SMS Technologies, Inc.

1. SMS Technologies, Inc. • Employees - 120 in San Diego • Low volume / high mix EMS - Electronic Manufacturing Services including Design, Layout, Rapid Proto-Typing, DFM & DFT, RF Technology, Supply Chain Management • AS9100, ISO/TS 16949, ISO 9001 & 13485 • Aerospace & Military Customers:

2. COP Home Universal Support Processes • What: • Strategic Planning • Values • Vision • Mission • Customer Satisfaction • Organizational Review Who: Quality Council Champions / Process Owners Subject Matter Experts / Trainers Customer-focused Teams Other Supply Chain Members Universal Support Processes: Business Planning Continuous Improvement Management Test Eng. Mgr. Corrective & Preventive Action Input: Customers need continually increasing quality, productivity & service value Output: Customers get continually increasing quality, productivity & service value Document Control Information Services Purchasing Maintenance Management Review • How:WI 5.6.1.1.01 • The Quality Council: • Selects strategic improvement priorities • Assigns team members to improvement projects • Provides teams with direction, guidance & support • Reviews improvement project progress • Improvement Teams: • Include champions, SMEs, & other members • Utilize PDCA problem-solving tools, etc. • Make results available to the organization • Are recognized for their contributions Measures: Team Performance Metrics Team Process Improvement Metrics CI Management Process Improvement Measurement & Improvement Staffing Workforce Development Internal Auditing 2

3. HOW:WI 5.6.1.1.01 • The Quality Council: • Selects strategic improvement priorities • Assigns team members to improvement projects • Provides teams with direction, guidance & support • Reviews improvement project progress • Improvement Teams: • Include champions, SMEs, & other members • Utilize PDCA problem-solving tools, etc. • Make results available to the organization • Are recognized for their contributions

4. WI 5.6.1.1.01 Continuous Improvement Management Process (SEA Continuous Improvement Management Process 1.1.4) 1.0 PURPOSE: To establish, document and maintain a standard work instruction as part of the overall Continuous Improvement Management Process appropriate to the SMS Technologies’ Quality Management System and its customer base. 2.0 SCOPE: This work instruction explains how SMS manages its continuous improvement management process. The council members identify improvement projects based on both internal and external customer needs and reviews each initiative's progress. Each initiative is assigned a team and guidance is provided as needed. A standard toolbox containing problem-solving methods is deployed throughout the organization. Continuous improvement team members typically include the respective process owner, master trainer(s), and strategic champion of that domain as well as any other member of the organization that may add value to the process. The output of the continuous improvement process will document the initiative's results, including success and lessons learned. 3.0 REFERENCE DOCUMENTS: 3.1 AS9100:2004 (B) Quality Management Systems – Aerospace – Requirements 3.2 ISO 9001:2008 Quality Management Systems – Requirements 3.3 ISO/TS16949:2009 Quality management systems – Particular requirements for the application of ISO 9001:2008 for automotive production and relevant service part organizations 3.4 ISO13485: 2003 (E) Medical Devices – Quality Management Systems – Requirements for Regulatory Purposes 3.5 ISO 14969: 2004-10-15 Devices – Quality Management Systems – Guidance on the application of ISO 13485:2003

5. 4.0 TERMS AND DEFFINITIONS: 4.1 Value Stream: All the processes required to produce a product or service of value to a customer. The term value stream applies to product families or individual products or services. The value stream includes the flow of materials in production as well as information flow. The customers of a value stream could be internal or external. 4.2 Process: A series of steps to produce an intended output. A process may be part of the Value Stream for a product/service or a business process necessary to run the business and help employees and departments do their jobs. 4.3 Process Group or Value Stream Champion: A senior executive who manages a group of business management processes and/or value streams with common or related purposes. For purposes of the SEA program, at minimum Champions are needed for Leadership, Operational excellence, Workforce Development, and each Value Stream or Product Line. The Champion supports Process Owners, prioritizes improvement initiatives, and charters improvement teams. 4.4 Process Owner: A designated person responsible for achieving ever-higher levels of process maturity and effectiveness; a focus point for the company on issues related to their assigned process. Usually reports to the Process Champion either directly or indirectly. 4.5 Master Trainer: A person trained and qualified to train and qualify others. The master trainer documents work instructions, trains and cross-trains those who will work in a particular process, and verifies that they can perform the work and quality checks according to the work instructions in the time allowed. 4.6 Subject Matter Expert: A person who has experience and/or expertise in the process. The SME has not necessarily been qualified to train others but serves as a resource to the Master Trainer. SMEs can become master trainers through certification. 4.7 Managed Process: A process selected by senior management for improvement. This process might be selected during strategic planning or other coordinated leadership activities. Managed Processes have a process owner, master trainer, and SME assigned to improve the process. Managed Processes have a team assigned for Kaizen, Six Sigma, or other Process Maturity improvement activities as appropriate.

6. 5.0 PROCEDURE: • 5.1 SMS Quality Council sets improvement priorities • 5.1.1 Quality Council selects improvement projects based on strategic planning criteria • 5.1.2 Quality Council assigns team members to the improvement project • 5.1.3 Quality Council provides team members with project direction, guidance and support • 5.1.4 Team members utilize the appropriate problem-solving tools including but not limited to the PDCA model • 5.1.5 Team members are comprised of process champions/owners, SME’s, and other members of the organization that may provide relevant insight into the problem domain • 5.2 SMS Quality Council reviews improvement project progress • 5.2.1 Team members are recognized for their contribution to the project success • 5.2.2 Project results are made available to the organization so they can build on the experiences of past projects

7. Selecting Improvement Priorities The model of a process-based quality management system shown in Figure 1 illustrates the process linkages presented in clauses 4 to 8. This illustration shows that customers play a significant role in defining requirements as inputs. Monitoring of customer satisfaction requires the evaluation of information relating to customer perception as to whether the organization has met the customer requirements. The model shown in Figure 1 covers all the requirements of this International Standard, but does not show processes at a detailed level. NOTE In addition, the methodology known as “Plan-Do-Check-Act” (PDCA) can be applied to all processes. PDCA can be briefly described as follows. Plan: establish the objectives and processes necessary to deliver results in accordance with customer requirements and the organization's policies. Do: implement the processes. Check: monitor and measure processes and product against policies, objectives and requirements for the product and report the results. Act: take actions to continually improve process performance. Figure 1 — Model of a process-based quality management system AS9100C:2009-01, Page 6 of 33

8. Model of a Process-based Quality Management System

9. WHAT YOU ARE DEEPLY PASSIONATE ABOUT WHAT YOU CAN BE THE BEST INTHE WORLD AT WHAT DRIVES YOUR ECONOMIC ENGINE Developing the Hedgehog Concept The Hedgehog Concept is a simple crystalline concept that flows from deep understanding of three circles: Jim Collins, 2001 pgs. 95-96

10. The SMS Quality Council • One particularly useful mechanism for moving the process along is a device that that Collins came to call the Council • The Council consists of a group of the right people who participate in dialogue and debate guided by the three circles, iteratively and over time, about vital issues and decisions facing the organization • Jim Collins, 2001 pgs. 114-115

11. Accelerating the Iterative Process To speed-up the formulation of the Hedgehog Concept, increase the number of times you go around that full cycle in a given period: ASK QUESTIONS, GUIDED BY THE THREE CIRCLES AUTOPSIES AND ANALYSIS, GUIDED BY THE THREE CIRCLES DIALOGUE AND DEBATE, GUIDED BY THE THREE CIRCLES EXECUTIVE DECISIONS, GUIDED BY THE THREE CIRCLES Jim Collins, 2001 pg. 114

12. WHAT YOU ARE DEEPLY PASSIONATE ABOUT WHAT YOU CAN BE THE BEST INTHE WORLD AT WHAT DRIVES YOUR ECONOMIC ENGINE Developing the Hedgehog Concept The Hedgehog Strategy: SMS can be thebest in the world at offering distinguished value-added Electronic Manufacturing Services:

13. The Total Spectrum of Manufacturing Solutions Product Design Services Process Design Services New Product Introduction Supply Chain Management Manufacturing Services Logistic Services After-Market Services Next Generation Services Process Engineering Product Engineering Prototyping Consulting & Planning SMT & PCBA Transport Forwarding Repair & Warranty Smart Systems Design For Manufacturing Product Development Tool & Mold Design BOM Analysis Plastic Injection Molding Warehouse Management Reverse Logistics Value Engineering Implementation Service Process Tech. Development Purchasing Backplanes Distribution E-commerce Replace Pool Customer Feedback Design For Test Environmental Engineering Assembly Documentation Logistics Machining & Enclosures Customs Clearance Failure Analysis Continual Improvements Engineering Documentation Lifecycle Engineering Info. & Sys. Integration Cabling Information Integration E-waste & Recycle Design for X ODM Regulatory Compliance BTO/CTO Order Fulfillment RMA Test & Quality Assurance Documentation Packaging

14. WHAT YOU ARE DEEPLY PASSIONATE ABOUT WHAT YOU CAN BE THE BEST INTHE WORLD AT WHAT DRIVES YOUR ECONOMIC ENGINE Developing the Hedgehog Concept The Hedgehog Passion: SMS is deeply passionate about getting 10 great OEM customers to attribute their success to SMS Technologies:

15. WHAT YOU ARE DEEPLY PASSIONATE ABOUT WHAT YOU CAN BE THE BEST INTHE WORLD AT WHAT DRIVES YOUR ECONOMIC ENGINE Developing the Hedgehog Concept Profit per customer drives SMS’s economic engine: The Hedgehog Economic Engine

16. SWOTANALYSIS Internal Strengths Internal Weaknesses External Opportunities External Threats

17. CHANGE-STATE (Hoshin) PLANNING Change-State (Hoshin) planning is the short-term & long-term process used to identify & address critical missions needs. Destination (Vision – Future State) Where is missions now? (Present State) Where is it going? (Future State) How will it get there? (Plan) What are the obstacles? How will Kingdom entrepreneurs navigate the road to achieving the vision ? Starting Point (Present State)

18. CHANGE-STATE (Hoshin) PLANNING Hoshin planning targets the critical few big obstacles (Boulders) on the road. The small obstacles (Small Stones) are handled by operations. A common mistake is to take on too much, dilute energy thereby, and achieve nothing in the end. Destination (Vision – Future State) Use Hoshin to remove big obstacles (Boulders) Use Operations to remove small obstacles (Small Stones) on the road Starting Point (Present State)

19. OBSTACLES & OPPORTUNITIES

20. Champions, Process / Measure Owners, & Master Trainers

21. Team Selection & Direction • Customer-focused Support Teams • Program Manager • Mfg. / Quality Eng. • Test Engineer • Production Planner • Value Stream Mgr. • Purchasing Agent • Customer-Focused Operations Teams • Cell Leaders • SMT Operators • Assembly Operators • Test Technicians • Quality Technicians • Route Runners CUSTOMERS

22. Team Selection & Direction Direction Customer-Focused Operations Teams Quality Council Customer-focused Support Teams Customer-focused Support Teams Quality Council Customer-Focused Operations Teams Support

23. Standard Problem-solving Model

24. Sharing of Key Learning

25. Improvement Idea Solicitation, Review, Approval & Implementation • Each team member silently thinks of and writes down as many ideas as possible in a set period of time (5 to 10 minutes). • Each member in turn states aloud one idea. Facilitator records it on the flipchart. • Continue around the group until all members pass or for an agreed-upon length of time. • Discuss each idea in turn. • Prioritize the ideas using multi-voting or list reduction. • Come to consensus on the team’s top seven collective ideas. • Assign team members to the ideas along with completion times. • Track assignments through to completion or revision. • Recognize and reward team members for their contributions.

26. Ensuring a High Level of Participation Alignment Alignment after Hoshin Planning Alignment before Hoshin Planning Flexibility: As the business environment changes, SMS activities change quickly with it

27. How Is Improvement Recognized?

28. Tracking Suggestions in the Gemba • Suggestions are reviewed as part of regular team meetings • A3 Storyboards are used to provide a history of improvement milestones • Progress toward implementation is tracked through each team’s responsibility matrix • Awards are passed down through the teams beginning with the champion

29. Thank You Other SMS Technologies Content Contributor: John Crankshaw, Test Engineering Manager Contact: Kenny Heifner kheifner@smstech.com