Missile Defense Agency Industry Stakeholder Team Quality Initiative

Missile Defense Agency, Industry Stakeholder Team Quality Initiative at Eagle. Picher Conference on Quality in the Space and Defense Industry March 26 -27, 2007 1

EAGLEPICHER TECHNOLOGIES, LLC Thermal Batteries DOD Weapon Systems Design and Manufacture Specialty Batteries for Defense and Space applications. Multi-function charge, Discharge & testing. Nickel Hydrogen Multi-Cell Battery 3 f Lithium Ion with Electronics ee t Energetic Devices feet 4 www. eaglepicher. com 2

EAGLEPICHER TECHNOLOGIES, LLC World’s Smallest Medical Implantable Battery 3

EPT Quality Organization President, Eagle. Picher Technologies Manufacturing Defense Programs Space Programs Director, Quality Assurance Silver. Zinc Defense Test Lab Thermal Batteries Calibration Energetic Devices Supplier Quality Space Power Quality Mgmt. System Product Development Space Test Lab Challenge for a consistent & healthy Quality System is the diversity and complexity of Eagle. Picher products. Aug 2006 4

Overview Quality Initiative at Eagle. Picher Team Participants • Missile Defense Agency MDA • Industry Team Stakeholders: • Boeing, Raytheon, • Lockheed Martin, Orbital Sciences, • DCMA Processes at Eagle. Picher • • • Establish Mutual Statement of Work Collective Assessment & History Review Identify Areas for Improvement “Big 4” Methodology for Addressing Systemic Issues Action Plan Completion & Validation by the Team Specific Actions Taken Next Challenage: The diversity and complexity of the Industry Team Outcomes: Metric Suite & Reviews • • Internal Quality Metrics – Phase 1 Cost Related to Quality – Phase 2 Lessons Learned – Customer Perspective 5

Quality Initiative at Eagle. Picher BACKGROUND Initial Notice Received at EP • July 2003: • MDA & DCMA Notice sent to EPT of Level 3 CAR: Systemic Quality Issues. Introductory Planning Meeting • October 2003: • Joint Industry Team developed the Quality Initiative and Statement of Work • November 2003 : • SOW Presentation to Eagle. Picher Technologies • December 2003: • EPT Commitment to the MDA / DCMA Team 6

Quality Initiative at Eagle. Picher INDUSTRY TEAM MISSION • Review EP data from 2 -3 Yrs of previous audit activities. • Included all non-conformance, non-compliance and hardware defect reports. • Company, product or program was irrelevant. • Identify common or systemic deficiencies. • Develop a method to address systemic issues. • Implement and document corrective actions. • Develop a methodology to evaluate changes. • Validate improvements. • Generate metrics to demonstrate effective RC/CA efforts and sustained continuous improvement. 7

Quality Initiative at Eagle. Picher Collective Outcomes: Industry Team Assessment • Reviewed data from 21 system level audits conducted during the past two years. • Analyzed approximately 200 findings. • Grouped data into main contributors. • Developed the main areas of focus Industry Team Challenge: Differences of companies, products and programs were put aside. • Process Discipline • Technical Data Package • Training • Root Cause/Corrective Action “Big 4” 8

EPT Quality Organization President, Eagle. Picher Technologies Manufacturing VP Defense VP Space VP Director, Quality Assurance Silver. Zinc Defense Test Lab Thermal Batteries Calibration Energetic Devices Supplier Quality Space Power Quality Mgmt. System Product Development Space Test Lab 10 Units per month 5000 units per mo. 10, 000 units per mo. 1 unit each 10 mo. Price range $ 45 K Testing 30 days --20 – 1200 sec. One shot devices --100 – 750 msec $1. 2 M Challenage is the diversity and complexity 60 days/ 20 cycles Rechargeables Aug 2006 9

Quality Initiative at Eagle. Picher Methodology for Addressing Systemic Issues First Attempt • Identifiedmultiple root causes specific processes in each of for “Big 4”areas. • Developed acomprehensive CA Plan the Enterprise level that at captured each of the Big 4 areas • • • Detailed milestone schedule to be maintained at EPT. Action assignments identified from the Industry Team. Reality Check: Goals were not getting accomplished because of change of focus: In-Effective RC/CA from Audit Findings • Success Will Require A Cultural Shift 10

Quality Initiative at Eagle. Picher Enlightenment Actions EPT established a “One Company”metric package to manage the business. Adopted philosophy: Knowledge -> Responsibility -> Accountability Across all functional areas and top to bottom. Stakeholder Industry Team: Multiple visits to EPT to work the issues/actions. • Industry Team meetings evolved into “healthy discord” Raytheon Boeing Orbital Sciences Lockheed-Martin Missile Defense Agency Eagle. Picher The integrity and common focus of the Industry Team 11

Quality Initiative at Eagle. Picher Next Level Joint Industry Audits at Eagle. Picher QMS Audits – • All Eagle. Picher Facilities : ISO 9001 & AS 9100 B Process Validation Audits – • All EP Facilities • Audit Team Lead rotates between Members of Industry Team. Level of effort (15/4) includes employees from all of the Joint Industry companies. Root Cause/Corrective Action Responses • All audit items addressed with RC/CA by Eagle. Picher. • Findings • Observations All completed actions validated by the Industry Team • Cooperative process checks on-site at Eagle. Picher by Industry Team representatives. 12

Quality Initiative at Eagle. Picher Summary of Audits Audit Findings C/A Plans Observations Positive Observations Nov 04 & Feb 05 QMS 14 88 32 0 July 05 – PVA 47 71 39 6 Jan 06 – PVA 12 14 45 10 Oct 07 – PVA 4 5 22 13 Same level of effort for each audit 13

Quality Initiative at Eagle. Picher Summary of Audits Nov 04 QMS July 05 PVA Jan 06 PVA Select Process Discipline 13 23 4 1 Technical Data Package 21 35 5 2 Training 8 4 1 0 4 1 2 1 “BIG 4” Root Cause / Corrective Actions Oct 06 PVA Flow Down 14

Quality Initiative at Eagle. Picher Summary of Audits Nov 04 QMS July 05 PVA Jan 06 PVA Select Oct 06 PVA Quality Mgt. System 20 19 4 1 Operations 11 22 2 2 Engineering 5 16 0 0 Supply Chain 3 4 4 1 Contracts 3 0 1 0 Human Resources 2 0 0 0 No RC/CA required 2 2 1 0 15

Quality Initiative at Eagle. Picher Action Plan Completion Validation Quality Metrics - Periodic Senior Industry Team Review • Identification of key enterprise areas for metrics. • Metrics focus on “Big 4” and customer expectations. • Metrics developed based on areas needed for Eagle. Picher improvement. • Matured and improved the metric package over time. • Metric package now used to manage the business. 16

Quality Initiative at Eagle. Picher Highlights of next session • How did Eagle. Picher go from 88 C/A to 4 C/A in two years? • Examples of metrics that lead to enterprise level Correction Action. • Summary of quantitative detail related to audits. • Keystone outcome: • Root Cause / Corrective Action * • Industry Team cooperation 17

Quality Initiative at Eagle. Picher Metric Review (NOTE Starting new data For Day 2 session) 18

Quality Initiative at Eagle. Picher Collective Outcomes: Industry Team Assessment • Reviewed data from 21 system level audits conducted during the past two years. • Analyzed approximately 200 findings. • Grouped data into main contributors. • Developed the main areas of focus Industry Team Challenge: Differences of companies, products and programs were put aside. • Process Discipline • Technical Data Package • Training • Root Cause/Corrective Action “Big 4” 19

Quality Initiative at Eagle. Picher Common or Systemic Areas in “BIG 4” Process Discipline • Many tasks were completed per individual preference : • Lacked attention to detail in some key areas: • Every function affected. 20

Quality Initiative at Eagle. Picher Common or Systemic Areas in “BIG 4” Technical Data Package • Instructions & procedures were inconsistent, based on program and/or technology variations: • Incomplete and inconsistent data distribution. 21

Quality Initiative at Eagle. Picher Common or Systemic Areas in “BIG 4” Training • On Job Training was ad hoc & undocumented: • No clear definition of “Correct Level of Training” 22

Quality Initiative at Eagle. Picher Common or Systemic Areas in “BIG 4” Root Cause / Corrective Action * • Little or no documented process of RC being connected to CA: • Actions more disposition rather than RC & CA: • Little / No Objective Evidence for RC analysis or CA in place: 23

Quality Initiative at Eagle. Picher Reviews at Eagle. Picher Joint Industry Team Audits Joint Industry Team / SOW Identified November 2003 Define Continuous Improvement Plan, March 2004 Quality Management System, November 2004 (Raytheon) Identify Metrics Support Big 4 – June 2004 Rework Nov ’ 04 Audit Answers April ‘ 05 Senior Team Review Metrics Development @ EPT, December 2004 Process Validation Audit, July 2005 (Boeing) Senior Team Metrics Review March 2005 ; October 2005 February 2006 Process Validation Audit –Select, January 2006 (Orbital) Senior Team Metrics Review July 2006 Process Validation Audit Flow Down, October 06 (Lockheed Martin) Senior Team Metrics Review March 2007 Scheduled April 2007 (QMS Pre-AS 9100) 24

Quality Initiative at Eagle. Picher EP Enterprise Quality Metrics • Metrics Suite Scorecard • Supplier Quality and Delivery • • Problem Reports – Aging • Closure Rate within 60 days • Root Cause Accuracy * • Corrective Action Completeness * • Traveler / Build Paper Audits • Final Data Package Review • Acceptance Test Metrics 25

Quality Initiative at Eagle. Picher GOOD 26

Quality Initiative at Eagle. Picher GOOD 27

Quality Initiative at Eagle. Picher Action Plan established 28

Quality Initiative at Eagle. Picher PR’s sorted by Battery Group GOOD Non-Conformance and Non-Compliance analysis GOOD PR’s sorted by Functional Group 29

Quality Initiative at Eagle. Picher G Adequate RC statement Objective Evidence of Analysis 30

Quality Initiative at Eagle. Picher G CA connected to RC Objective Evidence of Action 31

Quality Initiative at Eagle. Picher GOOD 32

Quality Initiative at Eagle. Picher GOOD 33

Y Supplier Delivery Actions Current Status: • 12 Month Average Rating of 78. 8% Goal: • Improve by 1. 5% per month (Sept to Dec) to achieve 85% SDR by the end of 2006 Close by Date: December 2006 Assigned to: Mike Beck Description: Action to improve on-time deliveries Evidence of Completion: Next Actions: • Metrics indicating Delivery Ratings above the MCL • Communicate to suppliers the importance of being in compliance with SD requirements. • Planners pro-actively contacting suppliers to ensure on-time deliveries. Help Needed / Challenges: • Low order volume with suppliers make it difficult to force changes. • Provide semi-annual Report Card on SDR performance plus Suppliers in Red required to complete C/A. • Bankruptcy emergence is requiring extension of terms. B Closed G Have Plan, It's On Track Y Have Plan, Not On Track R No Plan Established 34

Quality Initiative at Eagle. Picher GOOD 35

Y METRIC DATA Errors in Final Data Package METRIC EVALUATION History: FDP steady improvement; implementation of electronic Assignment and common traveler format. Current Status: Downward trend, need 3 more months below MCL to go green. RESPONSIBILITY Close by Date: 04/01/07 Assigned to: Forrest Reed Description: Errors or incomplete documentation in Final Data Package causes delay in shipping process. Help Needed / Challenges: Accountability of supervisors for complete and accurate data. ACTION PLANS Next Actions: Continue to post Visual Tally Display tracking errors on the floor with Production Supervisors responsible for corrections. Evidence of Completion: Positive trend to < 10% by March ‘ 07 ▼ 36

Quality Initiative at Eagle. Picher SUMMARY - EP Enterprise Quality Metrics • Supplier Quality Management - BCS Critical Suppliers (50 – 60) March ’ 05 – August ‘ 06 • Supplier Quality Rating • Supplier On-time Delivery Increased from 72% to 96% Increased from 74% to 92% • Internal Traveler Audits Weekly review of in-process build paper to ensure all items are complete and accurate. January ’ 05 – August ‘ 06 • Errors per opportunity (6000/mo) Decreased from 12% to 2% 37

Quality Initiative at Eagle. Picher SUMMARY - EP Enterprise Quality Metrics • Lot Acceptance Testing - BCS Complete data on four Business Units January ’ 05 to August ’ 06 • First pass testing • Test failures due to Operator error Remain > 98% Decreased from 6% to 4%. • Final Data Package Contracts, Operations, Quality, Test Lab January ’ 05 to January ‘ 06 • Errors per opportunity Decreased from 50% to 18% Remained steady in 2006 • Problem Report generated to document RC/CA for this situation. • Action plan has been developed and currently implemented. 38

Quality Initiative at Eagle. Picher SUMMARY - EP Enterprise Quality Metrics • Problem Reports (PRs) - BCS Recorded documentation of non-conformance, non-compliance and performance failure. September ’ 05 – August ’ 06 • PR Closure Rate (< 60 days) Increased from <40% to 90% • PR Resolution activity tracked by - Business Unit - Functional Group - Repeat Problem by Type • Total Number of open PRs Reduced by 54%. 39

Quality Initiative at Eagle. Picher SUMMARY - EP Enterprise Quality Metrics Analysis of Root Cause and Corrective Actions* Review of RC/CA’s submitted on PRs (50 – 65%) - BCS January ’ 05 – August ‘ 06 • PRs: Documented true RC Increased from 40% to 92% • Contain Objective Evidence Increased from 19% to 93% • Corrective Action Adequacy Increased from 70% to 91%. 40

Quality Initiative at Eagle. Picher Lessons Learned – MDA Perspective • Need absolute buy in from Supplier. • Constantly take the pulse of the project – It’s easy to take the wrong road. • Keep a grip on the Industry Team members – • Audit follow up is difficult. • Reduced audit activity is difficult. • Be aware that you don’t always know the “Inside Story”. • Don’t ever give up – Prepare for the long haul. • Make sure you follow through with your end of the bargain. • Make sure there is something in it for the Supplier. 41

Quality Initiative at Eagle. Picher Lessons Learned – MDA Perspective • Maintain consistency of the team, but bring in diversity in doses • Too consistent, start drinking your own bath water • Too diverse, keep reinventing the wheel and/or plowing old ground • Don’t sell the metrics short: Potential to be great tools. • In the beginning, focus on CA Plan completion. • It’s an improvement effort ! 42

Quality Initiative at Eagle. Picher Questions & Answers 43