Transparency Essential in DFARS, DoD Compliance

| February 17, 2016 | 1 Comment

shutterstock_276339986 (300x225)Last fall, the Department of Defense (DoD) released a set of proposed amendments to the existing Defense Federal Acquisition Regulation Supplement (DFARS) ruling that would extend the regulation’s reach to commercial — as well as military-specification — electronics while narrowing the definition of “trusted suppliers” of components and subassemblies. The implications of the proposal included major changes pertaining to the regulation, flow down and traceability requirements for electronics companies seeking to do business with the DoD.

In the wake of the DFARS amendments, flow-down and traceability requirements extend to commercial off the shelf components (COTS) that qualify for military use. While DoD sourcing remains but a modest percent of the global semiconductor sourcing market, history has shown that counterfeit mitigation strategies and standards trickle down from this comprehensive and rigorous set of requirements to the wider consumer markets.

The COTS program allows military contractors to use commercial components in cases where the devices meet the same form, fit and function of mil-spec parts. Online electronics distributors such as, a division of Arrow Electronics Inc., has implemented a series of processes and procedures designed to significantly reduce the risk of procuring noncompliant parts from the electronics supply chain.

Verical’s sourcing structure relies not only the guarantees of provenance that come with authorized distribution, but has its own audit procedures for inventory sourcing, ensuring that vendors along their supply chain are held to and abide by the same high quality standards, such as the SAE Aerospace 6496 standard, explained Dan Schoenfelder, Verical’s director for supply chain optimization.

“There are different elements that we audit for depending on whether the inventory source is a component supplier or a distributor,” he explained. “For example, we may require distributors to disclose how they handle returns from customers; whether they quarantine [the parts] or make them available to the public.”

Beyond the processes and procedures that Verical employs to ensure best-in-class quality of the products sold through its site, Verical provides its customers with an API to access a wide array of essential component data including batch numbers, date codes, certificates of conformance and trade compliance.

In parallel with the latest DFARS counterfeit mitigation requirements is the increased penetration and adoption of digital business platforms that enable and encourage greater data sharing among B2B partners. The integration of more sophisticated IT platforms for business operations such as secure sourcing and automated B2B procurement are critical counterfeit mitigation points for consumer-only through to the DoD sourcing events. Partnering with companies that have not only implemented the digital business tools and IT infrastructures that promote increased B2B visibility and transparency carry not only obvious advantages but are increasingly poised to be required for quality best practices as a trickle down from the recent DFARS amendments.

Verical has leveraged existing, best-in-class sourcing, data aggregation, auditing, and set quality control processes and procedures and streamlined these rich data into a global online marketplace.

“Data transparency helps facilitate a seamless transaction for customers and the confidence that Verical has taken the right steps – and that we have the right supplier programs and breadth of inventory – that prevents customer from having to go to multiple partners for sourcing,” Schoenfelder said.

As both industry research and simple market demands have shown recently, partnering for success and the construction of strategic, federated ecosystems are essential to market success as demands from customers become more complex and demand significantly greater customization. Given these demands and the ramp up in anti-counterfeiting efforts that are anticipated increased visibility into component histories, provenance, and the flow down to ensure the utmost quality will also be demanded.

As efforts to improve anti-counterfeiting gain, and as concerns over data security grow, partnering with companies that have established and mature IT structures as well as standardized sourcing processes and procedures will be ever more critical. “Verical is as transparent as any electronics seller of component you can find,” said Schoenfelder. “I characterize our data transparency as being a huge plus for customers.”

DFARS, to be sure, is designed for DoD sourcing, however, the impact of these new, tighter requirements calls into review the operations of all leading distributors and sourcing partners along the global semiconductor and electronics supply chain. The reliance on partners in the increasingly complex and competitive markets in addition to significantly tighter component flow down and transparency information requirements highlights those companies who are ahead of the game and already poised to deliver at these next levels.



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About the Author ()

Lisa Ann Cairns, Ph.D., Contributor Lisa comes to EPS with a diverse background that includes 10 years of hands-on experience in IT as well as in semiconductor and electronics distribution. The majority of that time, Lisa spent in the role of Senior Market Analyst and Senior Contributor at a leading, independent distributor of semiconductor and electronics. Prior to that tenure, she was a professor of linguistic anthropology, engaged in social science research, modeling, and analysis. The skills of observing and explaining complex social patterns adds a rich framework in which to indentify and to understand the range variables that constantly affect today’s globalized marketplace. Lisa’s admixture of experiences brings a fresh eye and a contextualized understanding of the global semiconductor and electronics supply chain. Lisa’s market analyses provides readers with unique views spanning micro- to macro-level industry events, synthesized insights bridging business and economics, as well as connecting the dots between upstream to downstream industry events that affect and inform distribution strategies. Lisa has a Ph.D. and A.M. in Linguistics from The University of Chicago, during which time she was awarded the prestigious National Science Foundation Doctoral Dissertation Research Improvement Grant. She holds a B.A. from Hofstra University, where she was Hofstra's first woman undergraduate to be awarded a Fulbright-Hayes Grant for independent research prior to attending graduate school. Lisa is currently consulting and freelance writing and can be reached at

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