I D E A S W H Y S C O P E W H O. A c h i e v e m e n t a n d S a v i n g s. I n n o v a t i o n D r i v e s E x c e l l e n c e, SUPPLIERS EATON

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1 W H Y S C O P E SUPPLIERS I D E A S EATON CUSTOMERS I D E A S I n n o v a t i o n D r i v e s E x c e l l e n c e, A c h i e v e m e n t a n d S a v i n g s H O W P U R P O S E W H O

2 P U R P O S E The purpose of the Eaton IDEAS program is to encourage supplier-initiated cost reduction and improvement suggestions. IDEAS will help create an environment that promotes open communication and mutual benefit between Eaton, its suppliers, and its customers. With its suppliers, Eaton will: Continually build and improve supplier relationships Innovate new product concepts and processes Eliminate waste Improve quality Reduce cycle times Embrace ongoing continuous improvement Build mutual trust S C O P E Work with all suppliers to maximize our collective success. 1

3 W H Y Our marketplaces demand improved quality, the elimination of waste, lower costs, and continuous improvement. Intense global competition requires that Eaton, its suppliers and customers work together to mutually build competitive advantage. Supplier expertise and creativity is a valued resource that contributes substantially to the success of Eaton and its customers. Supplier innovation in new products and technologies extends Eaton s capabilities in helping provide customers with cost-effective solutions. Eaton s diverse businesses require a uniform, fact-based program equitable to all suppliers. Eaton seeks a forthright, trustworthy supplier relationship with candid dialogue that enhances the company s drive toward continuous improvement. Innovation Drives Excellence, Achievement, and Savings. 2

4 H O W T O A C H I E V E S A V I N G S W I T H I D E A S Cost reduction and improvement IDEAS in all areas including: Thought Provokers/Enablers Product Design Content Design Materials New Technologies Optimization of Validation or Test Requirements Reliability Recyclability Manufacturing Improvements Cycle-time Reduction Inventory Reduction Process Improvement Volume Efficiencies Tooling Business and Administrative Improvements Payment Terms Communication Eaton Administrative Practices Complexity Reduction Logistics In Bound/Out Bound Freight JIT Delivery Packaging Re-Usable Containers Sourcing Strategies Integrated Supply Base Supplier Optimization Quality Warranty Other Cost of Quality Local Quality Initiatives ($10,000 credit/location) 3

5 W H O The Eaton Management Team is committed to supporting this program with resources within our organization and will include professionals from areas such as: Purchasing Product Engineering/Design Engineering Manufacturing Engineering Finance Quality Materials Management/Logistics Human Resources Manufacturing Operations Marketing/Sales This program requires the same commitment from our suppliers organizations. H O W Present a new proposal every time you see your buyer. Do not see engineering without discussing your IDEAS. Use VA/VE techniques. Use continuous improvement techniques. Use benchmarking. Act on IDEAS. W I N N E R S D O I T 4

6 P R O C E D U R E Below is a typical sequence of events for the submission and approval of IDEAS. Eventually, this process will become more spontaneous and less sequential. 1 Suppliers document proposals for improvement and cost reduction to Eaton Corporation using the IDEAS Form P The form is to be submitted to Eaton Purchasing (Buyer). The purchasing function will champion the supplier s proposals. 2 Eaton Purchasing (Buyer) will assign an IDEAS control number, and log the proposal into the Eaton data base. 3 Eaton Purchasing (Buyer) will send the proposal to the appropriate person (such as engineering, manufacturing, cross-functional team) for feasibility evaluation. 4 After the evaluation process is completed, a recommendation will be made to accept, modify or reject the proposal. 5

7 P R O C E D U R E cont'd. 5 The evaluator will return the proposal to purchasing with a recommendation. 6 If the recommendation is to accept the proposal, purchasing will review with appropriate person to determine if customer approval/notification is required. If required, sales/engineering will obtain customer approval. 7 Proposal is submitted to finance for concurrence of projected savings and credit. 8 Purchasing will communicate decision to the supplier. Implementation timing will be agreed upon. 9 Credit is given when IDEAS are approved. 6

8 P U R C H A S I N G ' S R O L E Champion supplier proposals within Eaton. Track performance. Conduct regular meetings with supplier. Review status of open proposals. Review performance against objectives. Resolve open issues. Coordinate cross-functional activities. S U P P L I E R ' S R O L E Champion your IDEAS. Initiate proposals and IDEAS for improvement. Develop action plan to accomplish IDEAS. Provide appropriate documentation, such as preliminary drawings and testing. Review with appropriate Eaton personnel. Review progress with Eaton Purchasing on a regular basis. 7

9 SUPPLIERS I D E A S EATON FLOW CHART CUSTOMERS Initiate IDEAS Proposal Assign IDEAS # and Log IN Assign to Evaluator Perform IDEAS Evaluation Recommendation Returned to Purchasing Reject Accept or Modify Customer Approval if Required Not Required Customer Disposition Reject Finance Concurrence IDEAS Credit Given Communicate Approval Coordinate Implementation Communicate IDEAS Rejection 8