ABS 4 The Alcoa Business System, or ABS, is an integrated set of principles and tools used to manage Alcoa businesses. The three overarching principles of ABS are: • Make to Use, • Eliminate Waste, • People Linchpin the System. Make to Use The Make to Use principle begins with Alcoa customers and is based on the ideal of: • Single-piece production • On demand • Defect free • At the lowest possible cost • Made safely This principle is based on customer usage, as opposed to making to inventory. Eliminate Waste The Eliminate Waste principle is our drive toward the ideal of exposing and solving problems, when and where they occur, to continuously improve the cost, quality and speed of all our manufacturing and business processes. People Linchpin the System This third principle is the drive to create the people environment, engaging all our associates in identifying and solving the problems linked to our transition from “make to inventory” to “make to use” and the continuous improvements in costs, quality, and speed. While ABS is about improvements, it has also led to significant cost savings. At the end of 2002, Alcoa had achieved $600 million in annual- ized cost savings toward its three- year $1.0 billion 2001 to 2003 goal – which comes on top of the company’s Inside The Alcoa Business System ABS: Much Achieved… But Only Just Begun Initiating Early Gains Significant Gains Major Improvement New Benchmarks 110 166 62 13 11 Next-generation   value based on   new benchmarks is significant 350+ Operating Facilities