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AMT's Global Forecasting & Marketing Conference Miami, October 20, 2010 Gene Cuenot Vestas Nacelles Supply Chain Management – The Americas Importance of Location The overall sourcing and manufacturing strategy: In the region for the region. 2 AMT's Global Forecasting & Marketing Conference Importance of Location Location of Suppliers and Competitors Supplier Information Existing Suppliers Modeled Location Foundry Machining Gears Generators 3 AMT's Global Forecasting & Marketing Conference Turbine Manufacturers GE Gamesa Suzlon Siemens Mitsubishi State Ranking for Potential Suppliers Top Quartile 2nd Quartile Chicago Nacelles - Overview Chicago Location Centrally located Available talent Response time to market Closeness to supply base 4 AMT's Global Forecasting & Marketing Conference Establishing Nacelles’ Supply Chain Category Sourcing Lean, Six Sigma, APQP, PPAP and ISO certifications desired Established sourcing milestones and detailed timelines Experienced staff selected from auto and off-highway industries 5 AMT's Global Forecasting & Marketing Conference Baseline • • • • • • • • • Historic Industry growth Economic Down-turn Critical components sourcing Commodities level sourcing Credit Conditions – tight but monies are available Demand for High Quality and Delivery Competition will be fierce N. America Sourcing but for global suppliers Industry driven ISO9000-like baseline work practices 6 AMT's Global Forecasting & Marketing Conference Nacelles - Overview Supply opportunities • • • • • • • • • • • • 7 Bearings Hydraulics, pumps Lubrications systems Plastics Wires and Cables Transformers Castings Weldings Fasteners Machined components Sheet metal work Lifts AMT's Global Forecasting & Marketing Conference V82/2MW V90/3MW The Sourcing Experience 8 AMT's Global Forecasting & Marketing Conference North America Suppliers Strengths Improvements Ability & Flexibility to Invest Grow knowledge of wind industry Transferrable skills Drive continuous improvements in quality & delivery Quality systems Knowledge in APQP and PPAP State and Government support 9 AMT's Global Forecasting & Marketing Conference Achieve one-piece flow Appropriate investment planning Emphasis on Safety and Quality Our Number 1 Priority Safety and Quality Industry specific standard to achieve quality fundamentals Wind suppliers MUST master basic quality management tools High quality = satisfied customer 10 AMT's Global Forecasting & Marketing Conference Importance of Quality One “small” supplier defect = Rework up tower Rework up tower = • Down Turbine • Crane Cost • Technician Cost • Shipping Cost Down Turbine = • Loss of Production • Loss of customer satisfaction Loss of Production = Lower business case certainty Raises perception of high risk investment High Risk Investment = Lower investments made Lower investment = No growth for any OEM and fewer jobs. 11 AMT's Global Forecasting & Marketing Conference Current Supplier Quality Performance Typical Industry Root Causes: • Product received does not meet form, fit & function requirements • Un-validated product/process changes • Critical Process not in statistical Control • Poor inspection and test coverage 12 AMT's Global Forecasting & Marketing Conference Market and Customer Expectations Suppliers must drive to improve the basics of Quality Management. • Implement Culture of Quality: OWN your product quality • Improve controls and test coverage • Improve responsiveness & take ownership of problem resolution 13 AMT's Global Forecasting & Marketing Conference The Supply Impact 14 AMT's Global Forecasting & Marketing Conference Industry Impact on Suppliers Extreme growth – • Fastest growing of the renewables sectors for quality suppliers • Renewables industry expansion drives need for uniform supply standard. • Industry growth driving: - manufacturing, installations and employment - supplier process optimization • Need for continuous improvement 15 AMT's Global Forecasting & Marketing Conference Industry Expectations of Suppliers • Innovativeness • Increased co-operation • Increased reliability • Multiple sourcing • Partnering and long term agreements • Production readiness 16 AMT's Global Forecasting & Marketing Conference Expected Tools • APQP – advance product quality planning • PPAP – production part approval process • FFF – form, fit and function • CTQ – critical to quality • Record retention 17 AMT's Global Forecasting & Marketing Conference Industry Outlook 18 AMT's Global Forecasting & Marketing Conference The following slides have been removed from Gene Cuenot’s presentation – contact emerging energy research to learn how to obtain this information http://www.emerging-energy.com/ North America Wind Energy Market Forecast: 2010–2025 US Wind Cumulative Capacity GW by Region: Base-Case Scenario US Regional Growth: Base-Case North American GW Added by Country: Base-Case Copyright Notice The documents are created by Vestas Wind Systems A/S and contain copyrighted material, trademarks, and other proprietary information. All rights reserved. No part of the documents may be reproduced or copied in any form or by any means—such as graphic, electronic, or mechanical, including photocopying, taping, or information storage and retrieval systems without the prior written permission of Vestas Wind Systems A/S. The use of these documents by you, or anyone else authorized by you, is prohibited unless specifically permitted by Vestas Wind Systems A/S. You may not alter or remove any trademark, copyright or other notice from the documents. The documents are provided “as is” and Vestas Wind Systems A/S shall not have any responsibility or liability whatsoever for the results of use of the documents by you. Vestas wishes to acknowledge and respect all copyrights in connection with the illustrations used in this presentation. In case we have unintentionally violated copyrighted material, we want to be informed immediately in order to straighten things out and thus to honour any obligatory fees.