The document discusses PSA Peugeot Citroën's plans to transform its manufacturing operations and increase competitiveness. It outlines the Excellent Plant program which aims to make plants more efficient in areas like safety, quality, costs and flexibility. It also describes changes at the Sevelnord plant like adopting more compact layouts, autonomous manufacturing, full kitting and the CORAIL supply chain system. The K0 project involves using Sevelnord to assemble a new mid-size commercial vehicle. The overall goal is to define a roadmap towards more automated and profitable plants of the future through technology studies and best practice sharing.

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INDUSTRIAL DAY
Rising to the challenge of competitive manufacturing

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CONTENTS
1 – Speeding up plant transformation in France and the rest of Europe
- Developing a competitive European manufacturing base
- The Excellent Plant programme
- PSA's New Social Contract
2 – Sevelnord: Transforming a plant to make way for a new vehicle (K0 project)
- More compact plants
- Autonomous manufacturing
- Full kitting
- CORAIL
- K0 project
3 – Roadmap to the plant of the future

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1 – Speeding up plant transformation in France and the rest of Europe
• To improve profitability, PSA Peugeot Citroën is building a competitive European manufacturing base
(4th component of the Back in the Race plan)
The competitiveness of the Group's plants needs to be stepped up quickly through a combination of upgrades and
alignment with other world-class production facilities. French production facilities need to be right-sized and upgraded
(see the switch to single line plants in Poissy and Mulhouse) and plant capacity utilisation rates, as measured by the
Harbour index, need to be optimised, with a targeted increase from 79% in 2014 to 115% by 2022. Vehicle production
costs need to come down by €500 over the period 2015-2018, after shrinking by €730 from 2012 to 2014. Low-cost
sourcing as a percentage of total sourcing needs to double, from 20% in 2013 to 40% in 2020.
• The Group is jump-starting efforts to improve plant manufacturing performance by launching the 'Excellent
Plant' programme
The quest for the most competitive production base possible is being driven by:
- Diligently applied best practices (PSA Excellence System).
- Simplified organisational hierarchies and operations matched by fewer structures.
PSA is relying on its production base to help it rise to two major challenges:
- Be recognised for world-class quality.
- Continuously improve.
'Excellent Plant' is the name of the Group's operating excellence project designed to equip it with a world-class
production base.
An Excellent Plant is a 'target' production facility that: ensures employees' health and safety; satisfies its customers;
adapts quickly; is calibrated to use just the right amount of investment, cash and labour; cares for its environment;
improves continuously and develops its workforce.
To close the performance gap separating us from the best, our production base needs to:
- Have SUSTAINABLY BUSY plants.
- PERFORM WELL in terms of safety, management, quality, costs, deadlines and the environment.
- Show FLEXIBILITY regarding volumes and the mix, be able to absorb more diversity, and adapt to changing
customer demand.
- Be AUTONOMOUS, with front-line teams managing changes and improvements.
- EXTEND to suppliers by fully integrating them into the Excellent Supply Chain.
With the Excellent Plant programme, each facility can position itself, draw up its own roadmap and measure its
progress towards excellence.
The targeted level of excellence is readjusted each year to factor in changes to internal benchmarks (between sites)
and external benchmarks (with our highest-performing competitors).
• Transformation projects are currently firming up the production base's cost competitiveness, driven by the
New Social Contract in France and similar flexibility and competitiveness agreements in other European
countries

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The New Social Contract was signed by four labour unions in October 2013. Its purpose is to shape the Group's future
while preserving employees' core interests and, as such:
- More effectively anticipate the changes necessary to the Group's recovery.
- Create the right conditions for maintaining strong manufacturing resources in France.
- Foster closer social dialogue.
- Address both business and labour challenges.
The New Social Contract has four components:
- Greater employee involvement in the Group's strategic vision and in forward-looking projects.
- A new approach that secures jobs as part of collective transformation processes.
- Deployment of a PSA intergenerational contract that provides for senior leave (potentially affecting 2,500 to
3,000 employees over three years) and the hiring of more than 2,000 young people on work-study
programmes.
- Flexibility initiatives and wage moderation measures, with no decline in remuneration paid.
- In addition, the Group has also given employees a stake in the Company's recovery through an improved
discretionary profit-sharing agreement and an additional profit-sharing payment (discretionary or non-
discretionary) signed on 26 January 2015.
The Group has also made commitments and concessions for the period 2014-2016:
- One million vehicles to be produced in France in 2016.
- Production levels to be maintained in the Group's plants in France.
- At least one new model to be launched in each assembly plant.
- €1.5 billion in capital expenditure to be committed to plants in France from 2014 to 2016, versus €1.2 billion
between 2011 and 2013.
- Excellence and flexibility to be the overarching objectives of the plant master plan, with the aim of achieving
100% capacity utilisation in Europe.
- R&D base to be maintained in France, accounting for over 75% of R&D.
• PSA Peugeot Citroën has a strong presence in the French economy and is proud of its French-made products
France is the Group's technical and industrial heartland
- 64,993 employees at end-2014.
- Leading patent filer in France across all industries for six years running.
- More than 12,000 engineers and researchers in R&D.
- Five automobile plants and 11 mechanical components facilities and foundries.
- Sourcing from 800 supplier sites in France.
- 85% of engines and gearboxes produced in France.
Made in France
- Eleven Group vehicles have already been awarded the 'Guaranteed French Origin' label:
- Peugeot 208 GTi and XY, 2008, 308, 3008, 5008 and 508
- Citroën C3
- DS3, DS4 and DS5
This label guarantees consumers that the products they are buying are from France. Bureau Veritas performs the
certification process. The Group will request the label for other vehicles at a later date. The labelled vehicles – DS
line, hybrid models, etc. – exemplify the Group's move upmarket.

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2 – Sevelnord: Transforming a plant to make way for a new vehicle (K0 project)
• More compact plants
Group plants must be made more compact and find ways to optimise floor space and internal flows if they
are to effectively manage production costs.
The move to more compact plants takes several forms:
- Fewer, smaller production lines to adapt to volumes (single line plants).
- Logistics concentrated at the centre of the facility.
- Suppliers integrated into plant operations.
- Available floor space put to good use whenever possible (lease or sale).
• Autonomous manufacturing
The "Autonomous Unit" approach is taken from the PSA Excellence System. It aims to empower everyone,
regardless of their position, to carry out their work autonomously and deal with any problems as and when
they arise. To achieve this, organisation must be improved so that managers know who their customers are
and what they expect and can manage their teams accordingly. Managers also help their teams to develop
their skills in dealing with problems at their level. In assembly, this mainly applies to workstations that use the
Standardised Work and Kaizen (SWK) method. In machining, more of an emphasis is placed on equipment
using TPM methods.
The "Autonomous Unit" approach encourages operations staff to assume full responsibility for customer
satisfaction. At the same time, the role of support functions evolves to place greater importance on
developing the skills of operations staff and helping them to acquire expertise. It is an ongoing process led
by all company employees and is squarely in line with the PSA Excellence System drive for continuous
improvement.
• Full kitting
Kitting is a new method for supplying parts to the assembly line, whereby operators are given all the parts
they need to assemble a vehicle together in a 'kit'. It is a radical change as it essentially does away with line-
side inventory.
The Sevelnord plant has been using this new production line parts supply method for almost a year. After a
smooth transformation process, the new system is working well in terms of both results and organisation. It
has proved a tremendously positive first experience.
Deployment kicked off in early 2014 on a zone-by-zone basis, with full kitting to be achieved in the second
half of 2015. Major works were occasionally necessary to ensure optimum installation. This was the case for
the instrument panel preparation zone, which was taken apart and completely redesigned. All work took
place during the maintenance turnaround in August.
In a decisive move for the project's success, the plant's management team led the kitting implementation
process from start to finish.

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Kitting in a nutshell
Kitting involves directly supplying all the parts needed to assemble a car in one kit instead of supplying
different parts to each workstation. These kits are transported from the kitting zone to the side of each
section of the production line by small robots, or Automated Guided Vehicles (AGVs), directed by magnetic
strips in the floor. A sensor at the front of the robot detects traffic and ensures safety.
After being transported by the AGVs, the kits are linked to their intended vehicle. They then follow that
vehicle along the relevant section of the production line while the AGV moves to the end of the line, collects
the empty kits and returns them to the preparation zone.
In most sectors, there is one kit for each side of the vehicle.
Kit preparation
The various parts needed to assemble each vehicle are formed into kits in special zones equipped with 'pick-
to-light', or light-directed, systems. The operator in the kit preparation zone, also called the 'kitter', scans a
barcode on a preparation sheet. Lights then switch on automatically above each part that needs to be
collected, or 'picked' and added to the kit. The kitter then collects the part, confirms the pick, and places it in
the kit. This operation ensures that all kits have the right parts for the vehicle's assembly.
Advantages of kitting
Kitting fosters more ergonomic production lines, greater flexibility when changing the mix, and improved
assembly and logistics performance. Full kitting makes internal logistics processes more adaptable to market
demand by reducing costs and the need to anticipate business adjustments and by more effectively
managing diversity. It is also a prerequisite for implementing systematic direct delivery flows for small parcels
(i.e. from the crossdock to the production line without intermediate supermarket storage).
Deployment in Group plants
Kitting is currently being deployed in all PSA plants in Europe and Latin America.
• CORAIL
CORAIL is a strategic programme for the PSA Group. Kicked off in 2009, it aims to transform how the
inbound supply chain and associated IT systems operate. What makes CORAIL such a breakthrough is that
it seeks to develop a global supply chain, assist Lean deployment by switching from just-in-time to just-in-
sequence, and factor in new supply chain processes abroad. For these reasons, CORAIL has major
implications for the Group's supply chain, namely a reduction in transport costs, inventory lead time and
associated floor space, while at the same time offering more efficient variation management and better
visibility for our suppliers.
What CORAIL will change
- Inventory: inventory management system to be replaced by flow management.
- Unit price, better preparation: supplier relations to be improved.
- Inventory: market demand to be met with smoother, more stable flows.
- Transport: transport requirements to be included in sourcing.
- Productivity and floor space: parts distribution to be optimised according to vehicle flows.
- Streamlining and IT systems: integrated IT system to be introduced.

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Plant deployment
CORAIL deployment began at the Kaluga plant in Russia in 2011/2012 with the implementation of an
intercontinental supply chain. Then, in November 2014, Sevelnord became the first European plant to benefit
from CORAIL, permanently replacing its legacy applications.
Now CORAIL manages and monitors the flow of 3,600 units at the plant every day. It has given Sevelnord a
rare opportunity to deploy the kind of breakthrough supply chain processes needed to achieve the levels of
performance set out in the Excellent Plant programme. CORAIL has lived up to its promise of reducing
transport costs, inventory and floor space.
Deployment has since quickened pace, with CORAIL arriving in Trnava in June 2015 and Rennes the
following November. By 2019, CORAIL will be deployed in all vehicle production facilities.
• K0 project
K0 is the codename for the PSA Peugeot Citroën Group's future mid-range, K1-segment light commercial
vehicle, which is to be assembled in Sevelnord.

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3 – Roadmap to the plant of the future
Progress and plant transformation can only be achieved if we ramp up our efforts to share and apply best
practices.
Studies are being led to explore profitable and flexible automation solutions that will bring down vehicle
production costs and eliminate workstations that present problems in terms of ergonomics, safety and
quality.
The subjects of these studies are determined by the Manufacturing Performance Plan, which is spearheaded
by the Industrial Operations Department, and the Process Innovation Plan, led by the Research and
Innovation Department.
The studies are carried out in cooperation with academic partners and innovative firms in France, the rest of
Europe and the United States to keep development costs down and gain access to complementary skills.
The purpose is to identify existing solutions and assess their cost. If proven solutions exist that meet PSA's
profitability and quality criteria, they are tested and validated before being suggested for manufacturing
projects.
Where no such option exists, less mature solutions are identified and studied in collaboration with their
inventors. These innovations are developed and adapted to PSA's manufacturing process according to a set
of milestones and decision-making processes, which aim to validate the solutions and determine whether or
not to pursue the study. All stakeholders concerned by the subject take part in the study, including the end
user.
All projects are run with the close involvement of the Industrial Operations, Research and Development and
Information Systems Departments as well as the plants. They favour flat, cross-functional organisations to
ensure that skills, best practices and ideas circulate as freely as possible.