We live in a volatile world Vice President & COO ChuckG@fescorp.com Aircraft Production 1999-2018 Rough Times After The First Civil/Military Upturn In 25 Years 160 (Market Value in 2009 $ Bns) 120 80 40 0 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Fighters MilitaryT ransports/T rainers/Other Bizjets Rotorcraft Jetliners/Regional AC 691 621 DoD Operating & Support Costs vs. Investment 100% % of DoD BA (Includes OCO) 90% O&S (MILPERS plus O&M) 80% 70% Lowest investment share since the Korean War 60% 1950 – 2010 Average: 36% 50% 40% 30% 20% Investment (RDT&E plus Procurement) 10% 0% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Tension between O&S and investment will reach historic proportions BALANCING QUALITY, SAFETY, RISK AND COST IN Volatile SPACE AND DEFENSE MARKETS Program risks associated with an “up & down” business scenario Hurry up, you are behind schedule • DESIGN PROGRAMS • Shortcut requirements analysis: DESIGN RE-SPINS • Compromise reliability / maintainability / availability analysis: REDUCED SUPPORTABILITY • Reduce scope & content of Systems / Hardware / Software Peer Reviews: MORE RE-SPINS • Shortest lead time becomes principal parts selection criteria: INCREASED OBSOLESCENCE & COUNTERFEIT PARTS RISKS • Hardware – Software trade-off studies scope reduced: PRODUCT DESIGN COMPROMISED • Reduced emphasis on Design for Manufacturing & Test: PRODUCTION/TEST REWORK • PRODUCTION PROGRAMS • • • • Shortcut work instruction preparation time: INCREASED “DO OVERS” Compromise production training: INCREASED SCRAP & REWORK Reduce rigor of first article / first build reviews: JEOPARDIZE PRODUCT INTEGRITY/SCRAP/REWORK Focus on delivery VS first time quality: MISSION FAILURE, INCREASED CUSTOMER REJECTIONS ACROSS THE BOARD RISK TO SYNERGY SLOW DOWN --THE PROGRAM IS SLIPPING • Design a ROLEX VS the TIMEX that the customer ordered: costs, lead times, producibility impacted • Utilize science experiments to solve a problem requiring simple analysis • Retain people on the program where ROI is low • Introduce production changes that actually reduce producibility & testability ANOTHER DAY ON THE PROGRAM IS ANOTHER DAY OF COST! Subcontractors caught in the middle • Subcontract reduction/terminations/extension • Delayed customer awards = Compressed Subcontractor Cycle Time “SUBCONTRACTOR” • Extended material/parts lead time • Increased parts materials/cost: Building to ORDER VS Building to STOCK A SMALL BUSINESS PERSPECTIVE Stillwater 86,500 Sq FT Facility A Native American, Woman-Owned Small Business President & CEO High Reliability Manufacturing CUSTOMER, PEOPLE & performance Our Customers Northrop Grumman 3.0% L3 0.5% Our People Others 1.5% Support 17% PROFS 17% NSWC 9.0% ENG 43% Ball 12.0% FY10 Revenue: $27.8M Lockheed Martin 22.0% Boeing 52.0% D&B Rating: 4A1 Total Team Strength: 154 MFG 23% REVENUE employees $30,000,000.00 200 $25,000,000.00 138 150 $20,000,000.00 $15,000,000.00 150 119 99 95 2006 2007 100 $10,000,000.00 50 $5,000,000.00 0 $- 2006 2007 2008 2009 2010 2008 2009 2010 Business Programs Space and Missile Programs Aircraft Programs UAS Programs Maritime Programs Radar Switchboards SB-4229 SB-4229A(V)/SP Certifications Awards & Recognition • Lean Manufacturing •Boeing • MIL-I-45208 •Northrop Grumman Supplier With 3 World Class Team Awards • MIL-Q-9858 • ISO 9001-2000 • AS9100 • JSTD-001 • NASA 8739.1 - .4 Supplier •Boeing Supplier of the Year 2001, 2005, 2009 •Lockheed Martin Star Supplier Enabling infrastructure -AS9100FES Corporate Quality Plan FES-QP-1 FES Quality Systems Manual FES-QSM-1 Quality Management Systems Section 4.0 Control of Documents FES-QSP 4.2-2 Management Responsibilities Section 5.0 Management Review Input FES-QSP 5.6-1 Resource Management Section 6.0 Training Assessment Delivery and Evaluation FES-QSP 6.2 •3rd Party Certified by NQA •Last Audit March 2011 •Score 1000 out of 1000 Measurement, Analysis and Improvement Section 8.0 Product Realization Section 7.0 Product Quality Planning FES-QSP 7.1-1 Purchasing FES-QSP 7.4 First Article Product Validation & Verification Return Authorization Procedure FES-QSP 5-2-1 Measurement, Analysis and Improvement FES-QSP 8.1-1 Non-conforming Material/Service Reporting FES-QSP 8.3-3 Proof of the Pudding Integrated Enterprise Processes Corporate Vision ISO Management Responsibilities Process 5.6-1 Goals Quality Policy Pre Bid Risk Assessment & Bid/No-Bid Decision Proposal Preparation Process 7.2-1-2 , Program Management Guidelines Customer Contract Requirements •Program Plan Technical Documentation Hardware Development Sub-Tier Supplier Management Software Development GFE/CFE Control Quality Plan Repair/Support Plan Product Realization -Manufacturing -Test Configuration Mgt Plan Budget / Schedule In-Depth Performance Reviews • Monthly Program Performance reviews with Executive Management – Earned Value and Risk Assessment – Technical, Delivery, Schedule, and Cost Performance Program Team Performance Measurement Continuous Customer Interface Daily Program Task Status Weekly Program Team Meetings / Performance Review Program Performance/Risk Weekly Customer Telecons Monthly PM Updates Program Schedule, Estimates to Complete, & Earned Value Quality Performance Program Performance Review with Executive Management Supplier Performance Financial Performance Business Area Performance Assessment & Resource Analysis Contracts Performance Product Assurance Network GUIDELINES REQUIREMENTS •FES-QSM-1 •FES Quality Manual •FES-QP-1 •FES Quality Plan Corporate Quality Goals ISO Documents •FES-QSP- 7.2-1 Contractual Requirements 7.1-1 MIL-SPECS 7.2-2 Departmental Goals •FES-QSM-1 •FES Quality Manual Customer Specifications 7.1-1 Process Specifications TOOLS APPLICATIONS •FES-QSP- PERFORMANCE ASSESSMENT/ FEEDBACK Process Training SPC 8.1-2 CAB 8.5-2-1 MRB 8.3-2 TQM's 8.1-5 Prog Review 5.6-1 BA Reviews 5.6-1 Vendor Rating 7.4-1 Semi-annual Mgt Review 5.6-1 Pivot Table 5.6-7 Program Mgt System 7.1-1 Contract Mgt System 7.2-1 Supplier Mgt Internal Process Audits and Validation Pareto Charts Customer Feedback •FES-QSP -7.2-2 •FES-QSP- 8.5-2-1 Process Improvement Benchmarking 5.6-1 8.5-1 Metrics Process Analysis 8.5-2-1 8.5-2-1 Audits 7.4-1 Q-Codes 8.2-1 8.2-1 7.4-3 CORE PROCESSES • Design • Material Acquisition • Manufacturing • Product Support design Subsystems/Product/Systems Engineering Yesterday • • • • • • Systems analysis Design Rigor Peer Reviews Systems testing, Validation, Verification Configuration Management and Documentation Technology innovation and product enhancement Preliminary Hardware Design Kickoff Meeting System Requirements Review Drawing Release Prototype/ Hardware MFG MFG Readiness Review Tomorrow Producibility Integration Contract Award Transition to Production Planning Today Software Code and Test Test Readiness Review H/W & S/W Requirement Analysis Analysis: Reliability, Producability, Maintainability, Availability Parts and Equipment Selection Peer Reviews Preliminary Design Review Preliminary Software Design Part Procurement (Production) Hardware and Software Integration First Article Build/ Qualification Informal Functional Verification Testing Integrate Lessons Learned into MFG Processes Design Qualification Testing Equipment MFG (Production) Lessons Learned Capture/ Application Acceptance Testing Peer Reviews Physical Config. Audit Critical Design Review Functional Config. Audit Production Release Drawings/ ATP Packaging and Shipment Turn-key material acquisition process YES NO Identify Alternate Parts Customer Approval Parts Obsolete NO YES CONFIG MGR MATERIALS ENGINEER PROJ ENGR QUALITY ENGINEER CUSTOMER REQUIREMENTS Start • Requirements Analysis PURCHASING TEAM Vendor Selection • Approved Vendor List • Past Performance • Process capability • Customer directed •Traceability / •Sources •GIDEP •Screen/Test • Develop Bill of Materials PURCHASING TEAM Request for Quotes PGM/PURCHASING TEAM YES Best Value Award NO Acceptable quotes Generate Purchase Request NO Supplier Performance • Certified • Qual-Deliv • Special Certs • Source Inspec PGM/PURCHASING TEAM •Issue Purchase Order •Monitor Vendor Performance PROGRAM MGR MATERIAL MGT • Receive • Inspect/Test • Prohibited Materials • Counterfeit parts • Stock PR YES PROGRAM TEAM Product Integration / Documentation Manufacturing process flow Process 1: Stencil Print Process 2: Automated Placement Process 5: AOI Process 9: Solder Connectors (and Thru-hole Components) Process 6: Touch-Up Process 10: Cleaning Process 3: Reflow Process 7: Lead Forming (as required) Process 12: Break Panel, & inspect individual boards Process 4: Cleaning Process 8: Install ThruHole Components Developing a corporate culture of commitment & process optimization • Leadership Integrity and Organizational / Employee Commitment Beyond Reproach • Foster Transparent Communication & Mutual Respect in Both Directions Throughout the Company • Welcome New Ideas • Specific Goals and Accountability Established Annually • Resources Allocated to Achieve Quality Goals in Company Operating Plan • Clear, Timely and Accurate Performance Feedback • Lessons Learned are Captured & Re-deployed Customer Focused Program management Integrated Product Team Approach – Team includes CUSTOMER, Program Engineering, Quality Test, Manufacturing, Configuration Mgt, Sub-tier suppliers – Open Communication, Proven Process Deployment, Risk Mitigation, Metrics Based Performance Assessments • Nimble and Responsive to changing customer requirements Monthly Program Performance reviews with Executive Management – Delivery, schedule, and cost performance & Lessons Learned • CUSTOMER BENEFITS – Performance to Plan Reduced customer oversight costs Key Quality Metrics • Line of Balance • Customer Satisfaction • On-Time Customer Deliveries • Customer Quality Acceptance Rate • Warranty Returns • Nonconformance Requests by Area • Customer Complaints • Supplier Corrective Actions • Scrap • Rework and Repair Labor • Supplier Performance • Risk CLIN7 Production PCU Line of Balance 7-1 7-2 7-3 7-4 7-5 7-6 7-7 7-8 7-9 7-10 7-11 7-12 7-13 7-14 7-15 7-SP 7-SP 7-SP % SN 200 SN 201 SN 202 SN 203 SN 204 SN 205 SN 206 SN 207 SN 208 SN 209 SN 210 SN 211 SN 212 SN 213 SN 214 SN 215 SN 216 SN 217 PCU 86706-507-11 On Dock Date/ Huntsville 100 % CSI 99% Final Test 95% Environmental Test 90% Conformal Coat 85% Confidence Test Hand Solder Components 65% Solder Reflow 25% Kit Inspection 10% Kitting 5% 8/27 9/3 9/23 9/23 10/24 11/20 10/24 11/20 10/24 2/9 11/20 12/12 2/9 12/12 1/12 3/9 3/9 3/9 8/28 10/1 11/6 11/6 C C C C 11/25 9/23 11/6 60% PWO Complete D Other Issues PCU Shortages Flag E 1) JANTXV1N5806US Diode qty 38 Impact Issue Action Plan A B C D E OVD on hold until resolved Confidence test during continuity Alternate part needs wider limit in test software Ten per CCA, parts will PCU #1 Insufficient parts provided by Boeing Customer to provide Exp. 12/10 have to be hand soldered Must go through review board Pending Nickel Plating lifted with conformal coat mask Confidence test failure NCR to Boeing MRB Troubleshooting FY 2010 Customer Satisfaction Score (Company Wide) Customer Satisfaction Weighted Formula Proposal Win Rate + Delivery Rate 2 .810 + .988 - .002 x 100 Warranty Returns X 100 Units Shipped = = Satisfaction Score 89.90 % 2 Proposals Won = 86 Proposals Lost = 20 Total Proposals = 106 Wins ÷ Total Proposals Submitted = Proposal Win Rate Warranty Returns = 4 Units Shipped = 2035 Proposal Win Rate: 81.0 % Delivery Rate: 98.8 % Warranty Returns ÷ Units Shipped X 100 4 ÷ 2035 X 100 = 0.002% Boeing updated the B.E.S.T. for 02/15/2011 Huntington Beach: Quality: 15 each received with no rejects Delivery: 15 each delivered on time Quality: Gold Delivery: Gold Huntsville: Quality: 122 each received with no rejects Delivery: 122 each delivered on time Quality: Gold Delivery: Gold St. Louis: Quality: With Complexity Factor: 99.99% Delivery: 1013 each delivered on time Quality: Silver Delivery: Gold Wichita: Quality: With Complexity Factor: 100% Delivery: 86 each delivered on time Quality: Gold Delivery: Gold Composite & BDS Rating Quality Rating: Alternate Quality Rating 100% Delivery: 1236 each delivered on time Quality: Gold Delivery: Gold Northrop Grumman Oasis Rating Quality: Gold Delivery: Gold DLA Ratings Updated on 2/22/11 Delivery Quality # Of DLA CLINs Vendor DLA Score Average DLA Score 100 100 15 100 91.7 FIRST PASS YIELD 100% 97% 95% 97% 98% 95% 94% 95% 97% 99% 96% 95% 93% 80% 60% 40% 20% 0% Feb-10 Mar-10 Apr-10 May-10 Jun-10 PCB First Pass Yield Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 PCB First Pass Yield Target=98% Dec-10 Jan-11 Burdened Rework Percentage vs. Burdened Mfg Labor Percentage 0.20% 0.19% 0.18% 0.16% 0.16% 0.14% 0.12% 0.10% 0.10% 0.10% 0.08% 0.07% 0.07% 0.07% 0.06% 0.06% 0.06% 0.05% 0.04% 0.02% 0.02% 0.00% Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Series1 Aug-10 Sep-10 Linear (Series1) Oct-10 Nov-10 Dec-10 Jan-11 Burdened Scrap Percentage vs. Burdened Material Percentage 2.00% 1.80% 1.72% 1.60% 1.40% 1.20% 1.00% 0.80% 0.59% 0.60% 0.40% 0.32% 0.20% 0.20% 0.16% 0.12% 0.07% 0.11% 0.19% 0.05% 0.02% 0.00% Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Series1 Aug-10 Linear (Series1) Sep-10 Oct-10 Nov-10 0.06% Dec-10 Jan-11 Supplier performance 100.00% 99.00% Acceptance % 98.00% 97.00% 96.00% 95.00% 94.00% Quality Total Group 1 93.00% Group 2 92.00% Goal 91.00% 90.00% 100.00% 95.00% 90.00% On-Time % 85.00% 80.00% 75.00% 70.00% 65.00% 60.00% 55.00% On-Time Delivery Total Group 1 Group 2 Goal Enclosure Delivery Quality 12 Month Avg = 15% No Failures Supplier Ratings Frontier's Supplier Quality Rating System is based on a 9 point system. It is divided into three categories, which will be the basis for a supplier remaining on the Approved Suppliers List. GOLD LEVEL expectations. 9 points Supplier Partner - Exceptional supplier performance, exceeding SILVER LEVEL 8-6 points Preferred Supplier - Very good supplier performance, meeting or exceeding expectations. BRONZE LEVEL 5-3 points Qualified Supplier - Satisfactory supplier performance, meeting expectations. YELLOW LEVEL 2 points meeting expectations. Marginal Supplier - Marginal Supplier performance, supplier is not RED LEVEL 1 - 0 point Unsatisfactory Supplier - Unsatisfactory supplier performance, clearly fails to meet expectations. Supplier is placed on Probation and has 60 days to implement corrective action. Unacceptable performance requires mandatory performance review. Program Risk Assessment ITEMIZED Risk Item Phase Score Estimated Value Risk Eng TOTALS Mat Mfg Total $ 85,000 $ 85,000 $ 25,000 $195,000 1 Design 6 New Electrical Design 2 Design 4 $ 25,000 $ 10,000 $ 3 Design 4 New Test Set Design 4 Mfg/Test 2 New Work Instructions 5 Mfg 9 Part Procurement to Meet $ 10,000 $ 50,000 $ Schedule 6 Mfg/Test 2 New Assy / Test Fixtures $ 7 Test 6 8 Mfg/Test 6 New Mechanical Design $ Eng Mat Mfg Total $ 27,500 $35,500 $ 8,500 $ 71,500 5,000 $ 40,000 30% $ 7,500 $ 3,000 $ 1,500 $ 12,000 5,000 $ 1,000 $ 11,000 30% $ 1,500 $ 1,500 $ 300 $ 3,300 $ 10,000 $ 2,500 $ 1,000 $ 13,500 30% $ 3,000 $ 750 $ 300 $ 4,050 - $ 750 $ 1,500 2,500 $ 2,500 $ - $ 2,500 $ 2,500 $ 5,000 30% $ 5,000 $ 65,000 50% $ 500 $ 5,500 30% $ 750 $ 5,000 $25,000 $ 2,500 $ 32,500 750 $ 750 $ 150 $ 1,650 $ 25,000 $ 10,000 $ 5,000 $ 40,000 30% $ 7,500 $ 3,000 $ 1,500 $ 12,000 $ 5,000 $ 15,000 30% $ 1,500 $ 1,500 $ 1,500 $ 5,000 $ 5,000 $ Risk Level MEDIUM LOW HIGH 5 4 5 3 2 Prob 5,000 $ $ Unit Failure to Meet Requirements Assy/Test Error During Production Likelihood Likely Value 4, 6 2,3 1,7,8 1 2 3 1 4 Impact/Consequence 5 4,500 A journey of continuous improvement Northrop Grumman World Class Team Awards DoD Nunn-Perry Awards Lean Journey Begins MILQ 9858 MILI 45208 ISO 9001-1994 1989 1994 2000 NGST Gold USN BMP Audit AS 9100 ISO 9001-2000 1999 Boeing Supplier of Year Awards 2001 ERP Supply Chain Mgt System 2005 2006 2008 2009 challenge • Forced re-design of the F-18 E/F Engine Fuel Display due to LCD supplier Bankruptcy o Hardware / Software • No break in production o Required 75% reduction in re-design time • Focus on 1st Time Quality to Reduce Production Cost approach • Formed integrated FES – Subcontractor – Customer Re-design team • Opportunity to Integrate Lessons Learned o Design o Producibility • Integrate EFD production team into Design for Manufacturability (DFM) and Design for Test (DFT) • Formed a Joint FES – Customer – Subcontractor accelerated improvement team o First Time Quality o Reduce Contract Award Delivery Cycle Time Supply Chain LEAN Deployment Reduce Boeing PO Award Order to First Delivery Cycle Time All All material material received received FES Sub 25 wks 30 wks PO Award to Sub 8 wks Sub 1st Delivery 56 wks Initial State 18 wks 4 wks 20 wks Current State 2 wks Future State FES Critical Path Sub Critical Path FES & Sub Critical Path 12 18 wks wks 34 wks 38 wks 41 wks 48 wks FES 1st Delivery 76 wks Result F/A-18E/F Engine Fuel Display Redesign (Tech Refresh) New Up-Front Control/Display Customer Recognition: Achievements: Boeing’s Avionics Supplier of the Year 2001 Design Time Cut -75% MTBF Improved +33% Price Reduced -48% New Engine Fuel Display New Multi-Purpose Color Display • Price established during negotiation of MYP-2 pricing • Reduced ESS Req’t • Eliminated PRAT • FES took Over glass Ruggedization from GE • STE Upgrade • Improved sub Test process Final MYP-3 Negotiated Price (With CRI) MYP-3 Reprice, 10% Incentive (No CRI) Initial Negotiated MYP-3 Price Previous CRI Actions (Unfunded) FY09 (FRP-10) PRICE (MYP-2, 5th Yr) Follow-on EFD cost optimization • LEAN Quality Initiative 13.8% • FES internal process enhancement initiatives drove additional cost reductions 20% • Boeing committed to participation in the FES CRI resulting in reduced testing & inspection 27.3% challenge • Transition of Production for SM-3 guidance unit circuit cards from Boeing to FES without a break in production • Subsequent to Production / Test Readiness Certification, transfer of High-Reliability material responsibility to FES approach • Full FES process verification with both Production & Test Readiness Reviews requiring Government Prime and Boeing approval prior to FES start • Integrated FES / Boeing Customer & Subcontractor Product Team formed to optimize production transitions ABMD Production Transition To FES GP Components Kit Inspected Guidance Processor (GP) Components Kitting PAL Programming Assemble per Drawing: Clean & Vacuum Bake PWB Stencil Print Automated Placement Thermal Bond GP Assembly Assembly Inspection AOI Mass Reflow Solder & Clean Automated Optical Inspection Install Connectors & Spacers Using Fasteners & Kapton Tape under J1 Install & Solder Individual Components to Board GP CCA Functional Testing Install Press Fit Connector Mechanical Bond Components Final Cleaning Cleanliness Test Vacuum Bake Component Lead Form & Tin Solder J7 Connector GP Module Conformal Coating Color Coding: Customer Production Line Certification FES Value Added GP Module Inspection GP Module ESS Thermal Stress Screening GP Module Functional Testing GP Module Ready for CSI / Shipping FES Production Facility Upgrade Program Solder Separation Fishbone People Processes Equipment Setup Assembly Technician s Machine Operators Solder Pattern Equipment Soldering Pre-tinning Solder wave height Application Speed Selective Solder Machine Solder Temperature Temp Sensors Flux Application Pre heating Mechanical Clearance Solder touch-up Heating Rate Batch Cleaner Cleaning Cooling Rate Solder purity in nozzle Cross sectioning PWB X-ray Inspection Functional Test Solder Solder Separation Humidity Calibration Lighting Connector Flux Specification Requirements Indicates that this has been eliminated as a cause of the problem Material Air quality Temperature Work Instructions Safety Precautions Indicates that is under current scrutiny Measurements Environment Methods/Procedures Counterfeit Parts Mitigation Process Flow Roadblocks to watch for Poor Communication Diverging goals and objectives Inadequate Training Backsliding Dirty fingernail gang looses clout Tackling Too Much too early Leadership Buy-In No Link to Company Objectives No Incentive A Closing Thought Customer Price Target Profit Profitability P R I C E Profit Cost Pre Lean Cost Post Lean