or if people do need to go outside that supply chain moving to a trusted source or just to where AS6081 does come in. And at least it is an auditable third-party standard sponsored by SAE or the Society of Automotive Engineers.

SAE certainly goes beyond automotive. Arrow has been very involved with SAE and their G19 committee. For several years Arrow was the only distributor on that committee but it has been expanded to involve a couple of other authorized distributors as well.

A gentleman by the name of Bill Palladino who is our Director of Quality has been on that G19 committee and has actually helped draft the AS5553 standard as well as the AS6081 spec. Again, Arrow is an authorized distributor but we also understand that there are challenges in the supply chain.

And we really feel that helping draft that AS6081 spec at least helps the industry overall deal with the challenge because electronics is built on faster, smaller, less expensive componentry – look at Moore’s Law and what’s happened in computing power.

In the aerospace defense industry we really don’t care for that. We like less expensive, okay, but basically we want to buy the same thing that we bought ten years ago – same form, fit, and function. And that’s a challenge because the overall industry— particularly with…

Electronic Products : You’re talking obsolescence.

Jim Ferry : Yes, with the advent of commercial off-the-shelf product as well, where typically suppliers like to build unleaded product, whereas in aerospace defense applications people are looking for lead because they don’t want tin whisker growth problems. They’ve got component failures out there as a result of that.

You know there are some real challenges that take place for the contractor who needs to build the same part that was used by the military ten years ago. Or take commercial avionics for example, where a 30-year standard is certainly not out of the question.

Electronic Products : What’s the effect of ITAR on import and export?

Randy Eller : We deal with ITAR every day. And it has added a very noticeable level of complication to being compliant for sure in that dealing with ITAR and the folks at the State Department who oversee the ITAR and are responsible for ITAR. I’ll equate it to dealing with the IRS. If you ask the same question several different times of several people, you often get several different answers.

Electronic Products : And that doesn’t instill confidence.

Randy Eller : And that is the problem. The challenge is that there are penalties for non-compliance and having a ‘finding’ occur during a State Department audit. The penalties are extreme, you know, $100 million plus penalties have already been levied against very prominent defense contractors which turns their situation into— as you would expect— paranoia about ITAR.

So our experience is that with our customers— and they could be tier-three all the way up to tier-one in the military defense marketplace- we now have the challenge of how to deal with it. And when it gets down to our level — at the component level — we see as documentation that ‘boilerplate’ stamps on the front of it saying that, “The information contained within this specification might include ITAR related— or information relating to ITAR,“ to paraphrase a pretty hefty paragraph.

So in our mind, they’re doing their best to slow down the requirements of ITAR whether or not it really applies. Well, at our level we have to find out if it really does apply; and trying to get that information is often times like pulling teeth. Because at the buyer level or the person sending out the RFPs, they really don’t know. They’re just doing the work. And putting it in our hands and giving us a five-day turnaround request for that pricing proposal on the parts that they need quoted.

Electronic Products : So that puts pressure on you to become an expert, is that what happens?

Randy Eller : It does. We like to think we are experts. We put man power and overhead resources together. We have a— what we’ll call an ITAR expert. It’s an Internal ITAR compliance person that has set certain rules that we must follow.

And part of that is going back to the customer who sends us the documentation. And we do it with any customer. It doesn’t matter whether they’re a commercial or industrial type of a customer, or a known aerospace and defense type customer.

We send out a product use declaration form that they must complete. The form asks basic questions, . such as – are these components designed specifically for a military application? Are they designed for applications that could be military applications?What we do is send the product use declaration form to the customer and request them to answer the questions. It serves to show, in an audit, that we have taken reasonable, responsible steps to make sure that we make an effort to determine what type of equipment our parts will be used in. . So it doesn’t take a lot of time but, again, engaging at the level by which we receive the information – often these folks don’t know what type of system the parts they have been asked to get quoted are used on. And, so it puts the responsibility back onto the supplier to make sure they get the information. Knowing if the parts you have been asked to quote are under ITAR is very important. If the parts are under ITAR we could build them in our ITAR registered offshore facility or in our ITAR registered domestic facility. If the RFQ is for product which is not under ITAR then we can manufacture in our non-ITAR registered facility at a substantially lower cost.

Electronic Products : Does ITAR put you at a disadvantage for supplying products for, let’s say, European customers. Are they going to buy from US suppliers that are subject to ITAR?

Randy Eller : I would say that under certain circumstances it can be a disadvantage. This is where ITAR becomes very complex. How ITAR applies to business for products being purchased by European customers depends on so many variables. Who is the actual end customer, where will the product be shipped, who is exporting and who is importing? It can be very complicated. You simply have to look at each RFQ on it’s own and there is simply no such thing as a “one size fits all” answer to ITAR and how it works with international business.

Again, we – Datatronics– are structured such that we have facilities in the Far East, in Hong Kong, that have been approved by the State Department to manufacture ITAR related products. But it still means that the information that we send to our own company in Hong Kong has to be sanitized regarding relative information about who the end customer is and what the end application is. Adding to that, the customer doing this type of business has to do due diligence and perform a site audit – in this case in Hong Kong. Whereby all of the secrecy that we’ve gone to great pains to protect for example, the customer’s identity, obviously that gets revealed when the customers come to do a site audit.

So it’s kind of a contradictory set of rules that we follow. And then it seems ridiculous that we go through so much to protect the customer’s identity but our customers have to do manufacturing site visits for quality system audits. Yet, we have to go a great deal of effort to keep the customer’s identity unknown to our off-shore ITAR facility staff but then it is acceptable for the customer to visit our facility. So why have we gone through so much trouble to try to be so protective of certain details?Electronic Products : Is that a real problem or is it a problem that could happen?

Mike Stout : No, it’s a real problem. Our company has been selling off-the-shelf commercial products for 20-years for the last 8 to 10 years we’ve been doing more and more military work.

It always starts out that they want commercial off-the-shelf and then— we find ourselves now doing more and more custom design. That it’s becoming an issue with us to the point to where the custom — everything is tested here in the U.S.

And inside the company we’re finding that it may beneficial at some point to actually divide the commercial from the military. It is a real problem for us.

Randy Eller : I have to agree with you whole heartedly, Mike.

So, to Mike’s point, even though most of our products are custom devices, we do have some that we consider standard devices which are qualified to MIL-PRF-21038, that pertain to magnetic devices.

And some of those devices are actually used in test equipment for testing some of the military devices. And then we also do— as I said— a small percentage of commercial off-the-shelf devices.But here’s what happens, and I’ll give you an example from Raytheon. We do a fair amount of business with Raytheon; a lot of standard commercial devices as well as a lot of our custom products. So as a qualified supplier to Raytheon they come to us often and ask us if we can supply a certain commercial off-the-shelf item as well. Off we go to preparing pricing, samples and qualification data for those particular items. And then they come back and want to place an order. And then we get a shoebox full of attachments and quality clauses that they want to apply to that particular device

And they also attach their PO a requirement that they want us to mark a particular Raytheon part number on that device in addition to what we would normally mark on the standard device itself.

Well, in the strict compliance of ITAR if we do anything to modify that commercial off-the-shelf part in anyway including changes as minor as terminal identification– marking a customer part number – the part then becomes a custom part under ITAR.

And everything that the customer’s trying to accomplish by using that commercial off the shelf part pretty much goes out the window. So we now have to create a ‘special documentation’ – a special build documentation. We have to have all the extra instructions. And we have to provide that to our factory and it takes out the whole commercial off-the-shelf angle for procurement of the product.

Jim Ferry : Yes, absolutely, ITAR has placed some pretty severe restrictions on how both technical data and parts have to be handled. And there are additional controls that you have to institute in order to assure compliance.

And it makes the sale of parts and products certainly more cumbersome because of the licensing process that has to take place if you are ITAR restricted.

You know, Arrow is EDTC registered— the US State Department Directorate of Defense Trade Controls, as I’m sure probably everybody on the call is with their processes. An additional wrinkle and Randy did touch upon it, is the technical data that gets involved with the changes that get made.

It requires some special handling. For example, when we get that Raytheon drawing and need to quote it. We do have to keep that in ITAR secure server so that no non-U.S. person can actually get access to that technical data.

It’s an extra step that takes— that has to take place in the process even in distribution. So the ITAR restrictions are there for a very good reason but at the same time it raises some real challenges that we have to meet.

Electronic Products : It sounds like ITAR has become more of a burden then solving any problems. Any comments on that?

Randy Eller : To us and from our point of view, it really has made things very, very burdensome, very cumbersome. And certainly drives the cost of the product up.

And from our point of view we’re in a custom magnetics manufacturing business, transformers, inductors, and the like. And from our point of view, transformers have been around since the light bulb.

The people we’re trying to protect this information from most notably China, are pretty much the center of excellence for new development in magnetic components anyway.

So we’re trying to protect stuff that they already know, and we’re going to great pains and great expense to do that.

Jim Ferry : In the case of electronics it definitely is something that I personally have seen products be reclassified as ITAR and seen all sorts of interesting requests for that product come from various places across the globe that are not centers of excellence for electronics. There’s definitely a need for it. The application of it certainly sounds like it may be something to talk about though.

Electronic Products : What are the challenges of continued use of COTS products?

Mike Stout : We’re finding more and more that we’re approached for COTS but in reality with all of the requirements, the contractor the military wants really lends itself to a custom product.

For Falcon, out of every 10 times we’re approached by the military, seven of those ten times they really don’t want to buy a commercial off-the-shelf product but they want a special product.

Usually a lot of it revolves around temperature. So we have developed some COTS products that we can sell out into the market that have wider temperature ranges.

We have the UPS line with a temperature range from -30 to +65C that falls into our military business. But it also falls into some good vertical markets. And then we design that UPS to be a little more rugged than the standard UPS.

And we’re finding that military’s happy with that. It really is a COTS product.

But in a lot of the cases they want a special quality program. They want a special package. They want the high-G shake and vibration and it really dictates that we either repackage or design a custom product for them.

Electronic Products : Yes, so it sounds like 70% might even be a low number when you’re dealing with the military.

Mike Stout: Yes, you know, they’re trying to buy something off-the-shelf and they’re trying to keep the cost down.

But their application is such that we were approached by a prime contractor to build, initially they wanted an off-the-shelf UPS that would survive in a Humvee in Afghanistan and Iraq. Well, obviously here you’re designing something. And the UPS business is very competitive.

So mechanically it’s designed to fit in a rack in a computer room. But we ended up having to redesign the product to meet all the shake and vibe requirements.

Jim Ferry : Well, COTS has been around for long time. The Perry Initiative back in 1994 started us on this odyssey. It used to be that products were almost entirely built of mil spec components. Today, about 50% of what we sell to our aerospace defense customers is still MIL spec products.

But commercial off-the-shelf product in electronics is certainly prevalent. The other 50% of what we sell is COTS and the biggest challenge from a distribution standpoint is the customer expectation when they buy a commercial device for a military application— they really would like to have the same level of reliability and traceability.

And that becomes a little bit of a challenge on the reliability front because some parts just weren’t designed with those applications in mind. And you may run into issues where parts may fail at the higher temp ranges then they were designed to perform.

In the case of traceability-you get full military certification paperwork with MIL products. For commercial parts, it’s a different level of certification.

And, you know, sometimes, you know, that paperwork expectation becomes real problematic in areas like aviation for example where it’s almost as if you’re buying the paper and not the parts, that’s just driving a lot of expense.

So, yes, it is a challenge. But it’s not going to change. You know, what you’ve got to do in some cases is deal with commercial parts and look at doing some additional testing, some value-added services to that. There are ways to deal with, for example, unleaded products that need to be leaded, doing a robotic solder exchange, and these are expensive solutions.

But the move for COTS was to try and drive expense out of the business. It does represent some challenges for that aerospace and defense customer.

Tom Blaskovich (Marketing Director, Datatronics) : I think one of the real issues is that the engineering community wants to use COTS product – especially the larger companies, Collins, ITT, Raytheon, Honeywell and those types of companies. They’re reducing the cost by going to a COTS product but they don’t realize that their company’s quality and purchasing department are adding their standard high reliability quality and purchasing boiler plate when they go out to purchase the end products or writing the product specifications.

I think one of the real issues is that the engineering community wants to use COTS product – especially the larger companies, Collins, ITT, Raytheon, Honeywell and those types of companies. They’re reducing the cost by going to a COTS product but they don’t realize that their company’s quality and purchasing department are adding their standard high reliability quality and purchasing boiler plate when they go out to purchase the end products or writing the product specifications.

Randy Eller : Just to dovetail here a little bit on what Tom was just saying. When you get into the COTS purchasing arena they do add additional requirements such as, adding their own spec. And they have their own part number on that spec and want to order to that part number. They want to order that part number along with the other additional items that they expect for inspection, for traceability.

In their system they order understanding that they have bazillions of part numbers in the system. So they try to be consistent.

What ends up happening is that in executing in a system compatible way for them, by adding a certain part number that we have to do — to be certifying to that part number and asking us to mark that part number so it shows up on the circuit board as a part number.

They’re modifying that part, and then in doing so you take a COTS part and turn it into an ITAR part. So, as soon as you go down that road you’ve not just added complexity to it but you’ve also made it an ITAR related issue where if that product as a standard off-the-shelf product might be made in China— you can’t build it there anymore. Anyway, for us in the magnetics industry that is where COTS and ITAR kind of mold into the same thing.

Mike Stout: And it goes even farther than that in a lot of cases they— if you’re approached by a Raytheon or a Lockheed they can’t tell you the end user of your product. And so, you know it’s a secret. And, you can get taken down a road that you may not want to go. And there may be some product liability issues.

Randy Eller : That’s kind of what we do, Mike. That’s why we use what we call a product use declaration form. They don’t necessarily have to tell us what it actually goes into. They only have to tell us if it’s a military device or not.

Mike Stout: Yes, that’s a good way around that.

Jim Ferry : We do run into some challenges there as well from the standpoint of our field people who are engaged in the design with engineers at the circuit level.

Application information is sometimes shared with us and we have to treat that information very, very carefully with ITAR in mind. And, again, have systems in place so that it can’t go outside of the proper chain.

Knowing those applications is sometimes critical to being able to help recommend the right component but it entails a level of responsibility that is a little daunting sometimes.

Electronic Products : What are the DOD funding trends, as part of the COTS programs?

Randy Eller : We don’t really get directly affected with DOD. What we’re seeing is that, obviously, the DOD puts pressure upon the prime contractors and sub-tiers contractors to reduce costs as much as possible.

And so at our level, the component level, for the most part I don’t see the trend other than when I see that the systems folks are militarizing commercial products by doing some additional testing, and I should say maybe— doing additional testing to upgrade. So at the component level— it really doesn’t look any different to us.

Jim Ferry : My answer would be pretty much the same. I think there is pressure on the prime contractors to be competitive, which is going to drive the potential usage of COTS products wherever possible.

It does raise more challenges though for those primes because of obsolescence, because of unleaded products, because of all the things that we talked about before. And, I think our challenge is that we have to be able to offer competitive component solutions whether it be MIL spec product or COTS product. We have to have the services in place to help support the needs of the aerospace defense customer because they are a little different than the commercial customer. And it’s not going to go away.

Our tax dollars are being spent more wisely perhaps than in the past, which raises more challenges for everybody on this call. But that’s why they call it work.

Randy Eller : To Jim’s point on that I think in some ways the tax dollars are being spent more wisely. And I think in other ways because of the way we have to execute on COTS and when we cross the line with COTS and it turns into an ITAR scenario.

Certain types of products— really not all— as Jim mentioned before. COTS has been driven up for reasons that really— that seem to be invalid in the magnetics world.

And circling back a little bit here if I may, to an earlier question – it puts us at a disadvantage – it does when we’re talking about competing internationally or globally. In the US everybody’s playing by the same US rules. However, if the folks from Europe or other locations in the world need to procure a certain part they can do so locally without as many of the encumbrances as the US suppliers have when it comes to the ITAR requirements. ITAR applies to the US. It’s a US directive. That means the Europeans don’t have to live with the US directive. So that does make it a bit more complicated and less competitive in the global market from that standpoint.

Electronic Products : How do you deal with product obsolescence as part of COTS, what works best?

Mike Stout: We state upfront the number of years that we will support the product. Typically with our products right now it’s five to ten years on some of the products. But we state upfront whether it be the military or subcontractor— the length of time that we will support the product directly.

We always supply schematics. We will always supply the documentation to allow them to service the product directly themselves.

Electronic Products : So what does the military do at that point? Can they go the lowest bidder— put it out for bids?

Mike Stout: Well, typically one of our customers is the Army. And the Army has a service division that will provide support after we discontinue servicing product.

Electronic Products : Does that opens up a different kind of problem all by itself? Security…

Mike Stout: Well, when you’re dealing with COTS and actually we support our products a lot longer than the computer industry…

Electronic Products : Yes, five years is ancient.

Mike Stout: Two years is ancient. So actually we support our products typically for with five-year warranties. It’s really not an issue for us but I’d imagine it would be an issue for someone that was supplying a router or a hub.

Randy Eller : Product obsolescence for us is an ongoing challenge. Not because we’re obsoleting it but because of our raw material manufacturers obsoleting their product and particularly in the materials for magnetic devices.

And probably like a lot of other industries, the market at large for consumer products primarily drives our industry. And that’s where a lot of the raw material manufacturers put their focus on developing new materials.

So as Jim pointed out I think a little while ago, it’s in our industry especially in the military aerospace industry but probably as big if not bigger in the medical industry. The design folks, the engineering folks, these customers want everything to stay the same until the end of time so they don’t have to go back and go through very extensive and very lengthy testing for reliability.

So we find that our suppliers are in situations where- I’ll use the magnetic core as an example – some of these materials have been out there for 30 years. And the manufacturers of those materials (predominantly in Asia) develop new materials because of improvements in the raw materials and pressures from the market for higher performance.

Computers, high-definition TVs, and all the things that we like to buy at a very low cost. But the demands are for smaller products so they develop more efficient magnetic core materials.

So what they do is phase out the old materials and pump out as much of the new materials as they possibly can. And we’re faced with no longer supporting a particular product without going through a requalification. And that maybe about a seven or eight-year life cycle and then those materials pretty much disappear.

So of course we get a lot of heat from our customers when that happens because they want to know why we haven’t been able to do something about it. And our only defense is to say, well, these companies want to make a profit and they’re making a profit on producing hundreds of thousands and millions of products turning in production. They don’t want to produce a couple of thousand a year anymore.

So it goes way— it’s purely a business related decision that puts our customers in a real jam and therefore us.

Jim Ferry : Yes, that’s a great point regarding the business decision. Tell you one of my co-workers— one of my favorite phrases is, hey, it’s really all arithmetic.

Electronics is driven in large part by the consumer market with products like the iPhone, the computer industry is driving those factories. The aerospace defense segment— although very important— is certainly smaller and so the scale of that sometimes overcomes the needs of the aerospace and defense market.

We do work with our suppliers and try to work those decisions as best we can to try support our customers as long as possible. We are very aggressive with product change notifications and EOL notifications and do offer a variety of solutions.

You know, sometimes they’re not always viewed as the best solution in the continued supply of product but sometimes that’s not possible because of that arithmetic.

We also have invested quite heavily in our supply assurance programs on select devices. We’ll continue the supply and even manufacture of product after an EOL event. We will invest in finished goods, die, and IP on products. And we’ll be able to support select devices well beyond their EOL dates. We’ll package products going, forward quite a long time.

So, not every device qualifies for that. But for anybody who’s been in the electronics business for a while— the Z80 microprocessor, was something that people were designing with in the ‘80s – and was discontinued, 10-years ago.

You can still buy them today because we’ve invested in the intellectual property. And, again, not in the aerospace and defense space, but customers are using them.

So there are solutions out there but when it comes to COTS, the challenge is to try to drive expense out. The solutions can get a little bit more expensive.

Electronic Products : So, Jim, if I understand you correctly, you retain the IP as opposed to saying, okay, this is end of life for us let’s give it to some other manufacturer? You don’t do that is what your saying?

Jim Ferry : Yes, Arrow’s the distributor so we work with our suppliers directly. But there comes a time when some suppliers will decide to end the life of a product. And we will work with them for potential supply assurance solutions for after the fact. It doesn’t apply to everything that we do but we are always on the lookout for opportunity. And, again, like I said, it comes down to the arithmetic, right?

Electronic Products : Datatronics you say that you will hand it off to another manufacturer is that right?

Randy Eller : No, we have to go through the normal process as Jim was mentioning. You give the customer notification.

We don’t always get notification from these suppliers. Again, we’re pretty small in the grand scheme of the transformer/magnetics industry. We don’t do a lot of the standard products. Even though in the military aerospace side of things we’re pretty well known, but as Jim pointed out that’s a very, very small part of the industry.

It’s not unusual for us at times to be caught off-guard by the decision of a critical supplier of a material that we need, when they decide they’re going to end life on a product. We require them to do it but sometimes they just don’t do it.

And there’s really not a lot you can do about that other than to try to get the customer informed right away. And come to them with a suitable option.

But to them – in our business – it often means a disruption in the supply chain for a certain period of time. It means a lot of calamity and chaos trying to figure what’s going to be best going forward long-term – and then re-qualifying a component or even components that are also other components that could affect those that we manufacture. And that’s a pretty hefty expense.

It’s never a good thing. It’s not good for anybody. It’s not good for the taxpayer, obviously, because that money is getting spent on something else that would otherwise not have to be spent.

But it is the reality of the business that as Jim pointed out, our industry is driven by the commercial industry and not by the aerospace and defense industry. That’s where the aggravation comes from. ■