Strategic & Operational Goals

1. Integrated Approach Systematic Orientation Business Excellence Framework Strategic & Operational Goals • Leadership • Strategic Planning • Customer & Market Focus • Measurement, Analysis & Know. Mgmt • Human Resource Focus • Process Management • Business Results Tools to be applied to achieve business excellence • EI • Lean • PBM • CMM/CMMI • 6-Sigma • Vision Support Plan • Benchmarking • Comparative Data • Breakthrough • Best Practices Process Management - Cycles of Improvement 1980s to 1990s 1940s to 1970s Early Systematic Approach Quality Orientation Reactive Approach Directive Orientation Deming Challenge Strategic & Operational Goals Strategic & Operational Goals TQMS MIL SPEC DOD/FARs Employee Involvement SPC Contract Quality Circles CQI • Used processes for many years • Reacted, non-focused approach • Started Continuous Improvement Today 1990s to 2000 Aligned Approach Process Orientation PBM & PAS ISO Strategic & Operational Goals EI CMM Lean Best Practices 6-Sigma • Process Design & Management • Process Assessment • Process Improvement

2. T-38C Avionics Upgrade Program Overview • Upgrade 511 USAF T-38 A/C to Digital Cockpits • 36 Aircrew Training Devices (Simulators) • Avionics Logistics Support • First Flight - 8 July 1998 • Production Planned through FY2008 Fwd Cockpit Provide Realistic Advanced Training for Future USAF Fighter/Bomber Pilots

3. Mobilize the Commitment to Lean Selling the Vision . . . . .

4. Pre-Lean Actuals Post-Lean Actuals FY01 FY02 437 308 286 281 283 265 259 123 116 82 58 48 45-49 65-69 15-19 20-24 25-29 30-34 35-39 40-44 50-54 55-59 60-64 70-74 Benefit of Lean Manufacturing Lean Enables Accelerated Learning and Reduced Variability Lean Benefit Relative DLHs (Including Rework) Max – Min Variation AUP DLHs (Including Rework) Business as Usual 85% Learning Curve Pre-Lean Trendline CUM A/C Grouping Cell 1 Cell 2 Cell 3 Lean Cell Implementation Post-Lean Trendline Cells 4 - 7 Post-Lean Trendline and Benefit Analysis Based on CUM 39 thru CUM 73 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 Completed Aircraft CUM Number

5. Supply Chain Services Value Chain Customer Relationship Customer Service Planning Quote & Order Processing Production Logistics Leadership (Goal, EPP IBAP) Customer & Supplier Partnership Performance Management Information Technology Lean & Process Management Employee Involvement Lean and Efficient Systems Enterprise Value Stream Map Standard Processes Visuals In place Supplier Development Partnership Pull and Point Of Use Continuous Process Improvement Benchmark & Breakthrough Process Redesign Examples of Deployment Examples of Benefits • Process Based Management on Quote, Order, and Delivery • Accounts Receivable Process • Direct delivery of shipments • Common Processes across SCS • Common Catalog • Standard Asset Management Planning Process • Reduced account receivable backlog– 254% imp. in cash flow • VIDS parts procurement from 4 days to 2 hours • Improved F/A-18 supply availability from 65 % for C/D to 85% for E/F