1. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Financial Workshop May 11, 2006

2. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 1 Workshop Goals An introduction to the Finance Role in a typical Lean Sigma deployment An understanding of the Roles and Responsibilities in our deployment Sharing of ideas and examples from other Six Sigma deployments -Financial policies -Templates -Benefits calculations -Benefits measurement -Project identification, scoping and chartering -Roles & responsibilities -Reporting -Etc.

3. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 2 Introductions Welcome Please tell us... -Your Name -Location Represented -Expectations for this session

4. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 3 Agenda Morning: -Introductions & Opening Comments -Finance Policies: Finance Champion Workshop Considerations / applicability at Voith Financial Policy breakout session – applicability / considerations at Voith -Project Chartering: Introduction to advanced project chartering techniques / considerations Afternoon: -Project Chartering: Review Voith project examples Breakout session – how to improve examples -Review Financial Analyst Training module -Introduction to Benefits Calculator Template tool -Questions & Answers -Wrap-up

5. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 4 Finance Overview Finance Guidebook Finance Champion & SSA Finance Manager Workshop – engage Businesses & Deployment team Establish principals, standards & guidelines Charter Template Financial Guidelines Assumptions, rates, standards Soft Benefits Cost avoidance Cap. Ex. Projects Long-term benefits WACC/Cash Flow projects Benefits measurement period (start/stop) Budget adjustments Benefits validation – audit Reporting Financial Analyst Training Finance Champion & SSA Finance Manager Workshop – FAs bring projects Black Belt Projects

6. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Finance Champion Workshop (Finance Policies and Processes)

7. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Note – This module begins with a one-on-one face-to- face workshop between the Client Finance Champion and the assigned SSA Finance Manager. It continues throughout the deployment planning period with a series of discussions. The final output is a collection of financial guidelines and processes. These outputs are captured in a customer-specific LSS Finance Handbook that is written by the Customer Finance Champion or designee with input from SSA Finance. This Handbook is written for the audience of Belts, Financial Analysts, and the Deployment Team. The content of this module addresses those policies and processes which must be defined. The specific content of each section is an example of one way that it can be done. Each client will customize their policies and processes.

8. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 7 Finance Policies and Processes Module Content Finance Roles and Responsibilities SigmaLean Project Benefit Policies - What Counts? - What Doesn’t Count? - How to Calculate Certain Project Benefits - Company Financial Standards SigmaLean Financial Processes - Project Closure - Benefit Recording and Auditing Results - SSA Payment Benefits Measurement and Monitoring -Data Base Requirements -Project-related Decisions Deployment Reporting Project financial documentation -Charter -Amendment -Closure Financial Guidebook Financial Analyst Training

9. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 8 Roles and Responsibilities Finance Finance serves as the financial advisor to SigmaLean project teams and supports Black Belts, Green Belts, Champions, and Process Owners in their efforts to identify, prioritize, select and drive projects that will provide maximum value for COMPANY Finance must establish an ongoing communication process with Black Belts, Green Belts, Champions, and Process Owners to ensure that any significant changes in the status and or assumptions of SigmaLean projects is promptly reported to management and reflected in the latest plans and forecasts.

10. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 9 Roles and Responsibilities Role Of Finance Champion The Finance Champion is a member of the Client Deployment Team and is responsible for overall coordination of the program from a financial perspective -Establish SigmaLean Financial Policies and Document in Financial Handbook -Establish Financial Processes and Document in Financial Handbook -Establish and manage a community of Financial Analysts to support the Deployment -Develop and Deliver Financial Analyst Training -Monitor Project Financials and Anticipated Close Dates -Prepare Deployment Forecast for Closed, Active and Future Projects -Report Consolidated Benefits for Closed Projects -Audit Project Benefit templates as necessary The Finance Champion also works with the Belts and with the Financial Analysts at a project level (as needed) to -Estimate Benefits Prior to Project Approval -Understand and report any significant changes in benefits or anticipated end dates throughout the project cycle -Approve project for closure after MBB and Process Owner

11. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 10 Roles and Responsibilities Role Of Financial Analysts During charter development and as project progresses through DMAIC stages -Assist Belts in accessing and interpreting source financial data (G/L, Budgets, etc.) -Assist Belts in summarizing project benefits and cost -Approve charter and forward to the Finance Champion -Review project benefit estimates and anticipated close date with the Finance Champion as necessary During the Control phase -Work with Belts to verify and validate project results -Approve closing documentation and forward to the Finance Champion -Review with the Finance Champion as necessary After project completion -Provide support to Process Owner or the Belt to monitor and validate ongoing benefits

12. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 11 Define Measure Black Belt /Master Black Belt Finance Steering Committee Review assumptions and high level estimates, Consider up-stream/down- stream effects Categorize as hard/soft benefits Review measurement methodologies Identify appropriate sources and uses of financial data to measure, estimate and validate as project progresses Analyze Improve Control Review Approve or re-direct Draft Charter High Level Problem statement, process definition, potential financial benefits and cost Engaged by Black Belt as needed to update measurements, financials, completion dates Update Charter as necessary while progressing through project phases. Engage Finance, Project Owner as needed. Request Steering Committee Approval if Method of measuring benefits OR significant change to benefits forecast is required. Validate actual benefits with Black Belt/Master Black Belt Update forecast if necessary Sign-off Project Implements Control Plan Validates benefits with Finance Presents to Steering Committee for Sign-Off Review Approve or re-direct Charter Originator DMAIC Process Map – Finance Project Selection Draft Charter Process Owner Sustain Long Term Project Benefits Utilize Ops reviews Finance Champion Approves as Steering Committee Member

13. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 12 Connecting Dollars to Defects … Sigma Lean will help you find and eliminate defects. Y By eliminating defects the company’s bottom line will improve. Defects Dollars

14. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 13 Dollars to DefectsDefectDollars 3rd Party Logistics processing times in excess of 1.2 days Increased sales (customers not canceling orders because of delays) Reduced expedited shipping costs Non Value Added activity in manufacturing process Overtime cost Leased computer equipment not recovered at end of lease Lease buy-out cost of un-recovered PCs & LapTops Customer accidents (slips, trips & falls)Cost of associated accident claims Sales Rep. Effectiveness (close rate) below 12% Increased sales

15. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 14 Quality engineering and administration Inspection/test (materials, equipment, labor) Expediting Scrap Rework Rejects Warranty claims Maintenance and service Cost to customer Excess inventory Additional labor hours Longer Cycle Times Quality audits Vendor control Lost customer loyalty Improvement program costs Process control Opportunity cost if sales greater than capacity Classical Cost Of Poor Quality Categories Most Losses Not Readily Seen Retrofits Downtime Service recalls Redesign Brand reputation Lost Sales Poor product availability

16. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 15 SigmaLean Project Benefit Policies What Counts? It is the responsibility of the Finance Champion to establish and document the policies to be followed when determining the net financial benefit of the individual SigmaLean projects. Company’s generally place value on “Hard Benefits” (P&L impact) and Cost Avoidance. “Soft Benefits” are often noted on the Project Charter but are generally not quantified. Project implementation costs are netted against project savings to determine net project benefits. –The Belts salary, benefits, travel, etc. to complete the project are not deducted to determine net project benefits, nor is any fee paid to SSA.

17. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 16 SigmaLean Project Benefit Policies What Counts? Hard Benefits -Hard benefits flow to Operating Income (OI) and the impact can be traced to specific Financial Statement line items. -Hard benefits result from such things as a reduction in headcount, labor rate reductions, reductions in material usage or cost, or an identifiable increase in revenue. Examples of Hard Benefits -The elimination of a position in department XYZ previously dedicated to correcting errors in a particular process once the defects have been eliminated or reduced. -An improvement in customer retention rate within the XYZ area resulting from the implementation of a simpler process, which allows more competitive rates to be offered to this specific customer segment driving an identifiable increase in revenue. -A reduction in the amount paid to a vendor supplying COMPANY with transportation services resulting from a decrease in the number of collection and delivery runs.

18. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Voith Finance WorkshopPg 17 SigmaLean Project Benefit Policies What Counts? Examples of Hard Benefits -A reduction in the number of manual reconciliations performed in department XYZ, requiring fewer temporary employees. -A productivity improvement in the process that allows for fewer overtime hours within the department. -Process Improvements of 70% in the XYZ Department result in the need for 6.2 fewer FTE. There are no part time employees and no overtime. The project benefit is calculated based on the salary and benefit savings of the 6 redeployed or severed