1. Maintenance Repair & Overhaul (MRO) Business Case Nadcap/NUCAP OEM Subscriber Experience
Revision Date: 15 May 2014

2. Contents Nadcap Global Acceptance
Survey of Existing Nadcap Subscribers
Background
Supply Chain Deployment
Nadcap Benefits
Case Study
OEMs
Suppliers
Perceived Myths
Benefits of Nadcap Approach
Challenges in the MRO Community
Business Case Objective
Gap Analysis
Chronology
Cost & ROI
Sequence for Expansion of Nadcap into MRO
For More Information
MRO Areas to be considered by Nadcap Subscribers
Acronyms

3. Background
Redundant audit activity exists in the Maintenance Repair & Overhaul (MRO) world
The requirements are just as stringent for MROs as OEMs
Nadcap improved controls in the OEM world, and there is a value in demonstrating these same kind of improvements in the MRO world as well
In some cases, MRO manuals and OEM specifications may not be aligned
There are more opportunities for rebuild and repair cycles in the MRO industry than the OEM industry, therefore increasing the chance of escapes, re-work, and cost.

4. Nadcap Benefits to OEMs
Global Supply Chain managed through a single real-time on-line system for the entire industry allowing companies to better manage supplier-associated data (eAuditNet)
eAuditNet supports procurement to identify accredited suppliers (Qualified Manufacturers List)
Conduct more in-depth, technically superior special process audits
Increases number of consistent audits of the supply chain
Establish stringent industry consensus standards that satisfy the requirements of all participants
Identify and reduce risk of exposure to lower-quality suppliers
Provides industry-wide early warning advisories for potential product impact and escapes (defective products)
Provides complete visibility of supplier behaviors and transparency of audit results in a secure and retrievable format
Program reduces costs of supply chain oversight and control
Utilizes technically superior auditors to assure process familiarity
Effectiveness of OEM’s Quality team increased – able to look beyond baseline requirements and focus on problem areas (special processes) and suppliers
Improves flow down of industry and customer requirements to sub-tier suppliers

5. Nadcap Benefits to Suppliers
Provides routine special process audits accepted by industry
*85% report supplier quality improvements after accreditation, including more than one-third reducing scrap rates, reworks and escapes (defective products)
Promotes lean and continuous improvement practices, leading to higher quality and lower overall cost
Industry accepted and consistent technical requirements leading to uniform process controls and greater operational efficiency
Develops a structured approach to special process and product manufacturing
Can use accreditation to increase client-base
Improves customer relationship, technical support, and training.
Improves Program/Special Processes predictability.
Increases visibility to subscribing OEM base.
Opportunity to participate in development of audit criteria and program operations
*Aerospace data

6. Benefits of the Nadcap Approach
End users become more aware of the importance of their processes
This activity becomes an integral part of internal risk reduction activity
Aids in identifying clear ownership for each Special Process
Enables improved levels of Process Control
Introduces standardisation of the Controlling Procedures across sites
Encourages cross functional team working
Provides the vehicle to implement focused improvements to processes
Key strategic improvement, with visibility at a senior level within the organisation
Following re-accreditation, sites can focus on Process Flow & Process Capability
Improves first pass yield
Improves operating approach, compliance, training, communication and alignment of resources.

7. Business Case Objective
The purpose of this Business Case package is to demonstrate to Nadcap/NUCAP (Nadcap Users Compliance and Accreditation Program) Subscribing OEMs the value of utilizing the Nadcap/NUCAP accreditation program in their internal MRO facilities that reduces risk, increases compliance to approved data and with airline support will reduce the number of redundant audits and improve process understanding. The ultimate objective is to drive Nadcap/NUCAP across the entire MRO community.

8. Chronology
At PRI Board of Directors request, a PRI staff team began to investigate where the Nadcap model may be applicable for the MRO Industry
PRI conducted research, presented at industry events, and developed relationships with industry stakeholders (Nadcap OEMs, CASE, airlines, MRO shops, etc.)
2012
Rolls-Royce presented to the Nadcap Management Council (NMC) on their implementation of NUCAP in their MRO facilities (Feb12)
An NMC sub team was launched to explore Subscriber interest & possible support - 12 Subscribers joined – bi-monthly meetings
Sub-team survey was conducted to determine level of interest and potential scope – results were favorable
Some existing Nadcap/NUCAP companies began using Nadcap/NUCAP internally for their MRO facilities

9. Sequence for the Expansion of Nadcap/NUCAP into MRO
Step 1. Existing Nadcap/NUCAP Subscribers’ own MRO Facilities. Gain regulatory agency recognition. Step 2. Existing Nadcap/NUCAP Subscribers’ MRO Service Providers (those who are already Nadcap/NUCAP accredited Suppliers) Step 3. Existing Nadcap/NUCAP Subscribers’ MRO Service Providers (those who are not Nadcap/NUCAP accredited Suppliers) Step 4. Part 145 Repair Stations (Non-Nadcap Subscribers)

10. Sequence for the Expansion of Nadcap/NUCAP into MRO
Part Repair Stations
Engage Airlines and Lease Holders
Suppliers to OEM’s MRO facilities
OEM’s MRO facilities (gain regulatory recognition)
2012
2013
2014
2015
2016
2017
2018

11. MRO Areas to be Considered by Nadcap/NUCAP Subscribers:
Contract with airline for maintenance – All components come from OEM side (Nadcap/NUCAP or OEM suppliers)
MRO shops on OEM sites – Majority of Special Processes done by Nadcap/NUCAP
Major stand-alone structural/overhaul MRO shops
Component repair supply vendors
Sites where primary OEM and MRO distinction is being combined or united

12. Survey Conducted of Existing Nadcap/NUCAP Subscribers
Special Processes within Subscriber internal MRO shops where currently self-imposing Nadcap/NUCAP:
Commodity
Number of OEMs
OEM Companies
Non Destructive Testing (NDT) 4
Goodrich (UTAS), Honeywell, Rolls-Royce, SAFRAN
Chemical Processing (CP) 3
Honeywell, Rolls-Royce, SAFRAN
Heat Treating (HT) 2
Rolls-Royce, SAFRAN
Coatings (CT)
Nonconventional Machining & Surface Enhancement (NMSE) 1
Rolls-Royce
Welding (WLD)
* Data from 2012 NMC MRO Sub-Team Survey (10 Subscribing OEM responses)
** There may be additional Special Processes and participating Subscribers not listed in the above chart, as eAuditNet only recently began differentiating between OEM and MRO audits

13. Current Use of Nadcap in the MRO Community
Current Nadcap/NUCAP Subscriber internal MRO shops with accreditation (NMC MRO Sub-Team Survey Data )
5 Subscribers self-impose Nadcap/NUCAP on their internal MRO shops
Commodities: CP, CT, HT, NDT, NMSE, WLD
Nadcap/NUCAP suppliers doing work for MRO shops (Self-identified in eAuditNet system – 15 April 2014):
Suppliers: 14
Subscriber Suppliers: 4
Accreditations: 31
Commodities: AQS, CMSP, CP, CT HT, MTL, NDT, NMMT, SE, WLD
Countries: Canada, Hong Kong, UK, USA, Singapore, South Korea, Spain
Nadcap/NUCAP suppliers doing work for MRO and OEM shops (Self-identified in eAuditNet system – 15 April 2014):
Suppliers: 51
Accreditations: 55
Countries: Australia, Belgium, Canada, China, Hong Kong, India, Italy, Japan, Mexico, Philippines, UK, USA, Singapore, South Korea, Spain, Taiwan

14. Supply Chain Deployment
Some Nadcap OEMs have begun to flow MRO into the supply chain
Rolls-Royce made a policy decision to mandate on the MRO supply chain
MRO suppliers to gain Nadcap accreditation in:
NDT (PT, RT MT)
Chemical Processing
Heat Treatment
1 process by end of 2012
3 processes by end of 2013
Targeted at ~60 suppliers (Planned for 50% uptake)
~ 30 NDT audits in 2012
~ 30 NDT, CP & HT audits in 2013

15. Supply Chain Deployment
Special Processes
NDT is used in every MRO activity
Evaluate other special processes based on frequency of MRO activity:
CP, HT, CT, NMSE, WLD
Risk Assessment Criteria
Part criticality
Process activity
Compliance to Repair Manual Requirements
Cost of non-quality due to special process
Known in-service issues
Special Process criticality

16. Case Study Nadcap/NUCAP Subscriber with 2 MRO Facilities:
Background: Subscriber major overhaul center, NDT, Weld, Heat Treat & Chemical Processing
Findings:
Experienced a large learning curve when earning Nadcap accreditation
The Nadcap audit methodology is very different than any other audit the site had experienced, depth of audit into the specific processes
NDT Audit
Prior to audit, facility did not see value
After the audit, facility recognized the reduction in risk
Number of Findings
Severity of Findings
Value of the audit methodology
Kevin Ward to provide additional data

17. Perceived Myths Myth: New MRO-specific checklists must be created
Fact: The current Nadcap checklists for NDT, CP, HT and CT were effectively utilized in Rolls-Royce’ experience.
Supplemental checklists to be modified for individual OEMs
Myth: Will increase internal costs with no business benefit
Fact: Nadcap is a risk reduction activity (cost avoidance). There are slight increases in direct costs (e.g. participation fees) with considerable decreases in indirect costs (e.g. manpower) for subscribers. Nadcap is a shared cost approach.
Myth: Not applicable to MRO
Fact: Audit checklists are specific to the special process as defined by industry specifications and are not specific to OEM or MRO. Checklists are the essence of good special process controls. There are MRO equivalents to OEM: 9100/9110; PO/FAA return ticket, technical publications; process spec/maintenance manual
Myth: Will make MROs uncompetitive
Fact: Creates a competitive edge/benefit for accredited suppliers. It opens up the market for increased opportunities for suppliers who meet Nadcap accreditation.
Myth: Not formally recognized within the MRO Industry
Fact: Nadcap has only been recently expanded into subscriber MRO facilities. Since Nadcap is widely recognized among OEMs & Regulatory Bodies globally, it should enable a smooth transition into the M RO community.
2Apr13 – Stopped sub-team review on this slide

18. Challenges in the MRO Community that will need to be Considered for Nadcap/NUCAP Deployment
Standard Practise Manuals do not define all requirements.
Lower level procedures inadequate or unavailable
Technical Instruction content inadequate
Inadequate document cascade: blue print  process specifications  shop floor instructions
Operator training and approval practises varied across sites
Pyrometry - Insufficient knowledge of AMS2750
Preventative Maintenance activities inadequate
No flow-down requirements exist
No advanced forecasting available
* No difference from what is seen in OEM / supply chain areas and are all areas of potential quality failures that could be rectified through the Nadcap audit and NCR close out process.

19. Cost & ROI Cost ROI Nadcap Subscriber fees: Nadcap audit:
Contact PRI’s Supplier & Subscriber Services Supervisor
Nadcap audit:
 Documents  Public Documents  General Documents  “Audit Pricing Sheet”
Audit preparation:
Will vary for each MRO based on current practices in relation to the audit checklist
ROI
Every OEM in Nadcap/NUCAP currently utilizes the program in a different way. The ROI is different for each OEM in relationship to their contribution and participation level.

20. For more information Scott Klavon Seema Martin Justin McCabe
Director, Nadcap Program & Aerospace Operations, PRI
Seema Martin
Director, European Operations, PRI
Justin McCabe
Research & Development Specialist, PRI

21. Acronyms AQS – Aerospace Quality System
CASE – Coordinating Agency for Supplier Evaluation
CP – Chemical Processing
CT – Coatings
FAA – Federal Aviation Administration
HT – Heat Treating
OEM – Original Equipment Manufacturer
MRO – Maintenance Repair & Overhaul
NMSE – Nonconventional Machining & Surface Enhancement
NDT – Non-destructive Testing
MT - Magnetic Particle
PT - Penetrant
RT– Radiography
NMC – Nadcap Management Council
NUCAP – Nadcap Users Compliance and Audit Program
ROI – Return on Investment
WLD – Welding