“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 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 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 Hoerl, Roger W., and Ronald D. Snee. (2003). Leading Six Sigma; p. 5

Six Sigma Project Outlook Practical Problem Statistical 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, BBs, 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 Black Belts Green Belts Each Level Drives the Team to Breakthrough Project Performance Six Sigma Leaders Master Black Belts Six Sigma Champions YellowBeltsYellowBeltsYellowBeltsYellowBeltsYellowBeltsYellowBelts Six Sigma Project Team Members

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 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 2nd 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 Six Sigma Resource Definitions

Types of Projects Cost Reduction –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 Cost Avoidance –Reducing effects of future cost increases (disposal/environmental) –Inventory Control Capital Avoidance –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 Projects Project selection & management Expansion Measurement Systems

Sept - Oct January 2000 February 2000 June 2000 December 2000 May 2001 June 2001 December 2001 January 2002 April 2002 September 2002 September 2003 Champion training in U.S. and Europe First Black Belt Wave Training Complete First Green Belt Training (Admin) Second Black Belt Wave Training Complete 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 Complete Analytical Green Belt Training Complete Reliability Green Belt Training Scheduled Six Sigma – Evolution at Grace

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

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

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. D efine M easure A nalyze I mprove C ontrol

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

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

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) = $ 1,000,000 (~ $15,000/person) –Davison Catalyst Portion is approximately 25% - $250,000 $ 75,000 per GB Class (External Training) –$50K fee; $25K 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: $ 15,000,000/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

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