Supplier Management Establishing Supplier Management as a Strength

1. Supplier ManagementEstablishing Supplier Management as a Strength Thomas W. Thrailkill Boeing Space & Intelligence Systems Supplier Management October 2008

2. Discussion Agenda • The Integrated Defense Systems (IDS) Supplier Management Path Forward • Space & Intelligence Systems Supplier Management Initiatives

3. People EarlySupplierInvolvement ContractingandRisk Management ImproveSupplierPerformance Systems & Tools IDS Supplier Management Path Forward Create Opportunities - Capture Value - Ensure Performance

7. EarlySupplierInvolvement ContractingandRisk Management ImproveSupplierPerformance IDS Supplier Management Focus Areas • Market Strategies & Control Points • Strategic Make/Buy • Enterprise Capability Sourcing Strategies • Enterprise Supply Chain Strategies • Capture & Proposal Strategy, Execution & Transition • EAC / BAC • Alignment to Prime • Affordability expectation • Risks aligned and managed • Leverage Spend • Terms and Conditions • Supplier Diversity • Strategic Work Placement • Strategic Agreements • Supplier Insight and Control using Six Sigma • Top 100 Supplier Performance Improvement • Supply Base Management • Supplier Partnership Initiative Lean Engagements • Common Buy Package • Supplier Program Manager Deployment Create Opportunities - Capture Value - Ensure Performance

8. Supplier Management as a Strength vs. Weakness • The Integrated Defense Systems (IDS) Supplier Management Path Forward • Space & Intelligence Systems Supplier Management Initiatives

9. Improving S&IS Supplier Management Improvements through 2007 2008 Forward • Comprehensive competitive source selection process • Standard buy package • SOW format, SDRLS, Quality documents, Specs, • Data Item Descriptions, Program Reviews • Standard checklists for formal reviews • Supplier Data Tool (SDT) to manage SDRL process • EPIC system for electronic storage of subcontracts • Standard purchase contract format • Standard change order log and format • Shared subcontract ownership through dedicated IPT’s • DSAM Supplier Assessment Matrix • Government participation at all formal reviews • Standard performance metrics • Faster sourcing through use of ASAP • Boeing furnished material is the exception • More consistent same “face” representation for technical leadership • Internal Boeing Risk management requirements flowed to subcontractors • EScan tool provides Boeing visibility of supplier corrective actions • Supplier Quality post award requirements review • Quality surveillance plan to identify important features for sourcing • Open SDRL’s tracked in SDT • Supplier Program Managers assigned to key critical subcontractors • S&IS Supplier Enterprise Review Board • IDS Common SSOW / MRD • Capability Assessments • Development Supplier Assessment Model (DSAM) & Leading Indicators

10. Considerable Evidence Current Supplier Management Approach Needs Improvement • Cost of Non-Quality (CoNQ) Related to Supplier Performance • Wide Variation in how Suppliers are Managed Within the Program and Shared IPT Structure • Insufficient Visibility into Critical Space Processes & Control • Performance Metrics Production Oriented

11. Supplier Conferences Confirmed Need for Improved Management Approach • S&IS Supplier Conferences Identified Management of Suppliers as an Area of Opportunity to Improve Execution • Multiple Interfaces between Boeing and the Supplier • Timely and Complete Product Definition Missing • Conflicting Requirements and Priorities • Lessons Learned are Not Consistently Carried Forward from Program to Program • No central person with the RAA responsibility to focus and direct the effort required from ALL functions needed to fully manage a supplier

12. Supplier Program Manager • Focused interface with the Supplier • Held accountable for execution (2-way interaction: Boeing and Supplier) • SPM RAA: • Responsible for Supplier execution and product integrity • Integrates and facilitates resolution of technical and business issues • Establishes and evaluates performance measures, metrics and leading indicators • Accountable for Supplier Improvement Plan and actions • Collaborates with Supplier to understand their capabilities related to program requirements & future growth Supplier * * Systems, Sub-systems, Units Suppliers Formalized Through Program/Team Execution Plans

13. Supplier Program Manager Attributes for Success • IDS/S&IS experience has shown that successful SPM deployment depends upon: • Appropriate skills & experience level commensurate with the subcontract complexity • Technical, programmatic and business acumen • Balanced cross functional vs. singular subject matter concentration • Mentoring and training from functions • SPM and support team assigned with clearly defined RAAs • Must address interfacing organizations (Program IPT, Shared IPT, Supplier, and Supplier Management) • Documented and approved in Program Execution Plans, etc. • Consistent and disciplined implementation • Executive leadership endorsement Valued skill set and recognized career path

14. Supplier Enterprise Review Board Cross-Functional Review of Critical S&IS Suppliers • Review current contract area performance parameters • Identify areas of greatest need • Problem statements • Define improvement actions & determine best indicators to measure progress • Document in Supplier Improvement Plan (SIP) • Draw from “Best of Boeing” • Standard Deck/specifics • DSAM (2-way) • AS9100 on-site reviews/audits • Award Fee • Process escapes/non-conformances • Contract status/definitization/changes • Capability assessments • Major milestone readiness • Change process cycle time A – Performance B – Needs C – Actions & Progress Indicators MA Q / SQ Ops Eng SM D - Improvement Functional Tool Kit (Best of Boeing) Forum to Address Supplier Performance Issues Affecting Multiple Programs

15. IDS Common Supplier Statement of Work • Purpose: • To Deploy Boeing Best Practices to Suppliers: • Finance - Earned Value Management • Mission Assurance • Program Management • Supplier Management • Systems Engineering • Drive common processes between Boeing and our suppliers • Provide for common templates and tools in the execution of program objectives • Align supplier execution strategy with program objectives Leveraging Proven Best Practices

16. General Factory Controls Training programs and processes Quality Controls and Quality Processes Supplier Management/Control Configuration/Change Management Parts Materials and Processes (PMP) Planning Processes Assembly & Test Processes Manufacturing Engineering Supplier unique processes Focus Area Lead Gap Assessment Section Lead Category Factory Controls ESD Controls Lab Maintenance Equipment Controls (SPC) Calibration Controls & Delinquency Rates Equipment Qualification & Certification Process Focus Area Lead Gap Assessment Section Lead Shelf Life Material Controls Category Lab Environment Controls (Humidity/Temp) Tool Control & Certification Training Alarms (humidity, temp, dew point on ovens, chambers, freezers, Gn2) Electronic Assembler Certifications Flight vs. Non Flight controls Test Technician Certifications Tooling/Tool Control Packaging & Handling Inspector Training Safe Move Process General Electronic Assembler Training School Estimated Years of Experience with space qualified hardware Command media - Training course code Documentation Culture/RAA (Quality focus, stove-piped thinking, attention to detail Chip Capacitor installation Training Quality Control & Quality Process Jumper Wire installation Training Inspection Check List Certifications recorded in centralized tracking system Audit of inspectors by QAE (Monthly) Mfg Engineer/Process Engineer Certifications to space standard solder specifications (NASA & MIL-STD) Work Instruction Estimated Years of Experience with space qualified hardware Escape Documentation Process Culture/RAA (Quality focus, stove-piped thinking, attention to detail MRB Photo Process Planning Controls Quality Metrics CABs/RCCA Planning Thoroughness Quality Data Systems Data Recording (temp. start/stop, torque values etc.) Move Safe Process REA Work Instruction Review & Signoff Packaging & Handling Planner Certification Process Estimated Years of Experience with space qualified hardware Red Line Process Culture/RAA (Quality focus, stove-piped thinking, attention to detail Document Control (Storage & Retrieval) Drawing Clarity Configuration Management Planner Verification Engineering Change Release Process Packaging and Handling on drawings Estimated Years of Experience with space qualified hardware Culture/RAA (Quality focus, stove-piped thinking, attention to detail Capability AssessmentsFocus Areas During Review Ensures ability to execute to Boeing/Customer standards

17. Development Supplier Assessment Model • Provides a Means for 2-Way Assessment of Supplier and Boeing Performance on Development Programs • Five key areas: Technical, Quality, Management, Cost, Schedule • Used by Integrated Product Team, SPM & Supplier Mgmt. to Improve Boeing and Supplier’s Performance

18. EarlySupplierInvolvement ContractingandRisk Management ImproveSupplierPerformance Summary • IDS SM Executing a Path Forward… • S&IS Focus on Key Initiatives Reflects Our Determination to Improve Management of Suppliers • Improving functional discipline and establishing accountability for improved supplier program performance - SPMs • Engaging both programs and functions in improvement activities - SERB • Bringing Boeing Best Practices to S&IS Suppliers – MRD/SSOW • Earlier & Periodic Assessments of Supplier Capabilities – DSAM & Capability Assessments Supplier Management as a Strength