Innovation Challenges in Finmeccanica’s Supply Chain

11

Innovation Challenges in Finmeccanica’s Supply Chain

Giovanni BertoloneExecutive Vice President OperationsFinmeccanica

Montreal, December 6th 2011

22

Agenda

Finmeccanica Overview

Technology & Supply Chain Innovation

Finmeccanica presence in Canada

Conclusions and Way ahead

33

FINMECCANICA : SEVEN SECTORS, ONE GROUP

HELICOPTERS

AgustaWestland Alenia AeronauticaAlenia AermacchiATR

DEFENCE SYSTEMS

Oto MelaraWASSMBDA

TRASPORTATION

AnsaldoBredaAnsaldo STSBredaMenarinibus

DEFENCE AND SECURITY ELECTRONICS

DRS TechnologiesSELEX ElsagSELEX GalileoSELEX Sistemi Integrati

SPACE

Telespazio Thales Alenia Space

ENERGY

Ansaldo Energia

AERONAUTICS

100% Finmeccanica Companies

JVs

44

19%

38%15%

5%

6%

7%10%

26%

30%11%

8%

5%

6%

14%HELICOPTERS


AERONAUTICS

SPACE

DEFENCE SYSTEMS

ENERGY

TRASPORTATION

REVENUES 2010

18.7 B€+2.9%

ORDERS 2010

22.5 B€+6.4%

In 2010, the three strategic pillars (Helicopters, Defence and Security Electronics and Aeronautics) generated

around 70% of Revenues and Orders

In 2010, the three strategic pillars (Helicopters, Defence and Security Electronics and Aeronautics) generated

around 70% of Revenues and Orders

2010 RESULTS

REVENUES 2010REVENUES 2010 ORDERS 2010ORDERS 2010

55

2010

2B€ = 11% revenues

2010

2B€ = 11% revenues

2010More than 20.000 people involved in R&D/Design &

Development on Total FNM Resources more than 70.000

2010More than 20.000 people involved in R&D/Design &

Development on Total FNM Resources more than 70.000

INNOVATION AND R&D IN FINMECCANICA IN NUMBERS

R&D expendituresR&D expenditures ResourcesResources

66

Agenda





77

Strengthening Global Positioning

Strengthening Global Positioning

InternazionalizationInternazionalization

Value Creation – Customer SatisfactionValue Creation – Customer Satisfaction

Competitiveness

Profitability

Competitiveness

Profitability

InvestmentsInvestments InnovationInnovation

Technologies

Processes

Integration/Synergies

Extracting value from businessMarkets

Products

Acquisitions

JV

FINMECCANICA STRATEGIC FRAMEWORK

88

Aerospace and Defence industry is an increasingly complex network of relationships, due to the shift from vertical programs to highly distributed, multinational and multi-stage operations

A large number of players are involved in an integrated and worldwide value chain, ranking from commodities suppliers (“Transactional Suppliers”) to strategic suppliers (“Fully Integrated Strategic Partner”)

OEMs in this environment have to drive and manage all the complex links and risks, running along their supply chain

GLOBAL SOURCING FOOTPRINT

99

Technologies & Processes Innovation

Technologies & Processes Innovation

What is Market asking for ?

Solutions to operational needs not only products

Greater flexibility to incorporate emerging technologies over the system’s life

Faster time to market

Risk resilience and cost-effective outcomes

Sustainability approach (development of “green” policies)

Full effective Life-Cycle Management

Value Chain Global Integration

THE DEMAND

Supply Chain OptimizationSupply Chain Optimization

1010

Phase 1:Knowledge Management

Phase 2: Technology Governance

Phase 3: Innovation Governance

2002 2004 2005Phase 4: R&D&I

Networking Governance

2008

...from Knowledge Management to a “Strategic R&T Networking”....from Knowledge Management to a “Strategic R&T Networking”.

European projects

CoordinationEuropean projects

Coordination

IPRIPR

Competitiveness Plan

Competitiveness Plan

MindSh@reMindSh@re

Start of Technology Governance

Start of Technology Governance

Innovation and R&D Strategy PlanInnovation and R&D Strategy Plan

2011

CTO BoardCTO Board

2003

FINMECCANICA GROUP: MAIN PHASES OF INNOVATION

1111

Clear Leader

Strong

Tenable

Weak

Favourable

Pacing BaseEmerging Key

Core & Common

Technology Platform

Outsourcing opportunities

Core distinctive OPCos Technologies

Innovation Breakthrough by

Internal development and

External collaboration

TECHNOLOGY DEVELOPMENT MAPPING

1212

Cost reduction and risk sharing lead to a shift from simple outsourcing towards

partnerships and collaborative models among the supply chain players (Prime,

OEMs, Suppliers, Sub-Suppliers, Logistic Operators, Support and Services Providers,

Customers)

Cost reduction and risk sharing lead to a shift from simple outsourcing towards

partnerships and collaborative models among the supply chain players (Prime,

OEMs, Suppliers, Sub-Suppliers, Logistic Operators, Support and Services Providers,

Customers)

Technology Network

New Business Models

Key Performance Indicators

Operational Optimization

Further KPI development for monitoring and to control suppliers’

performances, leading to enhance the responsiveness of each Supply Chain

player.

Further KPI development for monitoring and to control suppliers’

performances, leading to enhance the responsiveness of each Supply Chain

player.

Capability to optimize the inventory management minimizing relevant costs

along the whole lifecycle

Capability to optimize the inventory management minimizing relevant costs

along the whole lifecycle

The need to implement new processes, methodologies and tools is due to the

large number of relationships and the complexity of our products

The need to implement new processes, methodologies and tools is due to the

large number of relationships and the complexity of our products

FOCUS ON INDUSTRIAL COMPETITIVENESS

CHALLENGES AND NEEDS IN THE SUPPLY CHAIN DOMAIN

1313

ManufacturingManufacturing

DeliveryDelivery

Support /ServicesSupport /Services

Pro

gra

m M

anag

eme

nt

Pro

gra

m M

anag

eme

nt

Pro

cess

Qu

alit

yP

roce

ss Q

ual

ity

Industrial CompetitivenessIndustrial Competitiveness

EngineeringEngineering

Customer SatisfactionCustomer Satisfaction

Extended Enterprise

Supplier Performance Management

Global Sourcing

Procurement efficiency

Make or Buy (outsourcing vs insourcing)

Information visibility / Communication

Platform

Responsibility & Risk sharing

SUPPLY CHAIN MANAGEMENT: LEVERAGE FOR COMPETITIVENESS

Supply ChainSupply Chain

1414

Supplier ManagementSupplier Management

Improvement Initiatives in Supply Chain

Global SourcingGlobal Sourcing

Procurement efficiencyProcurement efficiency

Outsourcing &Processes improvementOutsourcing &Processes improvement

Economic Impact

BENEFITS ON GROSS MARGINBENEFITS ON GROSS MARGIN

Total ProjectsSupply Chain Projects

Savings from Supply Chain Projects represent more than 50% of total

savings

CLUSTER OF INITIATIVESCLUSTER OF INITIATIVES

SUPPLY CHAIN TARGETS ACHIEVEMENT

1515

INTEGRATIONLow High

VO

LU

ME

S I

N G

LO

BA

L S

OU

RIC

ING

HIg

hL

ow

2008

OFF-SHORE SOURCING IN

LCC

2009

OFF-SHORE ACTIVITIES

REINFORCEMENT

FNM EU/USA BEST PRACTICE

INTEGRATION

2010

2011

INDUSTRIAL COMPETITIVENESS

TASK FORCE

2012

FOSTERING GLOBAL

SOURCING

•FOCUS ON GEOGRAPHIC SCOPE WIDENING (USA AND CANADA)

2013

GROWTH OF VOLUMES

ADDRESSED TO GLOBAL

SOURCING

•OUTSOURCING PLANS IN LCC & BEST VALUE COUNTRIES

2007

LAUNCH OF GLOBAL SOURCING PROGRAM IN LOW COST COUNTRIES

(LCC)

Finmeccanica is committed to collaborate with supply sources worldwide, according to the Best Value principle

FINMECCANICA GLOBAL SOURCING ROADMAP

1616

“We promote cooperation and efficiency in the supply chain, ……. environmental sustainability and social responsibility become significant elements in negotiations with

our suppliers”

“We promote cooperation and efficiency in the supply chain, ……. environmental sustainability and social responsibility become significant elements in negotiations with

our suppliers”

31 December 2010

(Finmeccanica Sustainability Report 2010)

(€ millions)

GOODS AND SERVICES PURCHASED BY FNM GROUP IN 2010

IN 2010 PROCUREMENT COSTS ACCOUNTED FOR 65% OF TOTAL REVENUES

1717

Agenda





1818

Testo fintoArmy

Navy

Mili

tary

Mili

tary

Air Force

LINAPS artillery pointing systemHowitzers 105/14

76/62 SR naval guns class Tribal Fregates DRS Canada activities

CSH program (Canadian Search & Rescue Helicopter): 15 AW101 SAR Cormorant

Civi

lCi

vil

Commercial53 AW139,3 AW 119 Koala for Skyline Helicopters3 AW119 for London Air service (Vancouver)

FNM Acquired ContractsEnd User

392 people in Canada

3 DRS Technologies facilities Carleton Place, Ontario – Circuit Card Assembly

Kanata, Ontario – Secure Voice System for tactical comms, the

SIRIUS passive LR- IRST system, EW training systems, Simulators

Bedford, Nova Scotia – Power Conversion, Inverters, Converters

Alenia Aermacchi Representative Office, Ottawa

AgustaWestland Representative Office, Ottawa

392 people in Canada

3 DRS Technologies facilities Carleton Place, Ontario – Circuit Card Assembly

Kanata, Ontario – Secure Voice System for tactical comms, the

SIRIUS passive LR- IRST system, EW training systems, Simulators

Bedford, Nova Scotia – Power Conversion, Inverters, Converters

Alenia Aermacchi Representative Office, Ottawa

AgustaWestland Representative Office, Ottawa

FINMECCANICA PRESENCE IN CANADA

1919

Long and successful history of Economic and Industrial Cooperation in Canada, in different sectors:Long and successful history of Economic and Industrial Cooperation in Canada, in different sectors:

FINMECCANICA FOOTPRINT AND PERSPECTIVE IN CANADA

AERONAUTICSPratt & Whitney Canada for ATR 42-72 aircraft (3.5 B$ since 1982)

Bombardier on C-series commercial aircraft for tail plans

CAE for developing the simulator for the M346 Initial Training Capability

HELICOPTERSP&W for AgustaWestland helicopter engines. PW210 engine selected for the AW169.

AgustaWestland and CAE: ROTORSIM consortium for the development of flight simulation for helicopters training


Acquisition of DRS Canada, as part of DRS C3 and Aviation Group (average revenues 80 M$/year)

CMC Electronics for the provisioning of avionics radios (SELEX Elsag)

SPACEPartnership with MDA (MacDonald Dettwiler & Associates) and the Canadian Space Agency for

various programs (Earth Observation and Space exploration).

Partnership with NOVATEL and CMC Electronics on GALILEO. Cooperation with NAV Canada for the GNSS (Global Navigation Satellite System) program

TRASPORTATION

Strategic Industrial Agreement between Bombardier and Ansaldo Breda for the supply of high-speed trains to the Italian railways and other export markets (excluding Canada)

2020

(**): AW orders placed from 2005 up to date. Source: Finmeccanica Estimate

FNM PROCUREMENT&OPPORTUNITIES FOR CANADIAN INDUSTRY (> 16 B$)

(*): ATR orders placed from 1982 up to date.

3,5 B$

0,5B$

6,5 B$

2 B$

NEW REGIONAL TURBOPROP

NEW AW169 DEVELOPMENT

2,8 B$

= Potential IRB benefit to Canada in case of FWSAR win

= Forecasted orders

= Placed orders

> 12 B$

0,15B$ 0,15 B$

4,2 B$

ATR vs P&W (*)

AW vs P&W (**)

Others(DRS Canada, CAE,

etc…)

TODAY

total

1982 2005 2009

FUTURE OPPORTUNITIES

2121

Besides engines, most of procurements in the A&D sector concerns Electric & Electronic Components

More than 60 Canadian Vendors are actually included in FNM Suppliers Database

Pratt&Whitney Canada has been awarded “Finmeccanica Best Supplier 2010”.

The current vendor list can be further increased with a number of high technologies Canadian partners, supporting Finmeccanica in the major strategic opportunities in the Country:

Aeronautics (Fixed Wing Search & Rescue Program) Helicopters (Canadian Search and Rescue Helicopter fleet upgrading) Electronic Defence (Integrated Soldier Systems Program - ISSP) Air Traffic Management (Air Surveillance Radar - ASR)

Besides engines, most of procurements in the A&D sector concerns Electric & Electronic Components

More than 60 Canadian Vendors are actually included in FNM Suppliers Database

Pratt&Whitney Canada has been awarded “Finmeccanica Best Supplier 2010”.

The current vendor list can be further increased with a number of high technologies Canadian partners, supporting Finmeccanica in the major strategic opportunities in the Country:

Aeronautics (Fixed Wing Search & Rescue Program) Helicopters (Canadian Search and Rescue Helicopter fleet upgrading) Electronic Defence (Integrated Soldier Systems Program - ISSP) Air Traffic Management (Air Surveillance Radar - ASR)

CANADIAN SUPPLY CHAIN

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2323

Canada represents one of the high value markets where Finmeccanica intends to promote a coordinated strategy among the Group Operating Companies and to sponsor partnership/collaboration with local industry, Universities and Research Centers

In the last decades, Finmeccanica has established a strong consolidated economic relationships with major Canadian industries.

In order to increase Finmeccanica presence and recognition in the Country, we will continue to explore the relationship with Canadian suppliers, becoming part of a Global Innovative Network.

High technology Districts, as Aéro Montréal, represent a fundamental support for Finmeccanica to enhance the Supply Chain policy in Canada

References for contacts

Finmeccanica Group ServicesAngelo Cecchini – Head of Sourcing [email protected]

CONCLUSIONS AND WAY AHEAD

Documents

Innovation Challenges in Finmeccanica’s Supply Chain