Six Sigma A Powerful Methodology for Meeting Business

Six Sigma A Powerful Methodology for Meeting Business Goals Dan Cooper 5/26/07 12/13/2021 1

Today’s Agenda • What is Six Sigma and what is its potential impact? • An overview of Six Sigma Methodologies, Roles and Training • Dow’s Six Sigma Implementation Journey 12/13/2021 2

What is Six Sigma? • An operating philosophy of a business • Achieving excellence by significantly reducing defects in processes, products and services • The relentless pursuit of data-based problem-solving to eliminate defects • A strategic shift to a data-driven mindset, reflected in the actions of all employees The result is customer success and business value. 12/13/2021 3

Six Sigma Means a New Way of Operating • Changing how we do our work • Adopting an intolerance for variation • Measuring inputs just outputs Sixnot Sigma • Demanding measurement and Drives Change! accountability • Requiring sustainable gains • Delivering on customer satisfaction to build customer loyalty • Leveraging for competitive advantage 12/13/2021 4

Six Sigma’s History? • Developed at Motorola in mid-1980 s • Six Sigma Academy established in 1994 • Allied Signal and GE implemented Six Sigma principles in mid-1990 s • Dow’s efforts began in 1999 12/13/2021 5

What are the Benefits? 12/13/2021 6

The Cost of Poor Quality s 2 3 4 5 6 308, 537 66, 807 6, 210 233 3. 4 1$30 12/13/2021 Defects per Million Opportunities (DPMO) Average COPQ (% of Revenue) 30 -40% 20 -30% 15 -20% 10 -15% <10% Average COPQ ($ in Billions)1 $10. 5 $ 7. 5 $ 5. 3 $ 3. 8 $ 1. 5 billion in revenue 7

What Is the Impact of 4 Sigma Performance? A. For the U. S. Post Office, 20, 000 lost articles of mail every hour? B. For an electric utility, power outages seven hours every month? C. For a major city, unsafe drinking water 15 minutes every day? D. For a major hospital, 5, 000 incorrect surgical procedures per week? E. For a major airport, 2 long or short landings every day? F. All of the above 12/13/2021 8

How is Six Sigma Different from Quality Performance? Six Sigma: • Is driven from the top of the company – including leadership commitment and involvement • Is aligned to the business strategy • Focuses on business and customer needs • Prioritizes projects on expected value • Requires businesses to track project results and financial impact for accountability • Impacts all business areas – not just manufacturing 12/13/2021 9

How is Six Sigma Different from Quality Performance? (continued) Six Sigma: • Provides methodology & tools for success • Data driven; statistically validated • Dedicates people 100% to defect reduction • Full-time Black Belts are focused only on Six Sigma for two years – leading projects, mentoring Green Belts • Emphasizes projects with a defined beginning and end • Puts support structures in place--methodology, training, defined Six Sigma roles 12/13/2021 10

Six Sigma Methodologies Implement (MET) MAIC • • • Measure, Analyze, Improve, and Control. • Improve current process, products & services • Hard savings/soft savings • 12 -month impact • Improving the game! 12/13/2021 Most Effective Technology. • Design for Six Sigma • • Breakthrough in designing new process, products & services Data Mining and Modeling • Multi-disciplinary advanced methods to extract and analyze data and model processes • Used for Op Id and in the Analyze Phase of MAIC • Making a new game! Implement best known solutions/MET for process, products & • services • Hard savings/soft savings • 12 -month impact, sometime longer • Playing & winning the game! DMM DFSS Breakthrough in avoiding cost & capital • Long-term benefits • Making a new game! 11

Six Sigma Methodologies Define MAIC IMPLEMENT Yes DFSS Involves an existing product, service or process ? DMM No Measure Analyze Is a known proven solution available ? Yes Improve 12/13/2021 1 Explore Data Mining & Modeling No Yes Implement No Are conventional data analysis or modeling tools adequate ? Measure No Can improvements close the gap between current process capability and customer requirements ? Yes 1 2 Develop 2 Implement Control Operate & Leverage 12

Six Sigma Roles & Responsibilities Business/Function Leadership Business/Functional Champion Local Champion Master Black Belt Financial Analyst ALL EMPLOYEES • Understand vision • Apply concepts to their job and work area Financial Representative Team Member/ Green Belt Black Belt/Green Belt Project Leader Process Owner Data Miner/Modelers 12/13/2021 14

Requirements for Success Commitment § Leadership support § Dedicating resources to Six Sigma implementation § Setting goals, tracking results, reporting progress Education § Providing intensive training to Black Belt and Green Belt project leaders § Providing on-line training for all employees § Designating support structure for chartering and “owning” projects We’re making Six Sigma the way we work 12/13/2021 15

Dow’s Six Sigma Implementation Journey The strategic intent of Six Sigma at Dow: Enable superior business results through the application of the Six Sigma mindset, skills and tools. 12/13/2021 16

Leadership Commitment Andrew N. Liveris President, Chief Executive Officer & Chairman The Dow Chemical Company 12/13/2021 “Dow is continuously focusing on improvement and Six Sigma is our main tool for doing so. It’s all about IMPACT – increasing productivity, meeting customers’ needs, improving technology and innovation, achieving our EH&S goals and much more. ” ---Andrew Liveris— 17

Positioning Six Sigma • It is owned and led by businesses and functions • A primary goal is creating customer loyalty as a strategic advantage • It requires a new mindset and cultural change • It will position Dow at the premier level of companies worldwide by redefining excellence in Six Sigma terms • We will leverage like no one has done before us • It is critical to Dow achieving its Vision 12/13/2021 18

Six Sigma Impact • Expected results for Black Belts • $250, 000 per project; 3 -4 projects per year • $750 M-$1 MM EBIT delivery per year/per Black Belt • Dow’s experience • Project EBIT averages exceed targeted value generation for Black Belt and Green Belt Project Leader projects • However, our projects tend to be more complex and longer than the expected 4 months • Result: annual Black Belt contribution is consistent with what is reported in the literature 12/13/2021 19

Long History of Six Sigma Collaboration • Through joint Six Sigma projects with customers we have: • Developed new products to meet market needs and new regulations • Increased productivity at customer sites • Reduced costs for customers • Improved Environmental, Health and Safety Performance • Integration and Communication between Dow and Customer Work Processes 12/13/2021 20

INNOVATE (DFSS-Enabled Work Processes) IMPROVE (MAIC) IMPLEMENT Best Practices (MET) Operate Capture and Leverage Knowledge An Evolving Approach Operate at New Standard Identified Gap Six Sigma 12/13/2021 21

Key Learnings: • Drive 3 i model earlier in our implementation • Place more emphasis on Most Effective Technology • Look at Six Sigma for productivity gains first. . . before allocating capital • Eliminate the “additive” perception of Six Sigma • Avoid recognition and symbols that would lead to the conclusion that Six Sigma practitioners represent a different “class” of employees 12/13/2021 22

What We Would Not Change • $1. 5 billion target • Focus of the Six Sigma Expertise Center • Rigor on financials • Steering team composition and structure • Ownership of Six Sigma by the businesses • Having our own curriculum with our own Master Black Belts teaching • Reinforcing the value of “Constancy of Purpose” 12/13/2021 23