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Aerospace & Defense Forum Ducommun "Creating Competitive Advantage through your Supply Chain Sept. 10, 2015 Ducommun The Aerospace & Defense Forum Sept 10, 2015 Agenda Introduction Joel Benkie Company Overview

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Aerospace & Defense Forum Ducommun "Creating Competitive Advantage through your Supply Chain”

  • Sept. 10, 2015
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Agenda

  • Introduction

Joel Benkie

  • Company Overview

“

  • Strategic Growth Focus

“

  • Ducommun’s Operational Excellence Strategy

Jerry Redondo

– Creating a Competitive Advantage through the Supply Chain Management Process

  • Questions / Discussion

Ducommun The Aerospace & Defense Forum

Sept 10, 2015

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Ducommun Overview & Strategic Growth Focus Joel Benkie Ducommun President & COO

Ducommun The Aerospace & Defense Forum

Sept 10, 2015

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  • 1849: Founded in Los Angeles by Charles Louis Ducommun as a

watch business, then general store, during the Gold Rush

  • 1920s: Assists in birth of the aerospace industry in

Southern California; provides aircraft aluminum to early aerospace pioneers Lindbergh, Douglas and Lockheed

  • 1950s: Becomes largest metals materials supplier to the aerospace

industry in SoCal

  • 1960s: Diversifies into distribution of electronic components to the

aerospace industry

  • 1999 – 2000s: Expands capabilities through small acquisitions
  • 2011: Acquires electronics manufacturing services leader LaBarge,
  • Inc. in a transformational acquisition

Our Rich History…

Ducommun The Aerospace & Defense Forum

Sept 10, 2015

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Our Rich History…

Ducommun The Aerospace & Defense Forum

Sept 10, 2015

  • Today, Ducommun is a global leader in manufacturing sophisticated

solutions for the aerospace, defense, industrial and natural resources markets

  • $740 million in annual sales
  • 22 manufacturing and engineering operations in 13 states, Mexico

and Thailand

  • 3,100 employees companywide
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Company Highlights

  • Customer focused leading global provider of engineering

and manufacturing services to aerospace, defense and diverse technology-driven markets

  • Focused, niche approach capitalizes on growing market

demand

  • Well positioned to benefit from increasing demand for

advanced integrated systems

  • Grow strategic relationships with blue chip customers

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Ducommun The Aerospace & Defense Forum

Sept 10, 2015

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Ducommun’s End Markets Offer Growth Opportunities

Defense Technologies

(32% of Sales)

Defense Structures

(14% of Sales)

Medical & Other

(6% of Sales)

Natural Resources

(6% of Sales)

Industrial

(6% of Sales)

  • Missile systems
  • Radar systems
  • Engine ducts
  • Shipboard systems
  • Rotor blade assemblies
  • Glass container

electronic manufacturing systems

  • Electronic test

equipment

  • Semiconductor capital

equipment

  • Oilfield services

equipment

  • Mine automation

systems

  • Agricultural control

systems

  • Surgical systems
  • Patient monitoring and

therapy devices

  • Respiratory care

devices

  • Biodecontamination

equipment

  • Flight control

assemblies

  • Rotor blade assemblies
  • Fuselage assemblies
  • Leading edges
  • Composite winglets

Commercial Aerospace

(36% of Sales) 7

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Strategic Business Unit Structure Aligns Capabilities & Creates Synergies

Ducommun LaBarge Technologies

(Electronic Solution) 58% of LTM Q2 2015 Sales

Electronic Systems Group Advanced Systems Group

Ducommun AeroStructures

(Structural Solutions) 42% of LTM Q2 2015 Sales

Structural Systems Group

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Innovative Electronic Solutions

Ducommun LaBarge Technologies (58% of Sales)

Designs, engineers and manufactures high-reliability products used in worldwide technology-driven markets, including aerospace and defense, natural resources, industrial, and medical.

Core Capabilities

From prototype development to complex assemblies:

  • Turnkey design, engineering, assembly

and test

  • Cable assemblies, wire harnesses and

interconnect systems

  • PCB assemblies and

microelectronics/hybrid circuits

  • Box-build, electromechanical and

mechanical systems

  • Illuminated panels, microwave switches,

and motors and resolvers

  • Systems integration
  • Logistics
  • After-market support

Design, Engineering and Test Complete System Builds Integrated Mechanical Assemblies Integrated Electronic Assemblies Interconnect Systems Printed Circuit Board Assemblies

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Innovative Structural Solutions

Ducommun AeroStructures (42% of Sales)

Core Capabilities

Commercial Aircraft

  • Fuselage skin panels & assemblies
  • Flight control surface assemblies
  • Leading edges

Military Fixed Wing Aircraft

  • Fuselage skin panels & assemblies
  • Flight control surface assemblies
  • Various door panels
  • Leading edges
  • Engine ducts

Military and Commercial Rotary Wing Aircraft

  • Main & tail rotor blade assemblies
  • Leading edges
  • Firewall exhaust assemblies
  • Sub-assemblies

Fuselage Skins and Assemblies Flight Control Surface Assemblies Exhaust Systems and Engine Ducts Composite Winglets Rotor Blade Assemblies

Designs, engineers and manufactures large, complex contoured structural components/assemblies, and composite and metal bonded structures/assemblies for aerospace and defense.

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Our Strategy for Growth

  • Establishing Ducommun as an innovative

solutions provider

– Delivering a compelling value proposition to our customers – Expanding capabilities to provide more advanced integrated systems

  • Leveraging our portfolio of broad,

complementary capabilities

– Electronic, engineered and structural solutions – High-performance products and high-cost-of- failure applications – Reorganized into strategic business units to align capabilities and create synergies

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Ducommun’s Facilities Locations

Ducommun AeroStructures (DAS) Ducommun LaBarge Technologies (DLT) Miltec

Thailand

Ducommun Headquarters

Primarily U.S.-based with access to low-cost domiciles

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The “One Ducommun Platform” Forms the Basis for Achieving Sustainable Profitable Growth

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  • In recent years, the aerospace markets for both commercial and

military products have become more and more competitive.

  • Most companies have reacted to these challenges by initiating

continuous improvement activities focused largely on leaning out production operations and reducing direct labor product content.

  • Businesses who have embraced lean initiative for many years are

finding diminishing returns from this approach.

  • Given this situation, many companies have realized they must redirect

their attention to creating value through enhanced supply chain efficiencies.

Ducommun The Aerospace & Defense Forum

Sept 10, 2015

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"Creating Competitive Advantage through your Supply Chain” Jerry Redondo VP of Operational Excellence

Ducommun The Aerospace & Defense Forum

Sept 10, 2015

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Our Vision is to be our customers’ #1 provider of innovative electronics and structures solutions

Company Confidential

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One Ducommun "Creating Competitive Advantage through your Supply Chain”

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  • Develop & implement a DCO Supply Chain commodity focused process that

delivers improved material cost, quality, delivery and efficiency.

  • Capture “One Ducommun” standard work, controls and process synergy opportunities
  • Implement centralized DCO commodity process & optimized organizational structure
  • Consolidate supplier base through aggregation of commodities and sources to improve

level of performance management, risk mitigation and controls

  • Execute aligned S&OP, standard work materials, order management and controls
  • Link program management & supply chain to ensure flawless new program launches

and best customer service

  • Integrate supply chain standard work into strategic pricing NPI phase gate process

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Strategy Priorities, Deliverables & Accountabilities

One Ducommun "Creating Competitive Advantage through your Supply Chain”

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  • Organizational Design directed at

implementation of standard work across strategic business units & all functional process elements

Materials & Purchasing DCO Supply Chain Management

Supply Chain Strategy, Direction & Methodology

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One Ducommun "Creating Competitive Advantage through your Supply Chain”

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Supply Chain Strategy, Direction & Methodology One Ducommun "Creating Competitive Advantage through your Supply Chain”

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Strategy, Direction & Methodology

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One Ducommun "Creating Competitive Advantage through your Supply Chain”

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Office of Operational Excellence

OOE Vice President DCO Supply Chain Management Product Integrity DCO Program Management ESG Operational Excellence Engineering SSG Operational Excellence

One Ducommun "Creating Competitive Advantage through your Supply Chain”

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Supply Chain Strategy, Direction & Methodology Organizational Design One Ducommun

Vice President DCO Supply Chain Electronics & Electro-Mechanical Director, DCO Strategic Supply Chain Electronics, PCB’s & Elect ro Mech Printed Circuit Boards (PCB’s) Machined Components & Raw Material Director, DCO Strategic Supply Chain Machining , Mat’l & Std Hardware Standard Hardware Manager DCO Strategic Supply Chain MRO/Indirect & Services MRO / Indirect, Freight & Packaging “Non P.O.” Services, Insurance & Utilities DCO Supply Chain Regulatory/Compliance Administrator DCO Supply Chain Pricing Administrator DCO S&OP Process Champion/Leader Director DCO Supply Chain Operations Master Scheduling, Supply & Demand Aggregation 8 SBU’s/ 14 Oper’s Centers Locations

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Supply Chain Manager SBU/Operations Centers S&OP, Master Scheduling, Materials Management Commodity Management Partner, Contracting Logistics & Warehousing Proposal RFQ / NPI Integration & Analysis Product Integrity / Quality Supplier Quality Engineering

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Strategic Supply Chain vs. Operational Supply Chain

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  • Supplier

Selection

  • Contract &

Commercial

  • wnership
  • Supplier

Strategy Execution

  • Supplier

Performance Management Strategic Supply Chain:

  • Strategy identification, development &

execution- supplier selection

  • Commercial and contract ownership across

commodities

  • Support SBU product road maps & AOP

execution

Operation Supply Chain:

  • Execute AOP requirements and deliver

product and service to customer

  • Material scheduling per S&OP (pricing agreed)
  • Supplier performance – quality, delivery, lead

time

  • Managing inventory (min) and safety stock

One Ducommun "Creating Competitive Advantage through your Supply Chain”

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Supply Chain Process, Implementation Update & Results Commitment

One Ducommun "Creating Competitive Advantage through your Supply Chain”

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  • Drive Value, Quality & Delivery improvement through SBU’s to deliver the
  • ptimum products and services to our customers
  • Standard Work: Execute demand, production planning, materials management standard work across

SBU’s

  • S&OP: Effective S&OP to drive end to end forward forecasting process and improved execution
  • Logistics & Warehousing: end to end cost reduction with suppliers & customers in transportation,

warehousing and packaging

  • NPI: Align & execute Supply Chain process to NPI phase gate standard work
  • Performance Management: Robust management operation system, standardized work and metrics

(KPI) to exceed AOP and LRP requirements

  • Talent Development & Capability Building: Implement Lean and Continuous improvement culture

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One Ducommun "Creating Competitive Advantage through your Supply Chain”

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  • DCO Commodity Agreements - Key Process Objectives
  • Alignment of common products & processes into commodity families
  • Improve material cost position
  • Consolidation of DCO supply base
  • Inventory optimization
  • Flow down & alignment of Terms & Conditions
  • S&OP driven material replenishment across value streams & SBU’s
  • Optimized logistics
  • Aligned Quality Management System (QMS)
  • Integrated New Product Introduction (NPI)
  • Improve performance through administrative lean methodologies

One Ducommun "Creating Competitive Advantage through your Supply Chain”

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Decentralized Contracting to “One Ducommun” process

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One Ducommun

Leveraging the Supply Chain

Establish DCO Materials Management Standard Work S&OP Operations Center Commodity Demand & Forecast Aggregate DCO Commodity Demand Identify Distributor Candidates "Creating Competitive Advantage through your Supply Chain”

Electronics: Components & Interconnects Standard Hardware, Wire & Cable

&

Complete “One Ducommun” Aggregated RFP Package Conduct RFP Meetings with Distributor Candidates Proposal Responses due Conducted Candidate RFP Response Reviews Package, Negotiate & Final Award Execute Source Transition Plan across Operations Centers Candidates Execute Best & Final RFP Submittals

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S&OP - Linkage to the Operating Model and AOP Execution

1.

  • Mapping the SC process across Ops Centers & SBU
  • Create standard work through robust management
  • peration system for all the key processes:
  • demand

>

  • peration

plan > supplier management > execution and control.

  • Drive towards S&OP Excellence
  • Map & standardize mat’l flow across Oper’s Centers
  • Define and implement SC Management Dashboard /

Scorecard

  • Control & Escalation process / standard work & tools
  • Customer and Supplier communication protocol and

process: clear line of responsibilities and controls

Strategy Planning

Customer Suppliers

Strategic Planning (LRP) Busness Planning (AOP) S&OP (Volume) Master Scheduling (Mix) Detailed Scheduling (ERP. Prod. etc)

Dmand Planning Supply Planning

Sales Plan

Operations Plan INV

Execution

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One Ducommun "Creating Competitive Advantage through your Supply Chain”

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One Ducommun "Creating Competitive Advantage through your Supply Chain”

S&OP Business Model and Process

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  • Monthly demand rolling outlook/forecast against AOP, cascade to material level with inventory review and

consensus- first week of month

  • Risk and Opportunity understood and validated with clear owner and actions- manufacturing lead time,

bottle neck, cycle time, operation throughput, material lead time

  • Investigate and take action toward capacity at production and supplier level
  • Weekly demand, production and material review at SBU/site level
  • Demand to plan, operations/production to plan, OTD/shipment to plan, PD to plan
  • Inventory projection, safety stock,
  • Key suppliers response capability confirmation towards production and demand
  • Output with supply/demand issue with alternative plan flexibility as/if required
  • Daily ops center meetings, confirmations, actions to align (WIP, LF, FG, inventory, stock revolution, delivery

schedule)

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S&OP Standard Work

One Ducommun "Creating Competitive Advantage through your Supply Chain”

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  • Centralized commodity strategy strengthened overall supply chain management process
  • Significant supplier consolidation drives ability to increase level of supplier development and

performance management

  • Standard work across SBU and Ops Centers enables forward looking S&OP effectiveness
  • Clear roles, responsibilities and results accountability across supply chain function
  • Supply chain integration into Program Management and NPI process
  • Standard performance management metrics drives clear process priorities and accountabilities
  • Common process methodology drives standard work across disparate systems
  • Centralized Supply Chain Management process executes QMS initiatives
  • Full alignment and support from all levels of leadership critical driver of success

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Strategy & Process Summary

One Ducommun "Creating Competitive Advantage through your Supply Chain”

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Our aligned & purpose directed Leadership is the core driver of our “One Ducommun” success…

One Ducommun "Creating Competitive Advantage through your Supply Chain”

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Supply Chain Management Exceeding Customer Expectations Purpose-Driven Performance Talent Development Increased Financial Performance

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One Ducommun "Creating Competitive Advantage through your Supply Chain”