Honeywell Aerospace

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Honeywell Aerospace

• Oswaldo Gutierrez
• Intl. Procurement Office
• Honeywell Aerospace

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Honeywells Businesses
2005 Sales
Total 27.7B
Diverse Businesses, Technologies and Products
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Aerospace
The worlds premier supplier of aircraft engines
and systems, avionics and other products and
services for airliners, regional and business
aircraft, military aircraft and spacecraft.

• Air Transport Regional
• Key Drivers Price and Cost
• Customers Airbus, Boeing, Embraer, General
  Electric, United Technologies, Rolls Royce,
  Airlines
• Business General Aviation
• Key Drivers Value and Service Support
• Customers Gulfstream, Dassault, Cessna,
  Bombardier, Pilatus, Raytheon
• Defense Space
• Key Drivers Cost and Mission Outcome
• Customers US DOD, Coast Guard, Special Ops,
  DARPA, NASA

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Comprehensive Commercial Offering

• Integrated Flight Safety Equipment
• Runway Alerting
• Aircraft Environmental Surveillance System

Integrated Pneumatic System
Aircraft Hydraulics
Integrated Cabin Pressure Control Systems
Lighting Systems
Auxiliary Power Units (APU)
Cabin Electronic Systems
Power Generation Distribution

• Main Engines Components
• Bleed Air Control Systems
• Engine Fuel Controls
• Engine Starter/Generator
• Electronic Engine Controls

Environmental Control Systems

• Total Avionics Solutions
• Flight Management Systems
• Vertical Profile Radar
• Global Positioning Systems
• Terrain Collision Avoidance System
• Cockpit Display
• Enhanced Ground Proximity

Wheels Brakes
RAM Air Turbine Electrical Power System
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Vital Few Goals

• Execute on Commitments
• Customers
• Shareholders
• People
• Reduce Costs
• Material
• Conversion
• Overhead
• Development
• Develop and Execute ONE Strategy for Aerospace
• Drive a Culture of Performance

To Transform the World with Aerospace Technology
and Innovative People
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Sourcing
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The New Sourcing Organization

• One Aero sourcing organization
• Fully functionalized sites integrated with
  central
• OEM AMS Tactical Procurement responsible for
• Tactical execution of site sourcing
• Delivery, quality cost for the sites
• Local functional collaboration (Engineeringetc)
• Commodity teams focus on responsible for
• Commodity strategies
• Source selection, supply base design
• Commodity cost productivity performance
• Buy to buy make to buy transitions
• Agreements, contracting (LTC)

Successful 1st Year Of Re-Org But Still Maturing
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Significant Challenges Ahead

• Supplier capacity constrained Aerospace growth
• Performance improving but not where it needs to
  be
• Increasing raw material costs (metals)
• High cost structure relative to competitors
• Lagging in Global Low Cost Sourcing
• Significant cost reduction required to win new
  platforms

Strategies Developed to Transform Mitigate
Future Risk
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Honeywell Customer Requirements

• Zero Defects
• Repeatable achievement of zero defects is the
  expectation
• Credibility is built and lost with quality -
  quality cannot be compromised
• Suppliers must have a relentless drive for
  continuous improvement
• Requires proactive process control, mistake
  proofing, root cause corrective action
• OTTR
• On-time to customer request (OTTR) now the
  expectation
• Delivered at lead-time or negotiated PO schedule
  is no longer adequate
• OTTR requires a flexible supply base mfg
  systems
• Pull based processes throughout the supply chain
  should be the standard
• Low Cost
• Cost has become a deciding factor in awards
• Technical performance is expected - cost is the
  differentiator
• Suppliers must be committed to cost take out
  providing best value
• DFx, value engineering, and a global supply chain
  are the keys to success

Bar is Continuously Rising
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Attributes of a Grow Supplier Y f (X)

• A Honeywell grow supplier is one that
• Has flawless quality delivery performance to
  Hon REQUEST ALL THE TIME
• Delivers COST TAKE OUT YoY productivity
• Customer satisfaction orientation (VOC process)
• Is not a victim of environment, industry,
  circumstances
• Drives a culture of excellence continuous
  improvement (LEAN / Six Sigma / VE)
• Has a strong mgmt operating system, early warning
  systems, financial stability
• Meets Honeywell contractual terms and conditions
• Materials management is a core competency,
  enterprise wide systems
• Technical competence, subject matter expert in
  the field
• Easy to do business with.plants talk to each
  other common mgmt system
• Has a robust, flexible order mgmt, mfg execution
  pull system capability
• Challenges Honeywell with breakthrough ideas to
  improve performance
• Helps Honeywell grow be more competitive
• Has low cost global footprint strategy
• Communicates proactively, is responsivestrong
  bias for action

Y
X
A Culture of Execution and Operational Excellence
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Sourcing Summary

• Positioned to execute game changing strategies
• Capable supply base required for successful
  implementation
• Flawless delivery quality ALL THE TIME Know
  what your customer needs
• Willing to invest in the relationship NOW
• Build capability be ready
• Continuous improvement in cost service a MUST
• Exciting new growth opportunities
• Need your help to WIN

Big Opportunities Ahead Prepare Now!
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Globalization
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International Procurement Office (IPOs)
Poland IPOs
Czech Rep IPO
Taiwan IPO
Shanghai IPO
Xian IPO
Guaymas, MX IPO
Monterrey, MX IPO
India IPO
Malaysia IPO
Singapore/Bintan IPO
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Mexico IPO - Mission Vision

• IPO International Procurement Office
• An extension of Honeywell Aerospaces Integrated
  Supply Chain group.
• First of three IPO's for Emerging Regions
  (Mexico, Eastern Europe, China).
• Multifunctional and Multidisciplinary group based
  in Monterrey, Mexico.
• Interface between US Canada manufacturing sites
  and Supplier Base in
• Mexico / Latin America region.
• Focused on Sourcing Strategy Deployment and
  Project execution
• Oversight of Supplier Transitions.
• Attract competent Aerospace Manufacturing
  companies into the region.
• Supplier Development in Aerospace practices
  standards.
• Surveillance of active suppliers in Quality and
  Delivery issues.
• Assessment of potential suppliers in Mexico /
  Latin America region.

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Monterrey International Procurement Office
Milestones
Next Steps
Current Staff

• Office started operations in 2003.
• 2003 10 active suppliers in Mexico
• 2006 25 active suppliers in Mexico
• 90 of established companies are foreign
  investments or joint ventures.
• Major achievements include AS9100 supplier
  development for 6 companies.
• Participated in NADCAP approval process for
• Non Destructive Testing
• Chemical Processing
• Welding / Heat Treating

• Increase Spend in Mexico.
• Attract New Suppliers for this region.
• Creation of new aerospace business opportunities.
• Contribute to achieve overall savings for
  Honeywell.
• Sourcing in Low Cost countries.
• Supplier Consolidation.
• Attract Higher Value Added projects into the
  region.
• Migrate to a higher level of complexity in the
  Supply Chain.

• 6 Global Commodity Managers
• 3 Regional Commodity Managers
• 6 Program Managers
• 6 Engineering Quality Specialists
• Bilingual, Degreed professionals in
• Business Technical fields.
• 12 years average experience.
• Responsible for regional business
• development.

Mexicali
Chihuahua
Guaymas
IPO Strategically located in MONTERREY

• Major Industrial Business Metro area in Mexico.
• 4 million population.
• Strategic location Proximity to major US cities.
• World class Technical Business education
  institutions.
• Intercontinental Airport.
• UK EU consulates and government offices.

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Questions Answers