Strategies for Increased Production

Utilizing the “SHORE” process to ramp

up production on an efficient and cost
effective scale
Corporate Crew
Henry Nguyen Ryan Won
David Lun Tyson Dao
Caleb Jung Dean Fan
 The “SHORE” Plan
• Labor Calculator for Touch and • Factors of Interest
Support Employees • Impact Price Model
• Hiring Strategies • Supplier Decisions

Scale-Up Optimize Environment

Model Production Changes

Hire Re-evaluate
Employees Suppliers
• Aircraft Production • Assembly Simulations • LEAN 6S
• Delivery Schedule • U-Cell variation with Rabbit • Kaizen Implementation
• Employee Model Chase and Sub-Assemblies • Just in Time and Jidoka
 The “SHORE” Plan
• Labor Calculator for Touch and • Factors of Interest
Support Employees • Impact Price Model
• Hiring Strategies • Supplier Decisions

Scale-Up Optimize Environment

Model Production Changes

Hire Re-evaluate
Employees Suppliers
• Aircraft Production • Assembly Simulations • LEAN 6S
• Delivery Schedule • U-Cell variation with Rabbit • Kaizen Implementation
• Employee Model Chase and Sub-Assemblies • Just in Time and Jidoka
 SCALE - UP MODEL

Delivery Schedule
Maintain our goals for
number of planes delivered
DELIVERY per month
Model

AIRCRAFT Aircraft Goals

Output
Set goals for planes
DECISIONS produced per month

Model
EMPLOYEE Employee Model
Model Implement a plan to hire
touch labor at a steady rate
 • Begin with production
of Chinook aircraft for
U.S. contract

Chinook Production Model • Begin production

4
of Chinook
3.5 aircraft for U.K.
3
contract on 7/20
2.5

1.5

0.5

0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95

UK US

AIRCRAFT PRODUCTION
 DELIVERY SCHEDULE
Delivery Schedule

• Begin with an
annual output
2

of 30 aircrafts 1

in 2019 0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95

• Increase annual UK US

output to 38 aircrafts
by 2021
ANNUAL DISTRIBUTION
 • Plan to recruit touch labor
over the span of 17 months
from 8/19 to 12/20

• Ensure touch support

Employee Scale-up Model are implemented
900 along with touch
800 labor during the same
700 time period
600 • Introduce 1
500 additional touch
400 manager per month
300
beginning 8/19 until
200
8/20
100

0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95

Touch Labor Support Labor Management

TOUCH EMPLOYEES
 Workforce Scale-up

• Scale-up done in 2 years, allowing buffer period

Sensible • Ensure operational efficiency
Planning

• Small increments
Interval • Prevent workforce spiking
Hiring

• Even distribution between two shifts

Workforce • Mix of experienced and new workers
Distribution
 Workforce Scale-up

Planned Working Workforce Planned Working Workforce

Year Quarter Touch Support Manager Total Year Quarter Touch Support Manager Total
2019 Q1 300 280 40 620 2023 Q1 395 368 53 816
Q2 300 280 40 620 Q2 395 368 53 816
Q3 312 292 42 646 Q3 395 368 53 816
Q4 330 310 45 685 Q4 395 368 53 816
2020 Q1 348 328 48 724 2024 Q1 395 368 53 816
Q2 366 346 51 763 Q2 395 368 53 816
Q3 384 364 53 801 Q3 395 368 53 816
Q4 395 368 53 816 Q4 395 368 53 816
2021 Q1 395 368 53 816 2025 Q1 395 368 53 816
Q2 395 368 53 816 Q2 395 368 53 816
Q3 395 368 53 816 Q3 395 368 53 816
Q4 395 368 53 816 Q4 395 368 53 816
2022 Q1 395 368 53 816 2026 Q1 395 368 53 816
Q2 395 368 53 816 Q2 395 368 53 816
Q3 395 368 53 816 Q3 395 368 53 816
Q4 395 368 53 816 Q4 395 368 53 816
 Assembly Simulation
Machine Adjustment Operators

Recalibrated machine Number of operators

Machine Reliability Additional Lines

Different machines Change in demand

 Production Optimization
Rabbit
Chase

Sub-
Assemblies
 Advantages

Salary
Bottlenecks Costs

Flexibility
 Factors for Analysis
Part Price

PRICE DELIVERY On-Time Delivery

Quality Acceptance
QUALITY LEAD TIME

Lead Time
 Impact Price

= 𝑷𝒓𝒊𝒄𝒆 ∗ (𝟏 + (𝑳𝑻 ∗ 𝟏 − 𝑶𝑻𝑫 ) + (𝟏 − 𝑸𝑨))

𝑷𝒓𝒊𝒄𝒆 ($) 𝑶𝒏 𝑻𝒊𝒎𝒆 𝑫𝒆𝒍𝒊𝒗𝒆𝒓𝒚 %

𝑳𝒆𝒂𝒅 𝑻𝒊𝒎𝒆 (𝑴𝒐𝒏𝒕𝒉𝒔) 𝑸𝒖𝒂𝒍𝒊𝒕𝒚 𝑨𝒄𝒄𝒆𝒑𝒕𝒂𝒏𝒄𝒆 %

 Example

On Time
Delivery

Accept
Quality
Qty Per Supplier 2
Commodity A/C Location Unit Price Extended Price Lead-time

Engines 2 Southwest USA $2,450,000.00 $4,900,000.00 13 Mos 99% 99%

𝟒, 𝟗𝟎𝟎, 𝟎𝟎𝟎 ∗ (𝟏 + (𝟏𝟑 ∗ 𝟏 − 𝟎. 𝟗𝟗 ) + 𝟏 − 𝟎. 𝟗𝟗 )

= $𝟓, 𝟓𝟖𝟔, 𝟎𝟎𝟎

 Price per Lead
Part Qty Supplier Part Time QA OTD Total Price Impact Price
Engines ** 2 Supplier 3 $2,325,000 15 100 98.5 $4,650,000.00 $5,696,250.00
Aux. Power Units 2 Supplier 2 $122,500 11 99 95 $245,000.00 $382,200.00
Landing Gear 3 Supplier 1 $940,000 12 99.5 98 $2,820,000.00 $3,510,900.00
Cockpit Displays 2 Supplier 3 $199,000 12 100 99.5 $398,000.00 $421,880.00
Radar 1 Supplier 3 $1,220,000 12 100 100 $1,220,000.00 $1,220,000.00
Radios ** 2 Supplier 3 $142,000 9 100 98 $284,000.00 $335,120.00
Flight Controls - Cyclic & Collective 2 Supplier 1 $265,000 11 100 100 $530,000.00 $530,000.00
Cabin Intercom System 1 Supplier 2 $145,000 10 100 100 $145,000.00 $145,000.00
Flight Control Computers 2 Supplier 3 $350,000 12 99 98 $700,000.00 $875,000.00
Fuel Tanks 2 Supplier 3 $260,000 10 100 100 $520,000.00 $520,000.00
Guidance System 1 Supplier 1 $850,000 13 99.5 99.9 $850,000.00 $865,300.00
Troop Seats 40 Supplier 2 $420 6 100 100 $16,800.00 $16,800.00
Crew Seats 2 Supplier 3 $570 7 100 100 $1,140.00 $1,140.00
Interior Lighting System 1 Supplier 2 $110,000 10 100 99.4 $110,000.00 $116,600.00
Flight Control Actuators 10 Supplier 2 $70,000 13 99.7 99.4 $700,000.00 $756,700.00
Emergency Oxygen System 1 Supplier 2 $349,000 10 100 100 $349,000.00 $349,000.00
Cabin Section 1 Supplier 2 $2,100,000 9 99.7 99.4 $2,100,000.00 $2,219,700.00
Aft Ramp 1 Supplier 3 $240,000 8 100 99.5 $240,000.00 $249,600.00
 Supplier Results

-$854,010
-$504,010 -0.1 +4.3% +1.4%

$19,628,940 10.4 mos 99.1% 99.8%

PRICE per CHINOOK LEAD TIME ON TIME DELIVERY QUALITY ACCEPTANCE

Total Savings:
$268,299,240
6s Lean 06 01
Safety Sort
Create a safe
workplace Minimize

Sort 05 02
Set in order Sustain Set in order
Achieve
Organize
Shine habit of
maintaining
6S
Standardize
Sustain Standardize Shine
Maintain Sustain
Safety 04 first 3 pillars quality 03
Lean Implementation
01 Jidoka

02 Optimization

03 Kaizen

04 Just In Time
Lean Implementation
Jidoka
Automation with a human touch

Optimization
Maximizing workforce effectiveness

Kaizen
Continuous improvement

Just In Time
Providing the necessary resources when needed
 Financial Calculation Method

01 02 03
-Record Revenue -R&D Cost applied -Record
on Plane Delivery to Year 1 Outsource
-Record Labor -Outsourcing cost Production cost on
Cost on employee applied to Year 2 Plane Delivery
hours - Straight Line
Depreciation
 Financial Impact
Income Statement (Year 1) Income Statement (Year 2) Income Statement (Year 3)
Revenue Revenue Revenue
US Contract $ 900,000,000.00 US Contract $ 1,110,000,000.00 US Contract $ 1,140,000,000.00
UK Contract $ - UK Contract $ 68,000,000.00 UK Contract $ 136,000,000.00
Total Revenue $ 900,000,000.00 Total Revenue $ 1,178,000,000.00 Total Revenue $ 1,276,000,000.00

Direct Cost Direct Cost Direct Cost

Labor Expenses Labor Expenses Labor Expenses
Touch Labor Workers wage $ (20,697,600.00) Touch Labor Workers wage $ (26,230,400.00) Touch Labor Workers wage $ (26,544,000.00)
Touch Labor Support salary $ (21,725,000.00) Touch Labor Support salary $ (27,412,500.00) Touch Labor Support salary $ (27,600,000.00)
Touch Labor Support fringe benefits $ (7,603,750.00) Touch Labor Support fringe benefits $ (9,594,375.00) Touch Labor Support fringe benefits $ (9,660,000.00)
Touch Labor Management salary $ (4,170,833.33) Touch Labor Management salary $ (5,573,333.33) Touch Labor Management salary $ (5,830,000.00)
Touch Labor Management fring benefits $ (1,459,791.67) Touch Labor Management fring benefits $ (1,950,666.67) Touch Labor Management fring benefits $ (2,040,500.00)

Material Expenses Material Expenses Material Expenses

Procument of parts for US contract $ (588,868,200.00) Procument of parts for US contract $ (726,270,780.00) Procument of parts for US contract $ (745,899,720.00)
Procument of parts for UK contract $ - Procument of parts for UK contract $ (39,257,880.00) Procument of parts for UK contract $ (78,515,760.00)

Out-source Expenses Out-source Expenses Out-source Expenses

Non-recurring expense $ - Non-recurring expense $ (4,250,000.00) Non-recurring expense $ -
Production wrap rate expense $ - Production wrap rate expense $ (460,000.00) Production wrap rate expense $ (920,000.00)

Cost of Good Sold $ (644,525,175.00) Cost of Good Sold $ (840,999,935.00) Cost of Good Sold $ (897,009,980.00)

Gross Profit $ 255,474,825.00 Gross Profit $ 337,000,065.00 Gross Profit $ 378,990,020.00

Operating Expenses Operating Expenses Operating Expenses

Program Support personnel salary $ (11,000,000.00) Program Support personnel salary $ (12,000,000.00) Program Support personnel salary $ (12,000,000.00)
Program Support personnel fringe benefits $ (3,850,000.00) Program Support personnel fringe benefits $ (4,200,000.00) Program Support personnel fringe benefits $ (4,200,000.00)
Overhead $ (68,689,142.13) Overhead $ (88,712,107.56) Overhead $ (96,188,332.92)
Depreciation $ (55,000,000.00) Depreciation $ (55,000,000.00) Depreciation $ (55,000,000.00)
Research and Development $ (120,000,000.00) Research and Development $ - Research and Development $ -

Total Operating Expenses $ (258,539,142.13) Total Operating Expenses $ (159,912,107.56) Total Operating Expenses $ (167,388,332.92)

Net Income $ (3,064,317.13) Net Income $ 177,087,957.44 Net Income $ 211,601,687.08

Important Financial Indicators Important Financial Indicators Important Financial Indicators

Return on Investment (ROI) 39.64% Return on Investment (ROI) 40.07% Return on Investment (ROI) 42.25%
Gross Profit Margin 28.39% Gross Profit Margin 28.61% Gross Profit Margin 29.70%
Profit Margin -0.34% Profit Margin 15.03% Profit Margin 16.58%
 Financial Impact
Income Statement
Revenue Profit Margin Summary
US Contract
UK Contract
$
$
9,000,000,000.00
816,000,000.00
Year 1 -0.34%
Total Revenue $ 9,816,000,000.00 Year 2 15.03%
Direct Cost Year 3 16.58%
Labor Expenses
Touch Labor Workers wage $ (206,192,000.00)
Year 4 16.58%
Touch Labor Support salary $ (214,737,500.00) Year 5 17.23%
Touch Labor Support fringe benefits $ (75,158,125.00)
Touch Labor Management salary $ (44,724,166.67) Year 6 16.58%
Touch Labor Management fring benefits $ (15,653,458.33)
Year 7 17.23%
Material Expenses
Procument of parts for US contract $ (5,888,682,000.00)
Year 8 16.04%
Procument of parts for UK contract $ (471,094,560.00) Total Contracts 15.05%
Out-source Expenses
Non-recurring expense $ (4,250,000.00)
Production wrap rate expense $ (5,520,000.00)

Cost of Good Sold $ (6,916,241,810.00)

Important Financial Indicators
Gross Profit $ 2,899,758,190.00 Return on Investment (ROI) 41.93%
Operating Expenses Gross Profit Margin 29.54%
Program Support personnel salary $ (95,000,000.00) Profit Margin 15.05%
Program Support personnel fringe benefits $ (33,250,000.00)
Overhead $ (734,531,247.20)
Depreciation $ (440,000,000.00)
Research and Development $ (120,000,000.00)

Total Operating Expenses $ (1,422,781,247.20)

Net Income $ 1,476,976,942.80

 Improvements
Accounting Methods Financial Methods Operational Methods
• Spread R&D cost out • Lower pay while • Leasing assets
to 18 months. training instead of
• Depreciation • Increase employee procurement
reduced due to contribution to • Cutdown on
outsourcing healthcare and overhead costs
retirement funds

Profit Margin Summary

• Use bonuses instead
Year 1 4.10% of increasing salaries
Year 2 11.64%
Year 3 16.58%
• Perform a swap with
Year 4 16.58% a partner in the UK
Year 5 17.23% for better rate
Year 6 16.58%
Year 7 17.23%
Year 8 16.04%
Total Contracts 15.05%
Questions?
Questions?