Six Sigma for Managers TopDown Six Sigma Implementation

“Six Sigma for Managers” Top-Down Six Sigma Implementation for American Society of Quality Breakfast Meeting March 18, 2004

Two Key Aspects to Six Sigma • Methods and Tools – – Process Thinking Process Variation Facts, Figures and Data Define, Measure, Analyze, Improve and Control – 8 Key Tools • Sequenced and Linked – Statistical Tools – Statistical Software – Critical FEW Variables • Initiative – – Improvement Breakthrough Systematic, Focused Approach Right projects • Linked to business goals – Right people • Selected and Trained – Project Management • Management Reviews – Sustain the gains • New projects – Results • Process and Financials Hoerl, Roger W. , and Ronald D. Snee. (2003). Leading Six Sigma; p. 5

Six Sigma Project Outlook Practical Problem Statistical Solution Practical Solution

Key Inputs for Deployment • Strategy and Goals for Six Sigma • Process Performance Measures • Project Selection Criteria • Project Identification/Prioritization System • Deployment Processes for Champions, MBBs, etc • Roles of Management, Champions, MBBs, BBs and Functional Groups • Curricula and Training System • Project and Six Sigma Initiative Review Schedule • Project Reporting and Tracking System • Audit System for Previously Closed Projects • Reward and Recognition Plan • Communication Plan Hoerl, Roger W. , and Ronald D. Snee. (2003). Leading Six Sigma; p. 65

Keys to Successful Deployment • Committed Leadership • Top Talent • Supporting Infrastructure

The Right People Six Sigma Champions Six Sigma Leaders Black Belts Green Belts Yellow Belts Green Belts Yellow Belts Master Black Belts Green Belts Yellow Belts Six Sigma Project Team Members Each Level Drives the Team to Breakthrough Project Performance

Six Sigma Resource Definitions • Black Belts • Full Time Six Sigma Resource • 4 Weeks Initial training, plus follow-up advanced statistical training • Work 3 -4 projects Simultaneously • Mentor 5 -10 Green Belt project • Train all Yellow Belts and some Green Belts • Initially trained Manufacturing or Operations GBs • 2 Week training -- equivalent Define and Measure skills • Expectation is to complete at least 1 project per year, and then work on 2 nd project • Currently 25% of savings is from Green Belts • Evolved to DFSS, Technical Service, Transactional, Analytical and Reliability GBs • Yellow Belts • One day of training focusing on Define and Measure tools • Target team members, then future project resources

Types of Projects • Cost Reduction – – – – • Cost Avoidance – – • Reducing effects of future cost increases (disposal/environmental) Inventory Control Capital Avoidance – – • Yield and Rate Improvement Downtime Reduction/Equipment Utilization Raw Material Selection Utility Optimization (Gas, Steam, Air and Electricity) Trailer/Railcar Utilization Accounts Payable Process Corporate Credit Card Usage Plant Utilization Rate Improvement Revenue Enhancement – – Plant Capacity Improvement Tech Service Offerings

About Six Sigma at Grace • What is Six Sigma (at Grace, at Davison) – Improving business performance by improving process performance – All kinds of processes -- from mfg to corporate – Leadership, alignment, support – Objectives, financial and otherwise – Organization, infrastructure – Staffing, training (6σ staff and everyone else) – Projects, scoping, tools, review & follow-up – Results at departmental, product line. . . Grace levels – Individual mind-set, organizational culture

Davison Six Sigma Savings • Hard or EBIT savings – Revenues up – Costs down • Soft savings are – Cash Flow – Cost and Capital Avoidance EBIT: Earnings Before Interest & Taxes A project’s savings are tracked over a 12 months period.

Implementing Six Sigma in a Manufacturing Environment • • Evolution Training Resources Project selection & management Expansion Measurement Systems

Six Sigma – Evolution at Grace Sept - Oct. 1999 Champion training in U. S. and Europe January 2000 First Black Belt Wave Training Complete February 2000 First Green Belt Training (Admin) June 2000 Second Black Belt Wave Training Complete December 2000 May 2001 June 2001 December 2001 January 2002 April 2002 September 2003 Second Ops Green Belt Wave Training Complete First Yellow Belt Training Complete Six Sigma Project Hopper - 100% Utilized First Catalyst DFSS Green Belt Class Complete First German “Regional” Ops GB Class Complete Sales/Tech Service Green Belt Training

Trained Belts - Davison Goal is for each salaried employee to hold an active, engaged Six Sigma role

Project Selection & Management Process RTY studies Cp. K studies Bus. Leader Inputs Project Work Business Leader Acceptance jec t Pro ty ori Pri gh Hi Hold, Reject, or More Info Project Hopper s Champion Inputs BB/GB Follow-Up Projects BB Project Loading Evaluation (3 -4) and Assignment Project Reviews Monthly General Manager Reviews for Black Belts Monthly Plant Manager Reviews for Green Belts • Drive Project Speed • Instant Business Feedback • Opportunity to devote more resources • Understand Barriers • Opportunity to Kill a Project • Unearth additional projects

Some of the tools we use • • • Project Charter Process Map, Flowchart Cause & Effect Analysis (C&E) Failure Modes and Effects Analysis (FMEA) Statistics and Data Analysis – – – – Graphs, plots, etc. . . Multi-Vari Studies Control Charts Measurement Systems Analysis (MSA) Regression, ANOVA DOE (improve, optimize) Surface Response (improve, optimize) Process Capability • Control Plan – procedures, specifications, etc. Define Measure Analyze Improve Control

2003 Six Sigma Savings More capable savings accountability was used in 2003. Goal was to drive projects more directly and accurately to the bottom line with the use of EBIT Metrics.

Silicas/Adsorbents Tracking Cost Reduction Performance using a Control Chart Forecast • May, 2003 Started New Six Sigma Review Format • Better Six Sigma Alignment to Drive Higher Performance

Individual Project Savings • Every project must report savings monthly. • Savings accounting is reviewed by the Black Belt and Champion to insure accuracy. Expenses or Capital Investment are subtracted from the savings. • Savings are tracked for 12 months and subject to audit after one year. This drives the continuous use of the Control Plan.

Six Sigma Program Investment WR Grace (Total Commitment) • 44 GBs (2 classes) + 25 GBs (1 class) = $ 1, 000 (~ $15, 000/person) – Davison Catalyst Portion is approximately 25% - $250, 000 • • • $ 75, 000 per GB Class (External Training) – $50 K fee; $25 K travel and expense $ 25, 000 per GB Class (Internal Training) Grace has done 10 externally and 10 internally ROI: Grace Davison Catalysts (~25% of Grace) • • • Total Savings: $ 15, 000/year (60 times initial investment annually) – BB Savings (70%): $ 10, 500, 000/year – GB Savings (30%): $ 4, 500, 000/year Resources – Black Belts: ~ 20 – Green Belts: ~ 230 Annual Savings per Resource – Black Belts: $ 525, 000 per year – Green Belts: $ 20, 000 per year

Where We’re going with Six Sigma • Beyond manufacturing. . . • Administrative, Transactional, Corporate, Business processes • Sales and Technical Service • Maintenance, Reliability • Lean Manufacturing – Value Chain • Factory Physics • Customized Six Sigma Training

What the Six Sigma Project Has Accomplished Y = f (x 1, x 2, x 3, x 4, . . . xn) We begin with the “Y”: } Performance of the Y over Time Variation of the Y Process Map Initial Capability Assessment Measurement Actual variation C&E Matrix FMEA Multi-vari Reduced measurement error , “true” capability assessment ! FMEA reduces variation and effects for “inputs gone wrong” x 1, x 7, x 18, x 22, x 31, x 44, Multi-Vari identifies Noise x 57 variables and reduces the x’s for Multi-vari studies help develop association between the Y and key Xs Repeatability Reproducibility (equipment) (people / methods) The Roadmap “funnels” down the Xs from the trivial many to a “vital few” Y = f (x 7, x 22, x 57) DOEs identify the Critical x’s and their relationship to the Y Controls in place for Critical x’s

Summary • Six Sigma • Grace, and Davison • Six Sigma at Grace – – Evolution Strategic, infrastructure Tactical, execution Results • Questions. . . • Drawing. . . 30+ Inputs 10 - 15 8 - 10 4 -8 3 -6