Thales and SC21IAQG/SC21General Assembly Meeting, 22 October, York

2This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

Thales serves three markets

DEFENCE (50%)

Air ● Land ● Naval ● Joint

AEROSPACE & SPACE (25%) SECURITY (25%)

Thales around the world

68,000 employees

in 50 countries

Serving the defence, aerospace and

security markets

More than £11bn revenue

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Thales UK participates in all three market segments

In top five leading suppliers to UK MoD

4,000 engineers & technicians

90% qualified to degree level or above

Invested more than £3bn in UK over last 10 years

90% of sales to the MoD are UK sourced

2009 sales: £1.5bn

Backlog of orders circa £4bn

60% turnover from defence: 40% from civil

2008 was 120th anniversary of Thales in the UK

Thales UK

4This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

Thales UK

5This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

SC21 Activities

One of the 19 founder signatories in 2006

Actively involved in the original design of the SC21 tools and techniques

Hold seats on both SC21 steering committees (ADS/Scotland)

Thales led Tranche I implementations, 7 suppliers Active Electronics, ACW, Aeroflex, Astute, Kenard, Paramount Precision, Paramount

Panels Four awards secured to date; ACW – Silver, Astute Electronics – Bronze; Active

Electronics – Bronze; Paramount Precision - Bronze

Seven further Thales led Tranche II companies being taken through programme, all have published CSIPs Chess Dynamics, ITT ICS UK, Di-Spark; Labtech Microwave, Merlin Flexible Circuits,

New Chapel Electronics, Ilford Engineering

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SC21 Activities

Regional cluster approach in conjunction with RDA’s adopted as Thales preferred approach to widen deployment throughout Thales UK supplier base

Thales led Tranche III South West Cluster, 4 suppliers Westminster Engineering, NFF Precision Ltd, J+S Ltd, AB Precision (Poole), All companies working towards publishing CSIP

Thales led Tranche IV South East Cluster launched 4th October, 7 suppliers

Thales Optronics actively involved in Scottish SC21 programme

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SC21 Activities

Six SC21 awareness seminars/workshops held throughout Thales UK businesses

Workshop feedback used to help re-design Thales UK supplier management/performance processes

These processes reflect SC21 principles, and contain all SC21 tools and techniques

Redesigned processes being embedded throughout Thales UK

Whilst SC21 engagement will not be mandatory for our suppliers, it will be seen as a ‘virtue’!

8This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

Purchasing Strategy – Supplier Base

0

200

400

600

800

1000

1200

0 500 1000 1500 2000 2500 3000 3500 4000No of Suppliers

M E

uro

Cumulative MEuro

833 M Euro187 (5%) Suppliers

80%

989 M Euro733 (20%) Suppliers

95%1039 M Euro3593 (100%) Suppliers

100%

9This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

Purchasing Strategy – Supplier Base

A - Class Suppliers (80%)

0

20

40

60

80

100

120

140

160

180

200

2009 2010 2011 2012 2013 2014

10This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

Purchasing Strategy – Supplier Base

B - Class Suppliers (95%)

0

100

200

300

400

500

600

2009 2010 2011 2012 2013 2014

11This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

Purchasing Strategy – Supplier Base

C - Class Suppliers (last 5%)

0

500

1000

1500

2000

2500

3000

3500

2009 2010 2011 2012 2013 2014

12This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

Purchasing Strategy – Supplier Base

Total Suppliers

0

500

1000

1500

2000

2500

3000

3500

4000

2009 2010 2011 2012 2013 2014

13This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

Purchasing Strategy – Supplier Performance

On Time In Full (OTIF)

70%

75%

80%

85%

90%

95%

100%

2009 2010 2011 2012 2013 2014

14This document is property of Thales Group and may not be copied or communicated without the written consent of Thales

Purchasing Strategy – Supplier Performance

Right First Time

80%

85%

90%

95%

100%

2009 2010 2011 2012 2013 2014

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Purchasing Strategy and SC21Strong need to rationalise and consolidate; Target – reduce by 60% by

2014 3,593 suppliers; ‘exaggerated’ Pareto, 5% of spend with 95% of supplier count

Only 11% of suppliers used by more than one business

Strategy is to outsource at a higher level Sub-assembly/assembly level, to focus on core systems integrator capability

Tier/‘C’ Class service solutions

Performance improvement critical UK average OTIF 82% - target >95%

UK average supplier quality 92% - target >99%

SC21 engagement will play a key role: selectable 40% Competitive (typically lean, customer focused, adaptive)

Demonstrable, sustainable high performance