Protecting Intellectual Property When Outsourcing

Editor’s note

Outsourcing, while sometimes necessary, increase the risk of intellectual property leakage. The authors have developed a method to decompose a product into sub-components and thus decrease the risk of confidential information leakage by inference.

The risks and Benefits of Outsourcing

In global recession, outsourcing becomes a question of survival for most executives who need to restore profitability and growth in many manufacturing industries, such as aircraft, automobile, telecommunication, or information technologies. One of the critical challenges faced by such decisions is the potential risk of leaking confidential information through shared suppliers and partners. In this research, a new approach is proposed to decompose a product into several sub-components for mitigating the risk of Intellectual Property (IP) leakage caused by inferences in supply chains.

Explicit and Implicit Leakages

The nature of information leakage can be categorized as explicit or implicit leakage [1]. Explicit leakage means that confidential information has been mistakenly shared through the supply chain’s information channels. Implicit leakage refers to information that has been leaked by inferences, conclusions or deductions from reasoning over evidence rather than explicit information. This inference is mainly due to the different inherent engineering relationships and interactions (e.g. physical, mechanical, electrical, etc.) between product components.

To the best knowledge of authors, most of the existing literature focuses on explicit leakage, which aims to propose legal, organizational, social, technical methods to prevent direct information leakage. Recently, Zeng and Wang’s Labs have reported on how implicit information leakage happens and how to mitigate the risk of leakage [1–5]. Based on these findings, this article focuses more specifically on the methodological steps and tools to mitigate confidential information leakage by inference.

Design Structure Matrix (DSM)

An original approach is developed to decompose product structures (bill of materials) using DSM. A DSM is a square matrix with identical row and column (figure 1). Using this square matrix, the relationships of parameters between elements can be represented.  The decomposition approach has hence been found to be more suitable to protect product design information. Such approach takes into account the various interactions between the components based on a conceptual supply chain model.

Matrix-based design structuring is referred to the context, where a matrix is used to capture dependency relationships of any two entities related to engineering design applications [6].

In this paper, we focus on design decomposition ‘‘two-mode’’ problem, which aims to form the design subcomponents by properly grouping subsets of design functions and parameters. Generally speaking, a design decomposition problem involves three following stages [7]:

1.    Decompose the product structure into elements;

2.    Understand and document the different interactions between the elements;

3.    Integration analysis of the decomposed elements.

The Aircraft Pylon Design Case Study

In order to illustrate the practical implications of the methodology, an aircraft pylon design case study was chosen (figure 2). In civil aviation, a pylon is a key structural system which connects the engine to the rest of the aircraft.

They exist when the configuration places the engines below the wing, above the wing, or on the fuselage. The data for this case study was provided by a student design project that retrofits an engine in an aft fuselage mount configuration as illustrated in Figure 3.

Figure 4 shows the detail of the forward engine mount and the rear engine mount which are the main connecting structures between pylon and engine.

Product Structure Tree

For the pylon, the main structural systems are the front engine mount and the rear engine mount, illustrated in figures 5 and 6 respectively. Figure 5 shows the front engine mount, which includes four components: an extended yoke, a link and two mount pads.

The rear engine mount purpose is to constrain the engine relative to the aircraft fuselage, it contains three components: a yoke, a link and a mount pad (figure 6).

Figure 7 presents an extended product structure tree, which describes the relations between major components and assemblies of the pylon structure. According to the definition, a product structure tree T has only one essential component set (ECS). The ECS of our case is {FY, FL, FP, MPB, PEB, RY, RL, RP, PB, MEB}.

In this case, ‘‘withstanding tensile load’’, ‘‘withstanding shear load’’ and ‘‘withstanding temperature’’ are private parameters to be protected for each component. They are respectively key parameters to represent the interactions of ‘‘spatial’’ (physical effect), ‘‘energy’’ (aerodynamic effect) and ‘‘field’’ (heat effect) between components. Both the front and the rear space have neither interface with fluid line systems (material interaction) nor electronic systems (information interaction). If the three private parameters are inferred, potential competitors may know the material and the method of heat treatment. Thus, the pylon mount has a high risk to be copied by reversed engineering. Moreover, if one component is allocated to a supplier, this supplier is assumed to know all the related manufacturing parameters. The ECS in this case, such as {FY, FL, FP, MPB, PEB, RY, RL, RP, PB, MEB}, is taken as the component of product structure tree.

In this case, the component is roughly divided into two categories (part and connector). The component category function F_cc is shown in Table 1.

The level 1’s coupling value Degree of clustering is presented in Table 2. In this case, set at α = 0.20, the level 2’s DSM with regrouping component is shown in Table 3.

The previous approach can be summarized in a hierarchical tree (shown in Figure 8). Based on our proposed method, this figure illustrates the clustering procedure. In this case, according to the experiences of product developer, the tolerance of IP leakage threshold is set as 0.20. Thus, the suitable decomposition of product structure is {FY, RY}, {FL, RL}, {FP}, {RP}, {MPB, PEB, PB, MEB}. Each of these decomposed components is allocated to one specific supplier.

Additional Information

For a more comprehensive discussion about the Product decomposition using design structure matrix for intellectual property protection in supply chain outsourcing, we invite you to read the Research Paper in the journal Computers in industry:

Deng X., G. Huetb , S. Tana and C. Fortin (2012). Product decomposition using design structure matrix for intellectual property protection in supply chain outsourcing. Computers in Industry, 63, pp.: 632–641. (PDF).