Strategic Perspectives in Supply Chain Management – October 28, 2008

1. Strategic Perspectives in Supply Chain Management – October 28, 2008 Craig Sando

2. Supply Chain Management Agenda: • Moog’s Role in Space • Key Supply Chain Challenges • Changes in Approach & Strategy • Supply Chain Mission Success • Virtual Factory

3. Moog’s Support of NASA Space Programs 100% Mission Success

4. Actuation Moog Technologies & Products - Precision Motion Control Solar Array Drive Electromechanical TVC System & Components Antenna Pointing Hydraulic TVC System & Components Propulsion Controls Hydrazine Propulsion Systems Thruster and Latch Valves Subsystems SoftRide Passive Vibration Suppression Reaction Mass Actuator Active Vibration Suppression Vibration Controls Electronic Control Units for Electromagnetic Actuators Command Data Interface Unit for Ares I Upper Stage Avionics

5. Moog is Committed to the Long Term Support of NASA Space Programs

6. Space Related Supply Chain Challenges • Growing Product Offerings • Growing Dependence on External Suppliers • Growing Sub-contract Content • Growing Needs In Sub-tier Management • Delivery Performance, Risk Management, Capacity management • Process control & change control • Growing Cost Challenges • Continuing Challenges in: • Small quantities • Education of critical nature of hardware and end application • Qualified small businesses for critical hardware • Maintain supply chain over life of program • Specialty metals

7. Supply Chain Strategy - Key Initiatives: • Transition the organization • From Purchasing…to Procurement…to Supply Chain Management • Business Process Integration • Becoming an integrated part of Operating Group value stream • Program team member • Global Supply Chain Development • Develop new low cost Supply Chains • Strategy for moving centers of LCC sourcing • Category/Commodity Management • Teams focused on major categories of spend • “Virtual Factory” approach • Focus on Strategic Sourcing • Product Line Supply Chain Strategy • Alignment of business conditions, customer flow down • Re-qualification Strategy • Excellence in Operational Purchasing • Execution - Meeting the needs of our factories (QDSC) • Supply Chain Mission Success

8. Supply Chain Strategy - Key Initiatives: • Transition the organization • From Purchasing…to Procurement…to Supply Chain Management • Business Process Integration • Becoming an integrated part of Operating Group value stream • Program team member • Global Supply Chain Development • Develop new low cost Supply Chains • Strategy for moving centers of LCC sourcing • Category/Commodity Management • Teams focused on major categories of spend • “Virtual Factory” approach • Focus on Strategic Sourcing • Product Line Supply Chain Strategy • Alignment of business conditions, customer flow down • Re-qualification Strategy • Excellence in Operational Purchasing • Execution - Meeting the needs of our factories (QDSC) • Supply Chain Mission Success

9. Supply Chain Mission Success

10. Why The Increased Focus on Supplier Performance & Risk Management in the SC? Business Drivers: • Increasing Purchase Content • Move to Systems Provider • Increasing Major Sub-Contract Activity • Increasing expectations for risk management in the supply chain

11. Supply Chain Mission Success – Managing Risk in the Supply Chain Three key components: • Supplier Performance • Delivery and quality performance • Raised expectations • RCCA’s to meet these expectations • Risk Management • Identify the risks • Plan for high risk, high impact events • Eliminate, mitigate or have a response plan • Production Readiness • Confirming we are ready

12. Current Performance, Risk Management, Production Readiness Supplier Segmentation - Mission Success - Engagement Criteria • Single or Sole Source • Technology Leader • High Switching Costs • High Capacity Utilization/Lead-times Risk Factors Strategic • High NRE or program content • New suppliers • High Switching costs Key Increasing Risk Commodity Suppliers • Require Quality Approval • Ability to meet functional specs • Multiple Sources & Distribution • Safety Stock & VMI Expendable Suppliers Segmenting Suppliers for Prioritization and Focus

13. Supplier Mission Success Engagement Approach Depends on Type of Supplier:

14. SC Mission Success – Supplier Performance - RCCA • Suppliers are being encouraged to have a structured approach to the RCCA process and are assessed on their Corrective Action performance • Corrective Action Metrics • We are focusing on event based problem solving methodologies to correct Delivery and Quality deficiencies • Event based problem solving uses the cause and effect principle during analysis It is more than Root Cause we are after, it is Effective Solutions

15. G Risk Identification complete, no moderate or high risk items Y Risk Identification complete, moderate to high risk items identified, risk owner and response plan in place R Risk Identification not complete or high risk item identified and risk owner/risk mitigation plan or response plan is not in place or behind plan SC Mission Success – Risk Management • Risk Management • Starts during the design phase and continues into early production • A cooperative effort between Moog and our suppliers • Allows us to manage the sub-tier process in production by managing the risks • Risk Categories: • Contractual/Regulatory • Program Management • Purchased parts/assemblies • Design • Special Process • Materials • Manufacturing • Assembly & Test • Shipping • Installation • The Metrics – Risk Management

16. Category Dev Qual Production Comments Contractual/Regulatory G G G Contractual requirements not in place. Low probability of schedule impact as contracts get put in place Program Management R Y G New requirements putting risk on ITV/Qual schedule Design R R G Design instability putting schedule at risk Special Processes TBD TBD TBD Not fully assessed. XXXX to provide list of special processes and suppliers Purchased Parts/Assemblies TBD TBD TBD Not fully assessed. XXXX to provide list of purchased parts, assemblies and suppliers Materials TBD TBD TBD Not fully assessed. XXXX to provide list of materials and suppliers Manufacturing G G R New design driving new mfg processes. High probability of low production yield. Assembly & Test G G R Additional secondary operations may drive low production yield. Shipping G G G No identified risks Field Service G G G No identified risks SC Mission Success – Risk Management Example

17. SC Mission Success – Production Readiness • Production Readiness • Are processes in place and are they effective? • The Production Readiness process is designed to assure they are ready • Uses the Boeing Production Readiness tool as a guide • Production Readiness Categories • Production Planning • Sub-tier Management • Manufacturing Tools and Processes • The Metrics – Production Readiness • Facilities • Raw Material • People The challenge is recognizing processes that are not effective

18. SC Mission Success – Production Readiness Example

19. SC Mission Success Metrics - Summary

20. Supply Chain Mission Success What Does It Take To Accomplish This? • Specialized Supply Chain Management Resources • Focused Training • Co-location With Program Teams • Different Skill Set On the Team • Increased Supplier Collaboration

21. Virtual Factory Develop Select Suppliers to Be Strategic Partners • Leverage our Customer Intimacy value proposition • Build long term relationships based on the Moog Culture • Sharing of Moog resources Supplier Intimacy

22. Virtual Factory - Objective “Develop a new way of doing business with key suppliers” • Long-term relationship • Moog to support as “extension of our factory” • Mfg Eng, Lean, Materials Mgmt, QA & QE • Create a cell dedicated to Moog parts in Supplier’s factory • Focus on each other’s core competency

23. Strategic Perspectives in Supply Chain Management Take Away’s • The World Of Supply Chain Management Is Changing To Meet NASA’s Future Requirements • Supply Chain Management Is Key To Moog’s Success In Supporting NASA • Successful Management Of The Supply Chain Requires Changing Roles And The Engagement Of Multiple Functions • It’s About Managing Change …

24. Well Defined Plan? Effective Commun-ication? Clear Vision? Adequate Resources? Compelling Case? Sufficient Motivation? Capabilities? The Probability of Success Improves … … When Seven Critical Elements Of Change Are Aligned And Executed Against = Successful Change = Inertia = Confusion = Diffusion = Frustration = Fatigue = Crawl = Doubt Source unknown