Operational Excellence - (Re)Structure for growth and stakeholder value

1. Operational Excellence -(Re)Structure for growth and stakeholder value Anders Davas Eaton Aerospace Aerospace & Defence Forum - Orange County Chapter September 6, 2012

2. IntroductionAnders Davas • Work Experience • Division Manager Eaton Aerospace • VP & GM Telair International (A Teleflex Company) • Strategic Development Teleflex • Operations Director Ensas • Education • The Wharton School • University of Cambridge • Chalmers – University of technology

3. IntroductionEaton Aerospace - Fuel & Inerting Systems • Pedigree • First electric boost-pump manufacturer • First composite-wing integrated system • Complete ground-to-engine capability • Pumps for all power sources Technologically Advanced Thermally Efficient Fuel Pump Refueling Nozzle Flexible Coupling Pressure Transducer Engine Feed Tube • Key Platforms • Boeing 787 • Airbus A380 • Sikorsky CH-53K • KC-46A • Northrop X-47 • Eurofighter • Learjet 85 • KC-390 Transfer & Scavenge Jet Pumps Pedestal Mounted Ball Valve Engine Feed Pump and Canister • Future Platform Innovations • Composite conveyance & equipment for low-cost, light-weight composite wings • Integrating in-tank sensing with inerting control for reduced bleed consumption Motor Operated Shut-off Valves Motor Control Unit Digital Fuel Gauging Air Separation Module

4. IntroductionAgenda • Introduction • 4-Focus Model • Strategy • Processes • People • Systems • Pilot Implementation • Q & A

5. IntroductionOperational Excellence Model – Proven results 43%+ 2011 40% 2010 2009 EBITDA Margins

6. IntroductionTurn Operational Excellence into a competitive advantage Value • Company move to the left • Increasing Labour Cost • Decreasing Labour force • Frontier move to right • Competition moving to emerging markets • Availability of new labour • Competition is becoming better or cheaper Cost Improve performance/value Delivery, Quality, & Cost

7. Introduction4-focus approach to operational excellence • Strategic Planning • Strategic Deployment • Goal Setting • Automate • ERP Efficiency • Poke-Yoke • Visual Mgmt • Value Adding • Standardized • Continuous Improvements • Accountability & Commitment • Engagement & Development • Competence & Confidence

8. Strategy

9. StrategyKey dimensions of a strategic plan SWOT Analysis (situation analysis) Market Analysis Business Unit & Group Overview Strategic Plan - Growth Technology Road Map Competitive Analysis Product Developments Investment Opportunities Value Proposition Product Strategy Mfg. Strategy Internal External

10. StrategyValue analysis to identify core manufacturing activities Product/Process Core Non-Core Maintain/ Optimize Outsource BCC High Utilization Right-size / Consolidation Outsource Experts Product/Process Low Utilization

11. StrategyMaximize performance through best manufacturing practice Variation Reduction & Six Sigma Six Sigma processes Smoothed production Flexible & leveled production Kan-Ban Parts withdrawal Super Market Line feed Milk-Run Material Pull Balanced & Standard Operations Standard Work instructions Flexible Cells & Error Proofing Flow cells 5S, Visual Management & Tiered Meetings Visual Factory VSM, Product Grouping & Capacity Planning Paced ops Move beyond 5S+ to unlock potential in organization.

12. StrategyDeployment – Create alignment, accountability and commitment. • Strategic deployment matrix and scorecard • Organizes thinking and links action to strategy • Aligns functions for goal setting • Identifies/Establishes break-through actions • Provides tools for continuous improvement • Communicates goals and performance

13. StrategySet stretch metrics and identify breakthrough initiatives HOW HOW MUCH WHO HOWFAR All itemsare listedin priority orderstarting from the center WHAT

14. StrategyThe whole picture of your company on one sheet of paper Use dots to show relationship of Targets and Resources to the Improvement Priority NOTE: Only Solid dots on a resource deploy to the next level Use dots to show relationship of Annual objectives to 3 year strategic plan Use dots to show relationship of Improvement Priorities to Annual Objectives HOW HOW FAR HOW MUCH WHAT

15. StrategyExample of SD-Matrix

16. StrategyImprovement priorities cascaded to the point of impact Top Level – Company/Group Action Plan Second Level – Plant/Business The level where root causes are addressed! Action Plans can be initiated out of any matrix level. Third Level Sub Plant/Dept

17. StrategyEach target is copied to the SD score card

18. StrategyAction plans drive the rate of improvement ACTION PLAN

19. Processes

20. ProcessLean Management Philosophy Standard Accountability Processes Process Focus - PDCA - Visual Controls Leader Standard Work A Foundation for Operations Excellence

21. ProcessGood Leaders Execute& Improve Planning • Strategic Planning • Strategic Deployment • Profit Planning B-Work A-Work • Business Operating System • VSM • GEMBA • Root Cause Analysis • Process – FMEA • Lean Six Sigma LSSS • HPWT • Lean Councils • Business Operating System • Balanced Scorecard • Standard Work • Visual Management • GEMBA • Accountability • HPWT A-work – Value Creation Process – Delivery & Quality + B-work – Improvement Process – Faster, Better & Cheaper = Focused team with a continuous improvement culture

22. ProcessTiered meeting accountability and execution process – A-Work Attendees Agenda / Focus Tier 3 • Mfg Manager • Value Stream Leader • Support Mgr • Daily performance data (yesterdays) • - Safety • - Quality • - Delivery • - Cost • Overdue items and actions Escalation • Values Stream Leader • Cell leaders • Support group • Labour Plan • Daily rotation • Plant Issues • Improvement actions Tier 2 Escalation • Cell Lead • Team members • Labour Plan • Daily rotation • Cell issues/solutions (Forward looking)) Tier 1 Develop efficient Tier Meetings: - Short and crisp - Stand-Up - Visual - Close to workplace - Structured and standardized agenda

23. ProcessExample - Tiered Meetings in action…. A-Work Metrics Board Accountability Board

24. ProcessStandard leaders work to ensure leaders react to signals Standard and aligned schedule Process confirmation

25. ProcessData driven improvement process – Balanced Scorecards – B - work 1. Actual vs. Plan Assess the impact 1 2 2. Pareto analysis Prioritize the impact 3. Commentary Identify Root Cause 3 4. Improvement action plan Drive Short term containment Implement Long term prevention 4

26. People

27. PeopleTransition away from a traditional manufacturing organization Plant Manager Supply Chain Quality Engineering Manufacturing Manufacturing Engineering Continuous Improvements Human Resources Department Manager 1 Department Manager 2 Department Manager 3

28. PeopleTo a value stream centric organization with high performing teams Plant Manager Value Stream Manager Value Stream Manager Value Stream Manager Cross functional teams Located close to workspace

29. PeopleRedefine the Role of the Front Line Leader Supervisor Front Line Leader Selected based on technical capability / process knowledge Selected based on leadership Competencies • Directive (“Do as I say”) • An Expediter • Disciplinarian • Enforcer • Top-down • Supportive / Coaching • Intrinsically motivated • Future vision orientation • Life-long learner

30. PeopleAttract the right leaders Leaders need to… • Provide the vision and strategy • Lead by example – be a positive role model • Actively engage and recognize employees • Enable success of your employees (resources, barriers) • Empower the employees – drive decision making down through organization Values and ethics A balanced Leadership Team Engagement Leadership to drive and stimulate change Empowerment Leadership to create the environment

31. System

32. SystemCreate flow cells and an environment to support flow. High productivity assembly cell Kan-Ban driven Super Market Poke-Yoke Line Fed material at Point of Use System Pace board A-Work Bar-Coding

33. Moving Forward

34. Moving ForwardPilot Line

35. Moving ForwardSystematic approach to achieve excellence