Value Stream Transformation

From the shop floor to the board room

Chris Beaulieu Executive Director – CBS Global Operations

CUMMINS

100 1M+ 15M years serving engines annually engines in the customers produced field

UNDERSTANDS POWER — PAST, PRESENT AND FUTURE. 190 56,000 Countries & Employees territories Global Network 600 7,200 Distributor Dealer locations locations

6 Shaded locations indicate CMI and JV territory The COS 10 Practices

1. Put the 2. Synchronize 3. Design quality 4. Involve people 5. Ensure equipment customer first flows (material, in every step of and promote and tools are available and provide real physical and the process teamwork and capable value information)

6. Create 7. Establish the 8. Treat preferred 9. Follow common 10. Use Six Sigma functional right suppliers as problem solving as the primary process excellence environment partners techniques improvement method

7 31 Key Processes under COS

8 Bringing COS Alive in CBS

Cummins Operating System 10 COS PRACTICES Principles and Behaviours Plant leadership led training

31 O.E. KEY PROCESSES

1 2 3 4 5 6 7 8 9 10

Synchronize Flows Ensure Equipment Operational Excellence Put the Customer First Design Quality in Every Involve People and Create Functional Establish the Right Treat Preferred Follow Common Problem (Material, Physical and Tools are Available Six Sigma and Provide Real Value Step of the Process Promote Teamwork Excellence Environment Suppliers as Partners Solving Techniques and Information) and Capable

Customer Visibility Functional Excellence Continuous Supplier Improvement Bottleneck Management Quality System People Involvement Crisis Management Kaizen Six Sigma and Measures Structure Improvement Culture (Direct and Indirect)

Takt Time and Line Process Change Standard Woorking Goal Tree and Supply Chain Management Problem Solving Value Stream Mapping Team Measures Equipment Maintenance Balancing Management Methods Performance Measures (Direct and Indirect) Techniques

Scheduling and Load Workforce Capability "Go, See, Act" Process Control Setup Reduction Supplier Quality Leveling and Flexibility Management

Engineered Material Flows/ Plan for Every Part Process Capability Communication

Health, Safety and Environmental Management

5S (Sort, Set in Order, Shine, Standardize, Sustain)

Visual Management Assessments of 31 F.E. ACCOUNTABILITY Key Processes

Health, Safety and Takt Time and Line Supply Chain Management Standard Work Setup Reduction Process Capability Team Measures Six Sigma Environmental Management Balancing (Direct and Indirect) Definitions of of Operations Key

Scheduling and Load Engineered Material Flows/ Customer Visibility Process Change Problem Solving Crisis Management People Involvement Excellence Leveling Plan for Every Part and Measures Management Techniques Processes, Training training Standard Woorking Functional Excellence "Go, See, Act" Process Control Equipment Maintenance Bottleneck Management Kaizen Supplier Quality material QSI Methods Structure Management material and docs 5S (Sort, Set in Order, Supplier Improvement Workforce Capability Continuous Goal Tree and QSI docs Quality System Value Stream Mapping Communication Visual Management Shine, Standardize, Sustain) (Direct and Indirect) and Flexibility Improvement Culture Performance Measures Value Stream Transformation

Value Stream: A collection of all the process steps involved in bringing a service from initiation to completion, raw information etc. to finished process(es) to serve our customers.

Value Stream Transformation (VST): Value Stream Transformation (VST) – a systematic approach to achieve sustainable improvements in People, Quality, Delivery and Cost whilst developing a continuous improvement culture within our Business .

Value Stream Transformation is an enabling process within Operations Excellence

A preferred Cummins Continuous Improvement methodology 5 Steps – high level overview

Define the Value Products (goods or services) Streams D with common process steps The basis for the future Capture the state; 70 – 80% accurate is M Current State OK (directionally correct) Creating flow through the Design the A future State elimination of waste found in your current state map

Create Your RACI with ownership I implementation plan and timeframes – Simulation models C Implement & This is THE goal of mapping Sustain Value Stream Transformation (VST)

Common Mindset

Supply Chain vs. Silo Visualize Current State

Multi-Round VST Improvement Quick Win/Systematic/Deep

Develop Future State Identify Opportunities

12 Cummins VST – Operations

. VST launched in 2013 (2016 VST standardized & became a 6S methodology)

. Trained over 450 people(over 1000 engaged - extended team members) . Utilized in Supply chain / Plants and non-manufacturing locations . Closed 161 VST projects in 2017.

Public 13 CBS by the Numbers 2017 data

20 yrs.

1,000+ 59,744 32,000 + 51,000+ employees CGDs accounts contact 427 94,128 (7 models) reconciled 5,000 calls 24,000 translation 27 WWIDs people requests countries supported + onboarded 9,175 52,000 2,145 lines of GL 7.3M+ variable 9 servers payment surveys Regional 1,080 comp + invoices Centers sites 100,000 3,191 payments 1,388,500 supported travel immigration survey 4 9.9 PB reservations initiations responses 1,099 Service 1,242 32,915 storage intercompany education Lines (Petabytes) pension assistances disputed items distributions Public 14 Framework for Deployment

• 6S Charter created and approved Prepare • Quality, Delivery & Cost improvements defined • Project Prioritized

• 3 Day in region training delivered by OE team / building regional capability • 4 Projects per Wave • Min 20 people to be trained per wave Build Capability • Current State Map created • Opportunities documented and ranked • RACI created

• 90 day delivery plan Deliver and Support • Weekly Stakeholder reviews to share progress and remove roadblocks • Monthly metric pack to track improvement to our results (Quality , Delivery & Cost)

Public 15 Project Charter Objective:

Increase production rate from 159 per day to 180 per day without affecting product quality

Benefits:

Improved on time delivery, Reduced risk of losing business, reduced special transport costs, reduced inspection costs, reduced supplier management costs

16 Value stream mapping . The process was walked to understand all steps and activities. . An initial waste walk was conducted to capture non value added activities . The current state value stream map was created during the training workshop

Public 17 Baseline

I Chart of Diffuser_Volume

1 1000

800 Customer demand = 180 per day

600 UCL=620 5

e Actual volume

V 159 units per day 400

v _ i 200

d X=159

I 0 6 6

-200 LCL=-302 -400 1 5 9 13 17 21 25 29 33 37 41 Observation

Public 18 Key X’s identified

. X1 - 5s required across all processes . X2 - Workload balancing required to achieve target time . X3 - Workflow sequencing required . X4 - Standard work implementation required . X5 - Hourly production monitoring required

Public 19 Improvement Final capability chart Production volume increased from 159 to 255 parts per day (using same amount of resource in the same amount of time)

Boxplot of Diffuser_Volume

1000

800

u 600

f 400

200

Baseline Transition Diff_Vol_Stage

Target improvement 13%. Actual achieved 60% 20 First VST Project in CBS

Y :Increase invoice Paid On Time % for direct materials suppliers, without impacting headcount.

Results • Improved paid on time by 25% • Worst case lead time reduced from 140 days to 50 days (SLA is 60 days) • Team won Silver Shooting Star recognition award

21 CBS – VST Global Roll-out

Europe 5 Waves complete

North America Latin America 11th Oct 2016 China & NE Asia 2 Waves complete 4 projects Launched 1 Aug 16 7 Projects launched 4 Projects Launched

India 19 Sept 16 4 Projects Launched Africa 2 May 2017 4 Projects Launched South Pac & SE Asia 10 July 2017 4 projects launched

22 Value Stream

Transformation

1 Launched 41 projects and closed 25 2 15% of CBS trained on VST

3 3 Global Impact awards in 2017 projects 4 Delivered People , Quality , Delivery and Cost improvements Thank you Questions