Transforming and optimization of the supply chainto create value and secure growth and performance

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Niedersachsen Aviation, Jahresnetzwerktreffen Hannover, 10th December2015

• Short introduction to Premium AEROTEC (PAG)

• Trends that form and drive the future supply chain

• Our starting point

• Our strategic roadmap

Today’s storyboard

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• Our strategic roadmap

• Management of transformation

• Building “Procurement Excellence” – the vision that drives the transformation

• Wrap-up and outlook

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Premium AEROTEC. A portrait.

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The company.Premium AEROTEC belongs to the world's leading companies in the development and manufacture of structural components for the civil and military aircraft industry.

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The company.

• Leading supplier of aircraft structures

• Revenues of app. 2.0 bn euros (2015)• More than 9,000 employees• About 1,200 engineers in research

and development• More than 400 apprentices

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• More than 400 apprentices• Unique manufacturing processes• Partnerships with the world's largest

aircraft manufacturers

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The company.

• Strong investments in research and development (R&D)

• Full subsidiary of Airbus Group• Reliable employer with rewarding

assignments• Collaboration with universities and

institutes

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institutes• Constant investments in education

and further education

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5 strong sites.

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The programmes.Premium AEROTEC participates in all Airbus programmes, in the Boeing 787 and in large military programmes such as Eurofighter or A400M.

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Civil programmes.

Airbus A320 Airbus A330/A340 Airbus A380

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• Fuselage shells and sections

• Wing components• Floor structure

• Fuselage shells and sections

• Wing components• Floor structure

• Fuselage shells • Wing components• Floor structure

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Civil programmes.

Airbus A350 XWB Boeing 787

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• Fuselage shells and sections

• Wing components• Floor structure• Bulkhead• Main landing gear

suspensions

• Bulkhead• Titanium components

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Military programmes.

Eurofighter “Typhoon” Airbus A400M

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Eurofighter “Typhoon”

• Centre fuselage section

• Assembly/partial equipment

• CFRP components –system components

Airbus A400M

• Rear fuselage section• Shells for centre

fuselage section • Top cargo door• System components

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Aerospace supply chain management has to prepare fo r key trends and challenges.Trends that form and drive the future Aerospace supply chain

Trends and challenges in Aerospace and its supply chain

• Globalisation• Technology innovation (e.g.

ALM, automation,

Requirements for Aerospace procurement functions and their capabilities

• E2E capability of procure-ment and supply chain management – forecasting/

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ALM, automation, digitalisation, Industry 4.0)

• Time-to-market further decreasing

• Vertical integration• Continuous cost pressure• Supply chain risks• Increasing social and

ecological responsibility

management – forecasting/ planning, new products and changes, lead time mgmt.

• Technology and innovation scouting and management

• Manufacturing engineering capabilities

• Design and implementation of integrated supply networks – at global scale

We have to transform our classical procurement appr oach and skills.Our starting point (PAG view)

• Quite classical procurement approach: RFQs based on specifications, negotiations of prices and conditions.

• High number of suppliers. Only a few real “strategic partners”.• Savings cases based on price savings. Strong price cutting focus.• Limited TCO view; supply chain management may veto but is not a driver.

Strategic procurement

• Processing of orders – often below contractual lead times.• Catching up with late changes and short term demands.Procurement

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• Catching up with late changes and short term demands.• Chasing missing parts.• Classical SAP MM use, increasingly complemented by AirSupply usage.• Limited collaboration management with suppliers.

Procurement operations

• Classical purchasing skills. Limited international experience.• Still more administrative and reactive procurement.• Limited relationship and value management skills.• Supply chain fire fighters but less improvement and innovation managers.

Lack of industrial and manufacturing capabilities in supply chain teams.

Capabilities

“Procurement Excellence” will be the platform for n ext cycle.

Stabilisation Phase(recent past/today)

“driven by turnaround, recovery,

flexibility, capacity and short-term

demands”

Optimization Phase(starting with/tomorrow)

“driven by sustainability,

improvement needs”

Excellence Phase(moving to/2020 vision)

“driven by pro-active pursuit of

opportunities and continuous

improvement”

QSF-B > 90%

D1 > 99%

R1 < 100ppm

QSF-B > 50%

D1 > 90%

R1 < 1000ppm

QSF-A >90%

D1 < 70%

R1 < 1600ppm (not always

achieved)

“Procurement

Our strategic roadmap (PAG view) – two major cycles

BUY volume

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“Procurement

Excellence” project

E2E / TOW/ MM / UNITY /

Procurement Operations

set-up and development

QSF-B

Brasov Fill

QSF-A

We built a new Procurement organisation with E2E res ponsibilities.PAG Procurement organisation with E2E responsibilities and capabilities

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PAG followed a systematic process to select future strategic suppliersStrategic supplier selection for respective M2B and B2B clusters

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In Detail Parts, PAG currently manages important tr ansformation towards BTP suppliers (QSF-B).Change of PAG Detail Parts supplier landscape (QSF-A-to-B project)

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PAG Procurement Excellence project works along four axes.PAG‘s four axes of Procurement Excellence – Deliverables per workstream

“Best suppliers in Aerostructures market”

“Highest performing supply chain.”

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• Selection and management of strategic partners with TCO and value creation targets.

• Advanced supplier life-cycle and risk management .

• Enhanced BCC sourcing capabilities (market opportunity management).

• Capabilities and processes for continuous improvement and innovation (DtV) on both sides.

• High performing suppliers with D1 > 99% and close-to-zero rejections (R1) and concessions; top IPCA scores and VMI > 80% of deliveries.

• Strategic suppliers with POA to ensure more supplier self-sufficiency in quality assurance.

• Comprehensive value chain and creation capabilities and focus.

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“Highly qualified and motivated employees”

“Digital transformation to 4.0”

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• Comprehensive value chain and creation capabilities and focus.

• Integrated IT landscape (ERP, tools) with connected and digitalised supplier network.

• Sophisticated planning and forecasting capabilities; real-time supplier collaboration.

• Real-time performance (KPI), logistics and inventory management.

• Automation of standard processes (e.g. RFQ, ordering, claims).

• Definition of distinct competence profiles and development plans .

• Transformation of “buyers” to “supplier managers”, and of “supply chain recovery managers” to “supply chain improvement and innovation agents”.

• Market and technology trend scouting skills.

• Change management along entire E2E chain inside and outside of procurement teams.

Many thanks for your attention …

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Premium AEROTEC GmbHHaunstetter Str. 225D-86179 AugsburgTel. +49 821 801 0Fax +49 821 801 620 71www.premium-aerotec.com

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www.premium-aerotec.com

Your personal point of contact:Dr. Matthias MetteVP Procurement & Supply Chain Management

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the supporting grounds for these statements are not shown, Premium AEROTEC GmbH will be pleased to explain the basis thereof.

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21Joachim Nägele– Hannover, 10 December 2015