Supply Chain Management

Our Supply Chain Management (SCM) focus is to provide Rockwell Collins with a competitive advantage by working with our supply base to meet and exceed the needs of Rockwell Collins customers.

The intent of our SCM is to challenge suppliers and Rockwell Collins to continuously improve the process of producing the right technology and material at the right time, built to prescribed quality requirements at competitive prices. Practicing the principles of Lean Electronics is one of the most effective methods to achieve this goal.

A key element of the Lean Electronics process is alignment of customer and supplier expectations through eBusiness. By working with suppliers, we can reduce waste, cycle time and inventories while improving the quality of materials and services. We can achieve our goals for superior customer value, sustainable growth and global leadership.

The following outlines the methods SCM developed to evaluate and select suppliers. It describes the way in which we will operate, the criteria for recognition and the award process.

We strongly encourage your efforts in making both your company and Rockwell Collins world-class leaders in the products we produce and the markets we serve.

The Supply Chain Steering Team

Supplier Relationships

The Rockwell Collins SCM structure progressively moves to new procurement practices consistent with long-term relationships with fewer and better performing suppliers.

These practices include supplier evaluation processes used by commodity teams who assess the desirability of a supplier for long-term alliance relationships. This evaluation includes:

1) Past performance

2) Technology learning curve position of both supplier products and manufacturing processes

3) Supplier business practices maturity

4) Supplier business cost structural analysis

5) Supplier environmental impact and responsiveness. The composite assessment of these five criteria positions suppliers on a continuum from undesirable to highly desirable suppliers for Rockwell Collins. Over time, supplier selection practices will move the business to those suppliers in the desirable category.

Our relationships with highly desirable suppliers will include sharing future business plans, joint development of technology roadmaps and enhanced two-way communication between our commodity teams and the supplier organization. As the relationship matures, we expect the supplier to become a "virtual" member of our commodity team and Rockwell Collins to become one of their best customers.

Supplier Assessment Levels

The Rockwell Collins SCM has two supplier alliance assessment levels.

Preferred

This alliance level is the designation for those approved suppliers who have a mutual relationship with Rockwell Collins and meet expected levels of excellence in technology, quality, delivery, manufacturing processes, responsiveness, cost ownership, financial stability and environmental responsibility. These attributes are described in the Preferred Suppliers section of this booklet. This status is conferred by the cognizant commodity team or, if a commodity team is not applicable, by the cognizant buyer/subcontract administrator.

Approved

This alliance level is the designation for those suppliers who have an approved quality system and are capable of delivering a needed product. This status is conferred on suppliers by the cognizant commodity team or, if a commodity team is not applicable, by the cognizant Supply Chain Quality Assurance representative.

Preferred Supplier Performance Expectations

Our continued joint challenge is to provide materials of the highest quality and lowest cost with timely delivery, responsiveness and technology breakthroughs. This culture has several objective performance expectations from our preferred suppliers.

Mutual Working Relationship Strategies

• Long-term mutual commitments
• Business process alignment
• Financial stability (advanced and confidential communications on events affecting business assets)
• Succession plan to assure uninterrupted supply
• Consistent worldwide goals and roadmap
• Aggressive performance expectations
• Continuous process improvements and measures
• Effective two-way communication and feedback
• eBusiness culture
• Ethical business practices
• Active supplier management program
• Forecast sharing
• Win/win results

Technology Expectations

• New technology
  • Provide leading-edge technology
  • Timely new product introduction
• Mutual engineering
  • Mutual engineering and technological teamwork
  • Early design and application assistance
• Strong commitments to R&D
• Joint development of technology roadmaps with commodity teams

Quality Expectations

• Process control
  • Meet or exceed customer specification requirements
  • Continuous improvements via statistical process control (SPC) and
    lean  principles
  • Outgoing quality verification (supplier ownership)
• Demonstrated product reliability (by test/when requested)
• Documentation
  • Advance notice of major process and product change
• Responsive to alerts and corrective action requests
• Goals = 100% quality

Responsiveness Expectations

• Responsive to changing needs
• Initiate communication on potential problems
• Timely response and resolution to inquiries
• Support of sole-sourced parts
• Effective worldwide factory and field support for all entities
• Long-term product support
• Flexibility to changes

Delivery Expectations

• On-time delivery, that is, the contracted on-dock date as written in the purchase order or change order
  • Delivery window:  three days early and zero days late (+3/-0). For example:  if the due date is August 15, then on-time delivery would be considered between August 12 and August 15.
  • Goal = 100% on-time delivery
• Inventory Management Support
• Lead time
  • Stable lead time/decreasing over time
  • Progressively shorter manufacturing cycle times
  • Progressively shorter order processing times
  • Assurance of material in market upturns
  • Goals = <8 weeks, working down to 2 to 4 weeks
• Packaging
  • Goal = dedication to cost and landfill reduction via reducing, reusing, and/or recycling
• Use of specified methods for Rockwell Collins inbound shipments
  • Instructions can be found at our Supplier Portal, http://www.supplycollins.com

Cost of Ownership/Price Expectations

• Worldwide price leadership
• Cost reductions
  • Continuous price reductions through process improvements
  • Two-way feedback on opportunities for improvement
  • Leadership toward standard parts and processes

Environmentally Responsible

• Full compliance with environmental laws and regulations
• Operate all facilities in an environmentally responsible and sensitive manner
• Respond to community concerns about all operations
• Make environmental responsiveness and resource conservation an integral part of business management
• Attain ISO 14001 certification where appropriate

Lean Supply

We expect our suppliers to practice lean and eBusiness initiatives in their business and manufacturing processes

Lean Supply Initiative

The Lean Supply Initiative is an element of the Rockwell Collins Enterprise-wide Lean Electronics Initiative. Lean Electronics^SM principles are based on ideas from Time-Based Competition, the Lean Aerospace Initiative, the Toyota Production System and others. Lean Electronics is key to achieving our long-range business plans, while Lean Supply is a key in achieving year-over-year performance and relationship improvements with our suppliers.

Lean Electronics pulls together Agility, Lean and Time Based Competition under one initiative. It focuses on reducing lead-time, reducing assets and improving flexibility and customer responsiveness by eliminating waste. This focus helps simplify processes and improve productivity. It must be stressed that productivity improvements will not be made by making people work harder, but through elimination of non-value-added activities. Value-added activities are those which customers, like Rockwell Collins, would be happy and willing to pay for when made aware of the benefits.

The principles for which Lean Supply are based are from the Lean Electronics Initiative. Value Stream Mapping (VSM), Radical Process Improvement (RPI) and 5S are the workhorse processes within Lean Electronics. Their goal is to radically improve business and production processes thus creating a more efficient and productive foundation for the enterprise.

These tools, when utilized by our key suppliers, will result in total cost and cycle time reductions, which are critical for us both going forward in the new economy and achieving our Supply Chain Management Vision.

Program Measurements and Feedback

The Rockwell Collins supplier measurement and feedback system is key element of our supply chain management process. We believe our supplier relationships will continue to improve via a collaborative goal setting and measurement process. Supplier performance is available to our suppliers via a secured web-based application with monthly data updates. Currently, delivery and quality performance metrics are available with additional metrics to be added in the near future. For more information, please contact your Rockwell Collins commodity team.

Awards and Recognition

Each year, Rockwell Collins recognizes our 100 Top Preferred Suppliers at the Annual Supplier Conference. Supplier performance is the basis for supplier invitation and recognition. It is realized that our supply chain is the key to fulfilling our customers needs and is vital to our future in a competitive marketplace. In acknowledgement of our 100 Top Preferred Suppliers' significant contributions, Rockwell Collins has established a process of recognition and awards.

The capstone of our recognition program is the President's Award. Chosen from a field of suppliers who are already among our top 100, the President's Award recognizes one supplier who meets the criteria most completely. (For awards and recognition criteria, refer to the Preferred Supplier Performance Expectations section of this booklet.)

Future Growth

Growth at Rockwell Collins is expected through the expansion of our core businesses as well as through acquisitions that complement these core businesses. Kaiser Aerospace and Electronics is the most recent acquisition. Through this acquisition, Rockwell Collins has strengthened its portfolio in Head-up Guidance Systems, Display Systems, Electromechanical Systems, and Optronics, making us a leading supplier of electronic and optical display system solutions to the defense and aerospace industry. Principal products in these lines include cockpit display systems for U.S. and international military aircraft, such as Head-down Display (HDD), Head-up display (HUD), and Helmet Mounted Display (HMD) systems.

Summary

The fundamental Rockwell Collins belief is that our mutual survival depends upon our ability to continuously reinvent the way we do business, creating value for our customers.

We expect all of our suppliers to work with us as team members and to develop a culture focused on achieving these strategies and expectations.

Our customers not only expect the best, they expect more.

The Rockwell Collins Credo

We believe maximizing the satisfaction of our customers is our most important concern as a means of warranting their continued loyalty.

We believe in providing superior value to customers through high-quality, technologically-advanced, fairly-priced products and customer service, designed to meet customer needs better than all alternatives. We believe Rockwell Collins people are our most important assets, making the critical difference in how well Rockwell Collins performs; and, through their work and effort, separating Rockwell Collins from all competitors.

We believe we have an obligation for the well-being of the communities in which we live and work.

We believe excellence is the standard for all we do, achieved by encouraging and nourishing:

• Respect for the individual.
• Honest, open communication.
• Individual development and satisfaction.
• A sense of ownership and responsibility for Rockwell Collins' success.
• Participation, cooperation, and teamwork.
• Creativity, innovation and initiative.
• Prudent risk taking.
• Recognition and rewards for achievement.

We believe success is realized by:

• Achieving leadership in the markets we serve;
• Focusing our resources and energy on global markets where our technology, knowledge, capabilities and understanding; of customers combine to provide the opportunity for leadership;
• Maintaining the highest standards of ethics and integrity in every action we take, in everything we do;
• We believe the ultimate measure of our success is the ability to provide a superior value to our shareholders, balancing near-term and long-term objectives to achieve both a competitive return on investment and a consistent increase in market value.