KENWORTH PLANT TOURKENWORTH PLANT TOUR

TEAM MEMBERS:JILL RYAN

DAN JELLENSUCHITA KODE

CHERYL VIDAMO

WINTER 1996

OUTLINE OF OUTLINE OF PRESENTATION:PRESENTATION:

CORPORATE ENVIRONMENT OPERATIONS STRATEGY INFRASTRUCTURAL ISSUES STRUCTURAL ISSUES FUTURE TECHNOLOGY

KENWORTH TRUCKSKENWORTH TRUCKS

KW

CORPORATE CORPORATE ENVIRONMENTENVIRONMENT

CORPORATE MISSION/STRATEGY COMPANY, COMPETITION &

CUSTOMERS POSITIONING STRATEGY COMPETITIVE PRIORITIES

CORPORATE MISSIONCORPORATE MISSION

CUSTOMER SATISFACTION SUPERIOR QUALITY PREMIUM VALUE

BUSINESS STRATEGYBUSINESS STRATEGY

HIGHLY DIFFERENTIATED CUSTOMIZED LUXURIOUS EFFICIENCIES TECHNOLOGICAL SUPERIORITY OUTSTANDING CUSTOMER

SERVICE

COMPANYCOMPANY

DIVERSIFIED MULTINATIONAL NOTABLE LOCATIONS

– CORPORATE - BELLEVUE, WA– ENGINEERING - KIRKLAND, WA– MANUFACTURING - 53,000 TRUCKS

(‘94)» KENWORTH TRUCK COMPANY - (2) WA & OH» CANADIAN KENWORTH - QUEBEC (1955)» PACCAR AUSTRALIA PTY. LTD. KENWORTH (69)» KENWORTH MEXICAN (1960)

COMPANYCOMPANY1994 REVENUE1994 REVENUE

United States 79%

Canada 8%

Other (i.e. Mexico, U.K., Australia) 13%

Wholly owned subsidiaries in Canada, Australia, U.K. & MexicoResearching partners for emerging markets (esp. Russia & China)

COMPANYCOMPANY1994 SALES - $4.5 BILLION1994 SALES - $4.5 BILLION

TRUCKS* 89%

AUTO PARTS 4%

FINANCIAL SERVICES* 5%

OTHER 2%

*40% of Class 3-8 trucks delivered to leasing industry

COMPETITION COMPETITION (US & CANADA)(US & CANADA)MARKET SHARE FOR CLASS 8 MARKET SHARE FOR CLASS 8 TRUCKSTRUCKSCOMPANY

Freightliner

Navistar

Kenworth

Peterbilt

Volvo/GM

Mac

Ford

Other

1995 (%)25.7

17.6

11.5

9.7

11.1

10.9

9.7

3.8

1994 (%)24.2

18.9

11.8

10.0

12.1

10.2

9.4

3.4

1993 (%)23.4

20.0

11.4

10.1

11.5

10.1

10.2

3.2

CUSTOMERSCUSTOMERS

STRONG CUSTOMER DEMAND AGING TRUCK FLEET RENTON - WEST COAST MARKET TECHNOLOGY REDUCES

OPERATING COSTS

POSITIONINGPOSITIONING

HIGHLY CUSTOMIZED – 85,000 PUBLISHED OPTIONS

PREMIUM SEGMENT OF THE MARKET

TARGETING SMALL FLEETS SUPERIOR PERFORMANCE 3 HIGHWAY & 2 OFF ROAD TRUCKS

SWOT SWOT (STRENGTH, WEAKNESS, OPPORTUNITY & (STRENGTH, WEAKNESS, OPPORTUNITY & THREATS)THREATS)

STRENGTH - OPPORTUNITIES STRENGTH - THREATS WEAKNESS - OPPORTUNITIES WEAKNESS - THREATS

OPERATIONS STRATEGYOPERATIONS STRATEGY

HOW COMPANY OPERATIONS SUPPORT HOW COMPANY OPERATIONS SUPPORT COMPETITIVE PRIORITIESCOMPETITIVE PRIORITIES

FLEXIBILITY DELIVERY SPEED QUALITY

HOW COMPANY OPERATIONS HOW COMPANY OPERATIONS SUPPORT COMPETITIVE PRIORITIESSUPPORT COMPETITIVE PRIORITIES

FLEXIBILITY»Paint System»Custom Premium Trucks »PROSPECTOR » JIT »No Automation, Robotics

HOW COMPANY OPERATIONS HOW COMPANY OPERATIONS SUPPORT COMPETITIVE PRIORITIESSUPPORT COMPETITIVE PRIORITIES

DELIVERY SPEED» JIT Process»Order to Delivery »Actual Assembly »EDI » JIT W/Select Suppliers»Computerized Systems»PROSPECTOR

HOW COMPANY OPERATIONS HOW COMPANY OPERATIONS SUPPORT COMPETITIVE PRIORITIESSUPPORT COMPETITIVE PRIORITIES

QUALITY»Plant Certified ISO9001 (Oct. 1995)»88 Critical Characteristics»Standard Training»Reference Books »Customized Tooling»Paint Facility»Design Testing»Station QC»Receipt Check

INFRASTRUCTURAL ISSUESINFRASTRUCTURAL ISSUES

WORKFORCE INVENTORY/PLANNING MATERIALS MANAGEMENT SUPPLIERS

WORKFORCEWORKFORCE

550 1ST SHIFT, 350 2ND SHIFT & 3RD SHIFT MAINTENANCE UNIONS/LOCALS WORKSTATIONS DETAILED MANUALS

INVENTORY/PLANNINGINVENTORY/PLANNING

GOAL OF 20+ INVENTORY TURNS FORECAST PLANNING INVENTORY HOLDS

– 5 DAY MAXIMUM– 1 DAY MINIMUM

SAFETY STOCK FOR QUALITY TWO BIN SYSTEM

MATERIALS MANAGEMENTMATERIALS MANAGEMENT

SALES ORDER SHEET PROSPECTOR SYSTEM EDI COMPUTERIZED SYSTEM IN

RECEIVING HAND LABOR (UNIONIZED) KITTING

SUPPLIERSSUPPLIERS

PARTNERSHIP WITH MAJOR SUPPLIERS– CAT, CUMMINS, DETROIT DESIEL

JIT WITH SELECT SUPPLIERS DELIVERY FLEXIBILITY SUPPLIER HELD INVENTORY DUNNAGE

STRUCTURAL ISSUESSTRUCTURAL ISSUES

FACILITIES CAPACITY TECHNOLOGY

FACILITIESFACILITIES

RENTON ORIGINAL SITE (1907-1984)

ENVIRONMENTAL REMEDIATION (1985 - PRESENT)– SUPERFUND SITE -WA STATE DEPT. OF

ECOLOGY

STATE OF THE ART PLANT REOPENED MAY 1993

CAPACITYCAPACITY TWO SHIFTS MANUFACTURING & ONE

FOR MAINTENANCE FINAL ASSEMBLY PLANT-KITTING SMALL WAREHOUSE FACILITIES ASSEMBLY NEAREST DELIVERY ASSEMBLY LINE 1.5 FT/MIN AVG FLEXIBLE WORKFORCE TWO NW PLANTS

TECHNOLOGYTECHNOLOGY

PROSPECTOR - MATERIAL PROCESS SYSTEM & ENGINEERING DESIGN

STATE OF THE ART PLANT - PAINT EXCELLENCE

EDI AND JIT TRANSITION COMPUTER SYSTEM OUT OF STOCK

& DAMAGE

DOWN THE DOWN THE ROAD.............ROAD.............

AUTO PAINT ENHANCEMENTS MATERIAL FLOW IMPROVEMENTS DUNNAGE REDUCTION NEW PRODUCT DEVELOPMENT

CONCLUSIONSCONCLUSIONS

SWOT CUSTOMER DEMANDS VARIANCE NW CAPACITY ADVANTAGES PREMIUM STRATEGY