UNCERTAINTIES

1. UNCERTAINTIES • There is inherent variability in work makes it difficult to follow schedules. • There is competition for people, facilities and other equipment within and across products – work waits in queue • Unpredictable work cause schedule delays. • Frequent priority changes force constant shifting of resources. • Delivery dates move as customer needs change • Variability in work scope • Administrative delays (paperwork, system related, Inspection reports, Customer approval, …) • Differences between Delta demand and customer demand • Data integrity in system • Aging equipment increases unscheduled down time • Distractions due to business level uncertainty • Etc, Etc, Etc………

2. Product Assembly & Test Outside Repair Product Disassembly Scrap Replacement Repair & Support Shops Before TOC How Products Flowed – Engine Maintenance = Engines, APU’s, Landing Gear Historical 4 year monthly average production = ~38 engines/mth 20,000 open shop orders to support 60 + engines in WIP

3. Policy Constraint(s) • Pressure to deliver on time • Pressure to expedite  • Multi-tasking • Priority changes • De-synchronization • Induct Asset ASAP • Start repairs ASAP • Start buildup ASAP • Expediting  • Multi-tasking • De-synchronization • Early release for • production • Push parts to Back shops ASAP • Pull parts from Back shops ASAP Intrinsic Uncertainties Uncertainties multiply Delays  Start Early (CT ) Lines High no. of jobs in progress Delays/ Shortages  Lead time  Resource contention  (Queues ) Backshops Realization Technologies, Inc

4. “If I just had my !@#$ parts…” Originally focused on Disassemble and release of Parts ASAP • Created excess WIP • Little’s Law* • Competing priorities • Customer vs. Delta • Day Cards, Green Cards, Manager Specials • Long Queue Times vs. Short Touch Times • Long TAT and Low Through-Put • Parts late to Outside repair vendors

5. Implement Theory of Constraints • Metrics –Throughput, Turn Time, WIP • Drum Buffer Rope Scheduling (Repair Shops) • Exception Management • CCPM (Product Lines)

6. Simplified Drum-Buffer-Rope Drum Determined by Due Date Established a 15 day rope • 10 working days plus 5 days of Buffer • Determined by Longest Lead-Time part • Approx. 156 process hours, ~ 6.5 days • Most parts require < 3 days Touch-Time • Typical parts repair averaged 60 days • Now 10 days, 7 days plus 3 days of buffer Control release of Material • Work to the rate of R&S (Constraint) • Established Parts Release mechanism to protect the system • Parts sent to Holding Area to wait for release • Release Exception Parts ASAP • Release Non-Exception Parts at A15, now A10 • Repair Gate Manager—sets schedule & priority

7. Exception Management Production Meeting each Day • D+2 & D+7 Validation • BOMs complete • Exception Parts released • Non exception parts in holding area • A-2 Communication • Identify parts that will miss start date • Determine options • Wait, protected by Project Buffer • Expedite—20 Tags monitored • Swap—available part • Work with Supplier/Vendor for Solution • Buy

8. CCPM Introduced Critical Chain rules to manage Product Lines • Treat each Product as a project • Pipeline (staggered) Products across all lines to protect the system • Transitioned from precise, Task-Level management to Simple Milestones (Concerto) • Explicit time buffers

10. ASSY BEGIN (A ZERO) DISASSY END (D ZERO) INDUCTION (I ZERO) TEST (T ZERO) A-10 D+7 D+2 A-3 Stagger Inductions HOLD FOR RELEASE PARTS REPAIR DISASSEMBLY ASSEMBLY • Minimizes R&S WIP levels • Ensures only parts that are needed are in work • Results include increased throughput and decreased TAT • Do not begin until 100% of parts are received • Use OT only to regain lost buffer • All exception parts routed • Complete BOM BY D0 • Ensure all exception parts out by D+2 & D+7 follow up • All shops follow RED, FIFO priority in RGM. Expedite tags used only for emergency Current Execution Process A-2

11. Summary of Changes • Create Plans with Buffers • Developed aggressive project plans with buffers for Product lines • Setup FIFO/red/expedite priority system for all piece parts Control WIP • Control the release of Products into the system based on WIP • Hold non-exception parts until A-10 • Do not start assembly until all parts are available Manage Using the Buffers • Turn parts red 3 days before the start of assembly • Assign work based on buffer priorities • Allocate resources to red parts and/or red tasks Exception Management • Review D+2 and OSR parts at D+7 to ensure on-time delivery • Review all parts starting A-2 and make decisions if A0 will not be met

12. Results • WIP: • Was 20,000 Piece Part WIP  6000 Piece Part WIP TP: • 25% increase in piece part repair • 97+% parts back at A0 • 23% increase in engine production within first year • 50+ engines per month produced consistently Turn Time: • 70% Reduction in Piece Part TAT • Engine total TAT reduction – 40% AVG across all product lines • Landing Gear TAT reduction – 60% • Robert Fox Award—Operational Innovation

13. Next Steps TOC implementation has continued to drive the flywheel faster YOY • Next steps: • Distribution Solution • Focus on Outside Repair Vendors and New Material Supply Processes • Attention around exception management • Improve synchronization

14. Questions?