McLaughlin Body Company

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McLaughlin Body Company

• John Deere
• February 21, 2005

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Company History
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McLaughlin Body Company Corporate Office
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East Moline Operations 1400 5th Street (250,000
square feet / 23,225 square meters)
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Rock Island Operations 350-44th Street (450,000
sq. ft. / 32,516 sq. meters)
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Most Valuable Resource

• Dedicated employees at McLaughlin Body Co.
• 235 Hourly
• 83 Salaried
• Renewed relationship with U.A.W 1414
• Newly signed 6 year contract
• Lessons learned on both sides from a 4 week work
  stoppage

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Our Vision

• Committed to being the premier supplier of cabs
  and attachments by providing products and
  services of the highest quality and value to our
  customers.

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Our Mission / Value Statement

• Our Mission
• Our mission is to be the Quality,
  Service, Technology and Value leader in our
  industry. The focus on leading in all these areas
  will allow McLaughlin to exceed our customers
  expectations and mutually prosper.

• Our Values
• The integration of our people and processes to
  provide products of high value and high
  quality.The continual support of our community
  by providing valued jobs and participating in
  charitable activities.Continuous improvement
  through employee development, training and
  education.

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Competencies

• McLaughlin Body Company is a supplier of cabs,
  bodies and attachments to the ag, construction,
  industrial, military, mining, municipal and truck
  markets
• Expertise in
• Design and development
• Program management
• Prototyping
• ROPS certification
• Fabrication
• Weld
• Paint
• Assembly
• Delivery JIT to line set

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Fabrication Capabilities

• 5 OD capacity CNC controlled roll bender for
  complex sweeps

• Various lasers including a Mazak FMS (Flexible
  Manufacturing System) featuring (2) 4000 watt
  lasers
• 2500 watt Mazak multi-axis laser with sheet
  loader

• CNC controlled press brakes nearly eliminate setup

• Straight side and double action draw presses to
  1000 tons bed sizes up to 144 X 90 and 56
  shut height

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Robotic Welding

• 13 Existing robotic weld stations
• ABB
• Panasonic
• Fanuc

• 9 integrated weld positioners
• 3 flexible cells
• Continued dedication to expansion of automation

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Paint Capabilities

• Current dual paint systems handle parts of any
  size
• Current E-coat Cab line
• 8 stage zinc phosphate pretreatment with
  non-chrome seal
• 8th generation low cure cathodic epoxy e-coat
  material
• Minimal shrink / edge pull
• Reduced VOCs and improved performance
• Acrylic top coat
• 6 X 8 X 6 part size
• 2000 capacity
• Large line
• 5 stage iron phosphate pretreatment
• Polyester top coat over thermally cured spray
  primer
• 10 X 10 X 50 part size
• 10,000 capacity
• All new cab line will be operational in April of
  2005

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MBC Customers
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Quality
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Customer Quality Metrics

• Quality Delivery
• Customer A 5.1s 6.0s
• Customer B 6.0s 6.0s
  
• Customer C 4.8s 6.0s
• Customer D 6.0s 6.0s
• Customer E 98
• All Others 99
• (MBC, VOC Report Ratings)

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Supplier of the Year Award

• Deere Company, North American Ag Division, 2004
  Supplier of the Year Award

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Customer Communications Tools

• Customer Quality Status Reports (VOC)
• Internal quality rating system
• Quality Engineers communicate with customers and
  report to the McLaughlin organization on a
  weekly basis.
• NetMeeting or WebEx Capabilities
• Provides the opportunity for the design, process,
  manufacturing and quality engineers plus supply
  management to work as a team on cost reduction,
  corrective and preventive activities from
  multiple remote locations.
• Caterpillar Connect / Deere Supplier
  Collaboration
• Customer specific web based access to specs,
  drawings, quality performance reports and other
  communication information.
• Electronic posting of PPAP documentation

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Materials Testing

• Two local certified laboratories for chemical and
  physical testing of metals.
• Chemical supplier performs periodic system audits
  of cleaning and phosphating processes
• Paint supplier performs monthly analysis of
  E-coat bath.
• In-house testing
• Dry film paint thickness
• Zinc phosphate pre-treatment coating weights
• Specular gloss of topcoat paints
• Cross hatch paint adhesion,
• ASTM B117 salt fog accelerated corrosion
  resistance
• GM9540P cyclic accelerated corrosion resistance
• Ultra phonic leak testing
• Ultra sonic weld evaluation
• Surface hardness of metals (Rb)

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CQTS Completed Checklist
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CQTS Component Pareto Analysis
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Corrective preventive action

• New reports automatically sent via internal
  e-mail to specific employees
• Focus on Direct Root Causal factors, Mistake
  Proofing and other Prevention Activities
• Complete sort capability by date range,
  originator or report status
• Completed reports are electronically transmitted
  to the customer

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Cost Containments
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Pricing Methodology

• A specific formula is applied that both MBC and
  our customer know and understand
• Separate markups for purchased content vs.
  manufactured content
• Departmental overhead rates are applied for press
  room, weld, trim, and paint
• Changes are processed at variable cost only

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Cost Benchmarking Initiatives

• John Deere Steel
• Cat Logistics
• MRO Supplies
• Cost Containment Analysis

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McLaughlin Enterprise

• McLaughlin Body Company Cab Manufacturer
• Bee Line Company Laser Alignment
• McLaughlin Motors Auto Dealership
• SE National Bank Banking
• MBC Financial Leasing

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MBC Working to reduce costs?

• Major investments in equipment
• Info Systems Initiatives
• Continuous improvement initiatives
• Monthly cost reduction meetings
• Consolidation efforts

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Operations Consolidation

• Rock Island facility has been selected as the
  primary manufacturing facility
• Operations centered around world-class paint
  system
• Integration of all weld, paint and assembly
  operations
• Streamlined material flow between processes
• Integrated fabrication of components
• Operational in 4-6 months

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New system capabilities

• System will be isolated in separate, pressurized
  building
• Provide superior pretreatment
• 15 Stage immersion pretreatment with Zinc
  Phosphate
• Alkaline / Acid / Alkaline w/reverse polarity
  cleaning stages for best in class laser oxide and
  weld smut removal
• Include powder coat in addition to e-coat and wet
  spray top coat capabilities
• 8th Generation improved performance e-coat
• Low-E powder for reduced VOC emissions and reduce
  energy consumption

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Consolidation Goals

• Increased competitiveness
• Reduce waste associated with non-value added
  activities
• Reduce overhead by establishing multi-functional
  focus teams
• Accelerate throughput and reduced inventories
• Improve quality through streamlined processes and
  direct communication between functional groups

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Consolidation Goals

• Improved communication
• Integration of product support personnel
• Electronic data collection and online access to
  process instructions and drawings
• Open layout without departmental barriers
• Committed team focused with clear mission for the
  future

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Consolidation Goals

• Establish positive image within QCIC complex
• Segregation and distinction of MBC
• Exterior revitalization
• New visitor center and product showroom
• Clean and comfortable work areas for all
  employees
• Renewed emphasis on housekeeping

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What are the results?

• Material burden reduced 20
• Paint costs reduced 5
• Laser costs reduced 17
• Improved quality and capabilities
• Freight costs reduced 19

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Representative Price History 1
45
35
25
15
5
Base Price
5
15
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Representative Price History 2
12.5
7.5
2.5
Base Price
2.5
7.5
12.5
17.5
22.55
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Inventory Controls

• Forecasting
• Customer forecast and order requirements
• Delivery PPM scores
• In the past 12 months, of the 8092 trimmed and
  sequenced cabs produced, 100 were delivered on
  time
• Sequencing of delivered cabs to machine line set
• Releases for fully trimmed cabs with a wide
  variety of options are received into the planning
  system via EDI
• Electronic configuration of models and options
  (EDI data / web portal)
• Unique BOMs generated for each cab serial number
• Build card system for assembly instructions

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Order Process Trimmed Cab
Order Received EDI
MBC Create Work Order with Sequence
Build Ticket
Software and Test Download
Daily Shipments to Customer

• Sequence
• Options Required
• 30 Day Ship Notice
• 7 Day Firm Notice

• Details Optional Equipment

• Creates Sub-Assy Reports
• Reviews Inventory Requirements

• Software Downloaded
• Test Requirements
• Sub-Assembly Test Documented

• Daily Shipments by Customer Assy Sequence
• Invoiced

• Software Program Review Available Options for
  Acceptance

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Supplier Communication

• Supplier Forecasting Requirements
• Quarterly forecasting meeting with suppliers to
  review our estimated requirements for the next
  six months
• Expedited Freight From MBC suppliers
• Unscheduled customer volume increases
• Customer controller supplier late shipments
• Customer expedites cab shipments
• Supplier Quality Rating
• Reviewed with supplier on quarterly basis

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Development
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Engineering Support

• Current group consists of 5 Manufacturing
  Engineers, 4 Industrial Engineers, 4 Quality
  Engineers, 3 Design Engineers, 2 Tooling
  Engineers and 1 Weld Engineer
• This group can manage any product introduction
  from a complete design from the ground up to a
  straight forward transfer
• Average Quotation Lead Time
• 1 week turn on Engineering Changes
• 3 to 4 weeks Cab

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Product Development Process

• Provide acceptable quotation
• Establish target price

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Engineering Support

• Project Management
• Projects are tracked through production start up
  with detailed Gantt chart
• Responsibilities defined and communicated
• Key milestone reviews scheduled
• Critical path tracked and managed
• Summaries and updates are circulated to entire
  internal and external project team on
  predetermined intervals

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Engineering Support

• Project Management
• Tooling and product cost budgets are carefully
  tracked using development tracking summary
• Products broken down by functional group such as
  frame, glass, door, etc
• Costs tracked and monitored against initial
  frozen budgets
• Immediate visibility to budget creep
• Miscellaneous items such as hardware budgeted
  initially as a kit and tracked as defined

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Design Capabilities

• (7) Seats of Pro-Engineer (Maintain use of
  previous versions to support customer needs)
• Pro-Process for Assemblies (used by IE)
• Pro-Intralink (Data Management software)
• Pro-Mechanica 2001 (for FEA analysis)
• Ability to import IGES, STEP, DXF models
• Flexible and will adapt to customer needs

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Design Capabilities - Tooling

• Tooling design in can be done in Pro/E concurrent
  with product development
• Speed launch time, simplify changes
• Create permanent revision controlled record of
  tools

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Design Capabilities - FEA

• Linear FEA capabilities using Pro/Mechanica
• Analysis for potential hot spots
• Frame / joint optimization

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Product Expertise

• ROPS expertise with active members on both
  construction and Ag ROPS subcommittees.
• Bill Johnson Advance Engineering Manager,
  Current vice chair of SAE Operator Protection
  Technical Committee - OPTC
• Active member of OPTC SC4 - Protective Structures
  
• Active member of ASAE PM-23-2-2 Agricultural ROPS
  subcommittee

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Change Process
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Management
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2004 Five Year Strategic Plan

• Retain current customer base through superior
  customers service
• Improve customer communications with quarterly
  reviews
• Position ourselves as a Key Supplier all Deere
  Division
• Supplier of the Year for Deere Ag Division 2004
• Diversify business by obtaining new business in
  new markets and additional business from key
  customers
• Utilize adjacency strategies to grow key segments
  with valued customers
• Achieve high value status (low cost, high
  quality, exceptional services)
• Evaluate current supply base and look at offshore
  sources.
• Evaluate current supplier deliver process for
  inventory reduction
• Leverage supplier expertise and develop strategy
  for significant reductions

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2004 Five Year Strategic Plan

• Operations consolidation
• Utilize lean tools and methods to sustain
  continuous improvements
• Pursue technology advancements to improve quality
• Successfully address key management succession
  issues
• Identify key people and skills and develop
  appropriate plan
• Achieve ongoing company wide commitment to
  strategic direction
• Schedule timely review, update and measurement
  against strategic plan

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Thank You
From McLaughlin Body Company