Business Case Illustration

1. Business Case Illustration

2. Business Case Benefits Using conservative estimates, additional capacity of 120 – 162 FTE’s per year can be realized across 25 top and middle tier programs by implementing the complete set of lean improvement actions Total estimated annual benefits from improvement opportunities range from: $20.4 – 27.7 M

3. 300,000 250,000 200,000 Net Benefit (Hours) 150,000 100,000 50,000 0 0 1 2 3 4 5 Time (Years) (50,000) Improvement program value curve The value curve illustrates a significant capacity improvement that can be gained through targeted investments in the requirements management value stream Value Curve • A five year horizon is used for benefit realization • The value curve reflects the net hour benefit (hours) on a yearly basis • The model assumes a benefit realization of 5%, 37% and 100% starting at year 1 • Payback period is between 12 and 15 months • Total potential net benefits of 762,000 engineering hours can be realized over five years

4. Improvement Opportunity 1.0 Requirements Traceability and Prioritization:Reduce churn by requirements traceability and prioritization Recommendation Details Priority • Deploy Teamcenter Systems Engineering functionality. • Process design and definition should be central to the Teamcenter deployment activities • Conduct broad deployment to all level 4 programs • Provide Teamcenter SE access to all engineers on these programs, enabling them to directly manage all requirements in the application • Uniquely identify requirements by number • During definition, each requirement should be assigned a unique identifier to which associated artifacts are linked (specs, docs, changes, etc..) • Assign one owner per requirement • Each requirement should have one clear owner who assumes total responsibility for definition, linkage, issue identification / resolution and sign-off • Define traceability by upstream and downstream dependencies • The ability to track requirements and their associated designs, applications and test cases is essential to understanding and managing the impact of change • Set and record the priority of each requirement / feature within Teamcenter to ensure appropriate effort is allocated to activities High Impact Deployment Resources Pilot / Full Pilot / Full

5. Benefits 1.0 Reduce churn by requirements traceability and prioritization in TeamcenterSystems Engineering Assumptions • Data was gathered based on interviews with engineers at multiple levels of the product structure • Number of people per program = 15.8 (based on 25 NPI programs before gateway 3 and lifetime estimate of $235M • Data for reducing churn based on analysis of Monarch release data Net Benefits Across Programs (Average Hours)

6. Benefits 1.0 Reduce churn by requirements traceability and prioritization in TeamcenterSystems Engineering Additional Soft Benefits – Not Quantified • Improved quality and reduced field failure issues • Streamlined and automated process with increased adherence • Improved ability to manage customer requirements and the impact of changes across business units • Improved responsiveness to market changes • Mitigation of confusion and misinterpretation due to clear, consistent format in capturing and communicating requirements • Provides common direction for multi-site project collaboration and drives product design • Visibility into all open requirements allows prioritization and resource allocation • Improved ability to de-scope project to meet shortened timeframes • Better ability to integrate machine programs

7. Improvement Opportunity 2.0 Prioritize and Freeze Requirements: Reduce churn by better defining, prioritizing and freezing requirements by GW 3 Recommendation Details Priority • Define the sub-system and system scope of work and its respective dependencies • Identify 2 - 3 lead customers/users at product launch with product segment knowledge of features and functions to define machine features that are critical to customer needs including: • Value – indicates the relative benefit to the customer • Cost – design and development, testing, materials, etc • Risk – rating based on factors including, but not limited to complexity, supplier risk, reuse potential, etc… • Timeframe – indicates design and development duration • Resource requirements – identify effort and skill required to complete design and development activities • Dependencies – linkage between sub-systems and systems • Engineers should have flexibility to define requirements and specifications such that downstream users understand form, fit, function and dependencies • Finalized requirements are contingent upon downstream approval; ensuring that content is suitable for lower level requirement, design and test case definition • Employ rigorous controls starting at product launch and freeze requirements at each level of the product structure starting from machine features, system requirements, sub-system requirements and technical specifications to ensure all requirements are frozen at GW 3. Post GW 3, all changes are formally and rigorously controlled via the engineering change process • Map high level customer requirements to machine features and decompose functional requirements to the sub-system and component levels • Progressively lock requirements at each stage of the product hierarchy to ensure major requirements are set in order to reduce churn during requirements development, engineering design and development, and testing • Conduct meetings involving relevant cross-functional teams with emphasis on locking requirements and identifying interface conditions at each level Low Impact Deployment Resources Pilot / Full Pilot / Full

8. Benefits 2.0 Reduce churn by better defining, prioritizing and freezing requirements by GW 3 Assumptions • Data for top tier and middle tier programs which are before GW 3 have been used to estimate the benefits • Currently 25 NPI programs are pre GW 3 and with a lifetime estimate of $235 M • Hours per year FTE = 1,800 • Data for reducing churn based on analysis of Monarch release data Net Benefits Across Programs (Average Hours)

9. Benefits 2.0 Reduce churn by better defining, prioritizing and freezing requirements by GW 3 Additional Soft Benefits – Not Quantified • Improved quality and reduced field failure issues • Streamlined and automated process with increased adherence • Reduction in information search time • Improved ability to manage customer requirements and the impact of changes across business units • Increased customer satisfaction • Improved responsiveness to market changes • Mitigation of confusion and misinterpretation due to clear, consistent format in capturing and communicating requirements • Provides common direction for multi-site project collaboration and drives product design • Visibility into all open requirements allows prioritization and resource allocation • Improved ability to de-scope project to meet shortened timeframes • Better ability to integrate machine programs

10. Improvement Opportunity 3.0 Standard Engineering Change Process: Increase productivity by implementing standard engineering change process templates in Teamcenter Engineering Recommendation Details Priority • Implement a single change control and validation process for use on released objects (requirements, software, components, designs, etc) • All change requests should be communicated to directly affected resources (as identified through requirements traceability) at the time of the change, and all changes should be reflected in the project plan • Change control and validation should include a standard change request template with a unique identifier, name, description, change cause code (from standard list), value / cost of making the change, implications, and identification of impacted functions • The approval process should include affect on timing, quality, budget, staffing and associated risks • Define change governance and approval guidelines based on the following criteria: • Change control procedures should focus on the size of impact (hours of effort required) and the reason for the change • All changes are documented • All changes are reviewed by all dependent functions (per the requirements family tree) • Changes that exceed a specific budget / resource threshold must be reviewed and have concurrence from the program leader • Past GW 3, the change control approval process should become more stringent, requiring higher levels of approval • Aging of open design changes must be tracked to ensure quick response to, and resolution of the issue • Capture the following reason codes for all changes to manage rood causes of engineering: High Impact Deployment Resources • Initial release • Specification change • Supplier requested change • Change of supplier • Cost reduction • Quality input • Design error correction • Design interference / integration • Manufacturing requested change • Test results failure • Styling change request • Customer satisfaction Pilot / Full Pilot / Full

11. Benefits 3.0 Increase productivity by implementing standard engineering change process templates in Teamcenter Engineering Assumptions • Data was gathered based on interviews with engineers at multiple levels of the product structure for the Catalyst program • Average time wasted per person dealing with documentation of changes = 1.35 hours / week • Number of people per program = 15.8 (based on 25 NPI programs before gateway 3 and lifetime estimate of $235M • Percentage reduction of at least 25% is possible from standardized documentation of changes Net Benefits Across Programs (Average Hours)

12. Benefits 3.0 Increase productivity by implementing standard engineering change process templates in Teamcenter Engineering Additional Soft Benefits – Not Quantified • Improved ability to manage customer requirements and the impact of changes across business units • Enhanced supplier integration due to use of standardized change processes and templates • Mitigation of confusion and misinterpretation due to clear, consistent format in capturing and communicating changes in requirements and design and development • Improved design integration via clear visibility into the impact and effect of changes within different levels of the product structure

13. Improvement Opportunity 4.0 Standard Processes, Templates, Common Repositories: Reduce non-value added time through implementation of standard processes, templates, common repositories and communication plans Recommendation Details Priority • Create templates to standardize structure rather than content for each system, sub-system and component level to ensure the same amount and type of detail per document • Create and leverage templates for specifications, diagrams, meeting minutes and agendas • Each template should contain a table of contents, sample narrative text and same diagrams at the appropriate level of detail • Create a centralized repository to manage all documentation; templates, drafts and final documents • Publish all documents in a common, centralized location to ensure accessibility, version control of all drafts and specification history • Provide access to all engineers participating in the creation or validation of the specification • Common repository features should include full text searches and revision control • Re-orient current cross-functional meetings from a planning / coordination focus to a requirement creation focus • Designate a single physical location from which all requirement definition activities will be executed for each sub-system • Efficiently create requirements while incorporating all stakeholders’ expertise during a focused “kick-off” session • Sessions should include system and sub-system architecture and technical leads and technical domain owners, all of whom having appropriate authority to expedite decision making. SMEs, system and sub-system engineers are invited as needed for specific topical discussions Medium Impact Deployment Resources Pilot / Full Pilot / Full

14. Improvement Opportunity 4.0 Continued… Recommendation Details • Assign technical domain owners / experts by system, sub-system and component to manage specification development process, mentor new resources and facilitate integrated requirements definition meetings • Create one leadership position per technical domain per program for tenured engineers to oversee specification development • L3e examples include Fuel Systems, Speed/Timing Systems, After Treatment Systems, Air Systems, etc • Select technical domain leaders based on depth of knowledge in a specific area (e.g. 10+ years experience), interest in providing longer term continuity in that area, ability to perform critical technical reviews and mentorship abilities • Having these experts in place is essential to knowledge sharing and integration. Given the high percentage of unfilled roles (~60%), CATe should apply creativity to align engineers with these roles. Each situation should be tailored to an individual engineers career experience and aspirations

15. Benefits 4.0 Reduce non-value added time through implementation of standard processes, templates, common repositories and communication plan Assumptions • Data was gathered based on interviews with engineers at multiple levels of the product structure for the Catalyst program • Average time wasted per person dealing with requirement changes = 3.45 hours / week • Average time spent due to incomplete / inadequate requirements = 3.10 hours / week • Number of people per program = 15.8 (based on 25 NPI programs before gateway 3 and lifetime estimate of $235M) Net Benefits Across Programs (Average Hours)

16. Benefits 4.0 Reduce non-value added time through implementation of standard processes, templates, common repositories and communication plan Additional Soft Benefits – Not Quantified • Improved supplier integration • Streamlined product development processes leading to increase in personal and organizational productivity • Improved visibility and access to product information • Increase use of prior work documents, requirements and designs on future programs • Shortened learning curves from standard processes

17. Improvement Opportunity 5.0 Project and Portfolio Management: Establish simple workplans in Teamcenter Project and roll-up to portfolio analysis using performance metrics Recommendation Details Priority • Prioritization / Sequencing – Product & Technology Roadmaps • Develop a cross-functional consensus on technology roadmaps to drive portfolio & project planning • Establish clear sponsorship and governance to drive execution • Technology roadmaps for CAT Electronics should be presented to the Product Group NPI teams to set the direction for how and when specific technology will be available to future machine programs • On an annual basis, utilize product and technology roadmaps to communicate business, technology and product plans to team members, management, customers and suppliers • Prioritization / Sequencing – Portfolio Management • Establish a baseline understanding of the true capacity of CAT Electronics • Establish clear sponsorship and governance of portfolio prioritization and execution • Synchronization / Timing • Define a simple/standard workplan to define, develop, test, and validate each unique requirement • Program Management • PMO – (1) realign the current PMO org to directly support portfolio mgmt and allocate program/project management leads to specific programs; (2) allocate PMO pool to programs • Project and Resource Planning • Establish a governance and incentive structure so that all engineers across each development program perform the necessary to project management activities as part of their daily work Medium Impact Deployment Resources Pilot / Full Pilot / Full