VENDOR MANAGED INVENTORY VMI Overview Features Benefits AGENDA

VENDOR MANAGED INVENTORY VMI Overview, Features & Benefits

AGENDA Program Overview • Candidate Parts • Two Forecasts • VSRA – VMI Supplier Readiness Assessment • Implementations • QVR’s – Quarterly VMI Reviews • MIN / MAX review Program OTTR (on time to requirement) Measurement & Results Supplier Feedback Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved.

WHY SHOULD SUPPLIERS MANAGE VIA VMI? Improved Inventory Management = Sales Increase VMI suppliers can do an even better job of managing our products due to simplified consumption signals – and they have a big incentive to do it well. Happy Customer Reduced Administrative Costs = Cost Savings Since VMI reduces administrative costs; supply chain on both sides spends less time managing transactions and more time optimizing delivery and inventory. Studies has shown that the supply chain can manage at least twice as many SKUs on VMI as they can manage using the traditional approaches. That means all of our resources can focus on more value-added activities Strong Customer / Supplier Relationships = Supplier Business Growth Suppliers focus on the same goals and are aligned with our growth strategy which translates to Supplier growth. Honeywell Confidential - © 2020 by Honeywell International Inc. All rights reserved. 3 3

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HOW DO WE CHANGE THE TRAJECTORY IN 2020? Answer: Focus on the RIGHT Parts…. ü ü Move 50 + time per year 12% of SKU’s 70%+ COGS 30% of inventory High Value A 1 -B 2 Predictable, fast movers, low costs to revenue, risk is only costs of capital B 4, C 3 -C 4 Unpredictable, slow movers, high costs to revenue, + obsolescence Low EASY & FAST Low Demand Volatility High v v v v Move 1 -4 times per year 70% of SKU’s 5% of COGS 35% of inventory Carrying Costs $ MOQ excess $ Freight inefficiency $ Obsolescence $ HARD & SLOW Focus on Predictable, Fast Moving Parts = Dramatically Lower Risk for Supplier Honeywell Confidential – © 2020 by Honeywell International Inc. All rights reserved. Honeywell Confidential - © 2020 by Honeywell International Inc. All rights reserved. 5

VMI FLEX HASP – TWO FORECASTS AVAILABLE The Planning Forecast and has a 2 -3 year time horizon. This forecast is more strategic and often buckets demand by month or quarter, instead of week. Vendors are to use this forecast to build/MRP. Planning FC The MPS Forecast is Honeywell’s MRP extract, it is bucketed weekly and goes out 6 months. Vendors typically use this forecast to ship to. Vendor can also use it build shorter lead time parts (<26 weeks build time) These two forecasts tie out in the aggregate. If you add up 1 qtr of Planning Forecast and 1 qtr of Buildplan, the numbers will generally match. These forecast will not tie out on a week to week comparison Vendors should use both forecasts to plan their requirements. Buildplan MPS Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved. 6

VMI SUPPLIER READINESS ASSESSMENT (VSRA) Purpose: • Gathers critical information that guides us to make your implementation process a successful experience. • Helps determine systems and process readiness. • Helps your Honeywell VMI FLEX Implementation team provide tailored support based upon your needs to successfully launch VMI. • Streamlining the supply chain from the supplier to the customer. Scope / Process: • All suppliers with candidate parts participate • Questions: • Prior & or current VMI familiarity, use and capability • Production & inventory infrastructure • What types of products do you produce? • VSRA is an online assessment that should take roughly 10 -12 minutes • Link https: //www. surveymonkey. com/r/V 2 YZ 3 HT. One approach does not fit all Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved. 7

STANDARD IMPLEMENTATION SCHEDULE Week 1: Initial Training Meeting Weeks 2 -3: System Updates Week 4: Go-Live Meeting • • • Set up parts in SAP • Review Open POs • Confirm parts live in the Flex portal • Step-by-Step PO Creation • Questions/Next Steps • Confirm QVR Lite date • Confirm QVR Standard date Complete VMI Flex training Review HASP user access Review signed Flex parts Confirm Go-Live meeting date Footer, Arial Bold 10 pt VMI Implementation is a 4 Week Process Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved. 8

WHAT HAPPENS DURING VMI IMPLEMENTATION? • Outline process between Honeywell and Supplier to properly Implement VMI Kickoff Training & Review • Honeywell Aerospace Supplier Portal Training • VMI Supplier Replenishment Training • Optimize Min levels / MOQs / Lot Sizing • VMI Team / Supplier Collaboration & Initial Training • HASP user access, PO creation, VMI management tools • Signed VMI Parts System Settings Updated • Parts are changed in SAP to function as VMI Implement • System settings loaded to Flex configuration • VMI PO conversions • Review Open POs for VMI Parts • Essential for seamless transition onto the program • Conduct Go-Live Meeting Validation & Sustain Footer, Arial Bold 10 pt • Hold Quarterly VMI Reviews • Continuous Improvement through partnered inventory and delivery optimization • Supplier led to ensure full understanding and system functionality Streamlined & simple processes Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved. 9

QVR “LITE” (6 WKS POST IMPLEMENTATION) Questions: 1) Verify full implemented part portfolio is visible for supplier in HASP. Do you see any part(s) settings that are incorrect? If so, which ones and what is incorrect? 2) Have you generated a PO? 3) Have you changed a delivery date or quantity on a PO? i. e. created your own change orders 4) Do you know how to generate the consumption report? 5) Do you know how to generate the settlement report? 6) Do you know how to tie them together so that you understand when you will be paid? 7) Do you know how to read the forecast and MPS in order to schedule your manufacturing to ensure on time delivery? 8) Do you have any questions or need further training? 9) Is your Quarterly Vendor Review (QVR) scheduled? 10) Do you know how to use Case Management in HASP to resolve issues? 11) Is there any additional training or information needed? Proactive engagement is critical to long term success Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved. 10

VMI QVR METRICS DASHBOARD Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved. 11

MIN / MAX REVIEW VMI MINIMUM STOCK FOR DIFFERENT DEMAND OEM with Embedded R&O Distribution Center OEM (based upon ABC code) + Aftermarket Optimization A Part: 1 WOS B Part: 2 WOS C Part: 4 WOS Aftermarket Optimization (Demand variation during lead time with overall 95% service level. ) (ref. slide 5) Appropriate adjustments keep the program current to future demand whether its an increase, decrease or no change. VMI MIN inclusive of Aftermarket Demand variability Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved. 12

VMI SUPPLIER OTTR – PROGRAM RESULTS April‘ 19– April ‘ 20 94. 8% Supplier must maintain DAILY inventory levels equal to or greater than the established minimum level. In the event that a minimum quantity is not maintained, an OTTR impact will result. Simplified VMI OTTR calculations and execution have: 1. Improved supplier fill rates & enabled factory flow 2. Improved Customer delivery and satisfaction Parts implemented to VMI see an average OTTR improvement of 16% Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved. 13

SUPPLIER FEEDBACK Doing Well ü Greater transparency ü Robust HASP Training ü Improved collaboration & availability of resources ü Supplier Council ü Timely responses ü Ability to place / change PO’s Do Different ü Forecast Accuracy ü MPS reconciliation will redistribute PD and level set forecast ü Case Management ü HASP Portal Functionality ü System driven issues ü Messaging from Planning & Procurement ü Implementation Cycle-time Honeywell VMI is a continuously improving program Honeywell Confidential - © 2019 by Honeywell International Inc. All rights reserved.