37th National Energy and Environmental Conference American Society for Quality

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1 37th National Energy and Environmental Conference American Society for Quality Wind Energy Challenge San Antonio, November 1, 2010 Gene Cuenot Vestas Nacelles Supply Chain Management The Americas

2 Importance of Location The overall sourcing and manufacturing strategy: In the region for the region. 2 37th National Energy and Environmental Conference

3 Importance of Location Location of Suppliers and Competitors Foundry Machining Gears Generators Supplier Information Existing Suppliers Modeled Location Turbine Manufacturers GE Gamesa Suzlon Siemens Mitsubishi State Ranking for Potential Suppliers Top Quartile 2 nd Quartile 3 37th National Energy and Environmental Conference

4 Chicago Nacelles - Overview Chicago Location Centrally located Available talent Response time to market Closeness to supply base 4 37th National Energy and Environmental Conference

5 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 37th National Energy and Environmental Conference

6 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 37th National Energy and Environmental Conference

7 Nacelles - Overview Supply opportunities Bearings Hydraulics, pumps Lubrications systems Plastics Wires and Cables Transformers Castings Weldings Fasteners Machined components Sheet metal work Lifts V82/2MW V90/3MW 7 37th National Energy and Environmental Conference

8 The Sourcing Experience 8 37th National Energy and Environmental Conference

9 North America Suppliers Strengths Ability & Flexibility to Invest Transferrable skills Quality systems Knowledge in APQP and PPAP State and Government support Improvements Grow knowledge of wind industry Drive continuous improvements in quality & delivery Achieve one-piece flow Appropriate investment planning 9 37th National Energy and Environmental Conference

10 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 10 37th National Energy and Environmental Conference High quality = satisfied customer

11 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 th National Energy and Environmental Conference

12 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 37th National Energy and Environmental Conference

13 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 37th National Energy and Environmental Conference

14 14 37th National Energy and Environmental Conference The Supply Impact

15 Industry Impact on Supply 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 37th National Energy and Environmental Conference

16 Industry Expectations of Suppliers Innovativeness Increased co-operation Increased reliability Multiple sourcing Partnering and long term agreements Production readiness 16 37th National Energy and Environmental Conference

17 Expected Tools APQP advance product quality planning PPAP production part approval process FFF form, fit and function CTQ critical to quality Record retention 17 37th National Energy and Environmental Conference

18 Thank you for your attention 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.