NAVICP Top 2 Aviation Supply Chain Concerns

1. NAVICP Top 2Aviation Supply Chain Concerns Presented to the Senior Executive Partnership Round Table 10 2 May 2007

2. Naval Aviation Supply NAVICP Concerns • Meet Warfighter Material Availability Expectations • Decrease Customer Direct Turn Over (DTO) Backorders • Reduce Organic Depot Awaiting Parts (AWP) Levels • Support CNO Cost-Wise Readiness Objectives • Implement Ready For Tasking (RFT) Focus • Expand Utilization of Performance Based Logistics (PBLs) The War On Terror And The Battle Against Cost ... We Must Win Both

3. Decrease Customer DTO Backorders Backorder Breakdown (NAVICP Managed Items) Observations • DTO slice of the pie is too big • We must do a better job of filling outfittng / stock rqmts to prevent DTOs • To succeed, we must reinforce our day to day efforts on basic business F M S Outfitting DTO Stock

4. Decrease Customer DTO Backorders The Way Ahead Reinforce sound supply chain management practices as part of day to day business operations • Continually improve requirements forecasting • Execute timely placement of procurements • Ensure on-time delivery of all due-in material • Pursue aggressive expediting, where required • Utilize intense customer collaboration to prioritize efforts Focus on the Basics

5. End FY06 Current % Change Metric East 2105 2312 9.8% Total Comps in AWP 772 975 25.8% Comps > 150 days 693 758 9.4% Comps w/ BBs South East 558 781 40.0% Total Comps in AWP 149 273 83.2% Comps > 150 days 164 278 69.5% Comps w/ BBs South West 616 711 15.4% Total Comps in AWP 118 317 169.0% Comps > 150 days 162 227 40.1% Comps w/ BBs Reduce Organic Depot AWP Fleet Readiness Center AWP Scorecard FRC Bottomline: Need To Reduce The Negative Trends

6. Reduce Organic Depot AWP What We're Doing • Continue aggressive interface with FRC-Ds / DLA • Validate requirements, target expediting, and discuss select inhibitors • Focus on AWP with BBs, overaged AWP, and AWP with single downers • Review growth in local purchase/local manufacture requirements • Reinforce process discipline and reconcile data bases • Conduct DLA site visits; ICP AWP Summit; Business meetings • Assemble and disseminate “AWP report card” • Develop AWP Entitlement metric • NAVICP developing with DSCR, FRC-D supply/production reps, NAVAIR • Entitlements set by site, based on historical induction rates, budgeted delay time

7. Implement Ready for Tasking (RFT) Focus RFT Overview • RFT Defined: ”The right readiness, at the right time, at the right cost” • Amount of required readiness for any given aircraft is determined by mission • RFT replaces traditional Full Mission Capable (FMC) standard... ”Aircraft and all mission systems ready at any given time” • RFT creates some Initial Support Challenges • RFT is dynamic...must be defined for each T/M/S and each mission...effort is in its infancy • Virtually all current metrics are based on FMC standard...RFT will demand revised metrics to properly focus support efforts Paradigm Shift From “Readiness At All Costs” To “Cost-wise Readiness”

8. Implement Ready for Tasking (RFT) Focus Current Effort • The Naval Aviation Enterprise (NAE) is working three FY07 goals to support RFT attainment • Achieve necessary RFT gap closure • Identify and prioritize systems degrading RFT • Improve reliability of RFT degraders Right readiness, right time RFT Availability (E-2C) RFT Entitlement RFT Gap Degraded RFT Actual RFT

9. # days contribution to RFT gap Other(Non- PDS-ESM, 0.11 RAM/RBM), 0.07 Engine/ Power IFF Interogate, 0.15 Plant, 0.80 CEC, 0.17 JTIDS (Link 16), 0.23 UHF/HF Radio, Propellers, 0.46 0.23 Radar, 0.68 Flight Controls, 0.45 Airframe, 0.33 Other NRBA Systems, 0.44 Landing Gear, 0.26 Inspections, 0.10 Elec. Pwr. Sup. & Navigation/Insts., Light, 0.26 ECS/Pneum. Sys., 0.18 0.25 Implement Ready for Tasking (RFT) Focus E-2C Example

10. Expand Utilization of PBLs The Essence of PBLs • What we buy: • Comprehensive performance package... not individual parts • Value Proposition: • Substantially improved performance at less than or equal to cost • Why they work: • Government sets performance, establishes long-term fixed price relationship ... Fixed price "pay for performance" contract motivates vendor to reduce failures / consumption • Long term commitment enables vendor to balance risk vs. investment Vendor asked to provide superior performance at no additional cost A Reengineering Tool To Improve Readiness Through Improved Reliability And Better Availability

11. Expand Utilization of PBLs PBL Program Performance Availability Reliability Inventory Reduction H-60 FLIR ... 40% increase ALR-67 (v)3 Radar Warning Receiver- 53% increase Aviation Tires ... - Wholesale Inventory reduced by 90% - Plane-side inventories reduced by 66% F/A-18 SMS - availability was 65% ... now 98% ARC - 210 Radio – availability was 70% ... now 85% APU - availability was 70% ... now 95% F404 engine availability was 43% ... now 99%

12. Expand Utilization of PBLs Current Enterprise Objectives PBL Cost Reduction - Reduce the cost of PBLcontracts renegotiated inFY07 by an average of 2% • Reduce AVDLR costs for items supported by PBLs renegotiated in FY07 • Support NAE cost-wise readiness goals and objectives PBL Demand Coverage Goal: - Increase aviation demand covered by PBL contract to 28% by the end of FY07 Benefits: - Enhance supply support at equal or lower cost - Achieve select reliability improvements - Support NAE RFT and ACWT goals and objectives

13. Summary • NAVICP Top Priority is Meeting Enterprise Performance Expectations as defined by CNO Guidance and Our Customers while Improving the Supply Chain and Reducing Life Cycle Costs