Objectives:

1. To develop and implement Quality Audit within The XYZ Company Objectives: Background Effective execution of our requirements through the consistent execution of quality audits throughout manufacturing Impact: Assumptions: The Quality of our products and processes is a critical component of the XYZ Company Compliance to our performance requirements will deliver products meeting our customer and consumers needs

2. DMADV Storyboard

3. D M A D V Auditing Project – Objective • To develop and implement processes for Quality • Audits of: • All facilities and operations on an annual basis • Suppliers – Major Product Suppliers Auditing Project – Opportunity Statement Monitoring and refining our quality assurance processes are critical elements to maintaining the quality standards of our products as expected by our customers and consumers. There is an opportunity to achieve greater consistency in our governance responsibilities through an audit program addressing the basics of the manufacturing processes.

4. D M A D V Preliminary Project Objective: • By January 1, 2005, To develop and implement processes for: • Quality audits of Manufacturing facilities • Environmental and Occupational Health and Safety Audits for manufacturing facilities

5. D M A D V Audit Program –Process Macro Flow Processes Req./ Contract New Product Introduction Distribution Customer Service Core Planning Marketing Production Logistics Sales Communicate Business Plans Execute Plans Evaluate Performance Business Environmental Data Develop Plans Level 1 Execute Audit Plan Determine Audit Needs Report Audit Performance Secure Resources Level 2

6. D M A D V Identify Facilities Schedule Audits Audit Level 2 Process: Project Scope Auditors BU/QD Supplier Operating Division Schedule Prepare Collect information and protocols Complete Logistics Conduct Conduct on-site evaluation including audit close-out Confirm findings Report Issue Audit Reports to Facility and Division Issue Audit Summaries CAP Develop and submit CAP Execute CAP Review CAP Project Scope Audit Close-out: Confirming the status of the corrective actions taken against the findings of previous audits.

7. For our team to get a common understanding, please tell us how you interpret the term “Quality Auditing”? What do you see as the attributes of a successful Quality Audit program? What are the top 3 attributes in order of importance? How would you measure whether a Quality Audit program meets your expectations on these top 3 attributes? D M A D V Audit Project – Interview Questions Identified key attributes of the program • What are your top 3 issues related to Manufactured Quality in your organization today? • Do you see a Quality Audit program helping to resolve these issues? • If so, how do you see a Quality Audit program helping to resolve these issues? Identified needs arising from current challenges • What information should a Quality Audit program generate for your organization? • How will this information be used within your organization? Identified informational needs and attributes • Is there anything else you would like to share with us? “Catch all”

8. D M A D V Audit Project – VOC Analysis • Extracted solutions, issues and needs from interviews • 253 need statements transcribed to Post-it notes • Post-it notes color coded by customer segment • Top needs from each customer highlighted • Needs affinitized and sorted using tree diagrams All customers needs and priorities were similar

9. D M A D V Tracks Criteria Design Method Project Size Cost Discovery Potential Process Knowledge Gap to Be Closed PMIS small least least highest Small moderate QFD medium large moderate moderate moderate moderate large Benchmarking medium large high moderate high low large Audit Program – Project Track QFD (Quality Function Deployment) Track selected for current project

10. D M A D V Audit Project – New Process Objective • To develop and implement a program for Quality Audits of all Manufacturing facilities and operations on an annual basis that: • Is reliable • Audits the right things in the right places • Has actionable outputs

11. D M A D V CTQ Design Ideas Clearly identify where the current and potential risks and problems • In-depth standardized audit modular protocols for systems and compliance • Determine audit schedule, type, content and team appropriate for the auditee in collaboration with local BU/Division Independent Audits • Internal validation process • Use external auditors only • Interdivisional audit teams Locally Relevant • Incorporation of Division Quality representative in audit team • Audit expertise at BU level to implement and adopt locally • Audit budget is owned at BU level to enable local initiative and adoption • Linked to ISO certification where appropriate Fair audits • Auditor certification Verification of completeness of Corrective Action • System for reporting status of findings and corrective actions • Corrective action escalation procedure Consistent audits • Decision criteria and process for consistent ratings of individual findings and overall facility performance Externally accepted audits • Audit program certified by recognized 3rd party - Mechanism for benchmarking against other companies to establish competitive advantage Complete Communication • Audit reporting roll-up process Audit Project – Design Ideas

12. D M A D V Our Audit Program – QFD

13. D M A D V Audit Project – Trade-offs “Inclusion of Division QA in audit team” and “Convertible Rating System” conflict with other design elements Top 6 design elements have no conflicts and are synergistic Potential synergies and conflicts between design ideas identified

14. D M A D V Audit Program – FMEA Routine for considering the incorporation of local needs into Audit program Mix of Internal and External auditors enables annual audits of all manufacturing operations Top design requirements tested for failure and countermeasures incorporated in design

15. D M A D V Audit Program – Process Flow Audit planning designed in accordance with ISO 19011 Report Audit Performance Determine Audit Needs Execute Audit Plan Secure Resources Level 2 Establish Current Status Identify Audit Type Identify Audit Team Required Level 3 Schedule Audits • Identify number of plants to be audited and location • Establish maturity of facility and rank operations based on potential risk. (Based on Division assessment against established criteria) • Determine audit type required based on facility maturity • Determine additional auditing needs (obtained by use of the collaborative routine established in the GAP) • Determine the preferred audit timing from the Divisions • Select the audit team • based on: • Qualification • Right process knowledge • Location of auditor • Language ability • Availability • Lead Auditor • Develop audit schedule: • Schedule systems audits based on auditee’s readiness and auditor availability • Firm scheduling of compliance audits (prioritized based on risk profile) • Draft Schedule indicates: • Availability of auditee • Duration and type of audit • Timing of audit & team who will conduct audit • Confirmation of schedule • Communication of final schedule • IT Enablers: • Searchable Auditor and Operation Databases • Scheduling Software How Much: 80% of time match audit type to auditee; 100% match of audit team on process knowledge; In 2004 at least 50% of audits conducted with fully certified auditors; 2005 onwards 80% of audits conducted with fully certified auditors Firm scheduling routines to have the right team at the right location conducting the right audit

16. D M A D V Audit Program – Process Flow Selection, training and evaluation of auditors consistent with ISO-19011 Report Audit Performance Determine Audit Needs Execute Audit Plan Secure Resources Level 2 Certification Maintenance Selection Training Certification Level 3 • Select using criteria for: • Personal Attributes • Education • Related experience • Train auditors in: • Audit principles • Audit execution • ISO Lead Assessor • Process Technologies • Business Processes • Quality Management System (ISO-9000) • Laws and regulations Certify auditors Certification criteria Periodic re-training and evaluation • How much: • By 31 January, 2004 • 80 % of internal auditors recruited/transitioned • 100% of external audit service providers identified • How much: • 80% of auditors trained by end of June 2004; • 100% of auditors certified to ISO Lead Assessor by 31 January 2005 • How much: • 80% of auditors and 100% of lead auditors certified • Certification criteria by 31 December 2004 How much: Maintain steady state of 80% of auditors and 100% of lead auditors certified Auditor Certification Program - Internal and external auditors have the right skills and competences

17. D M A D V Audit Program – Process Flow Report Audit Performance Determine Audit Needs Execute Audit Plan Secure Resources Level 2 Audit execution designed to meet ISO-19011 guidelines Level 3 Perform Plant Audit Plan Plant Audit Standardized protocol module for planning, execution and reporting of individual audit outcomes Standardized modules to evaluate compliance of processes and systems during individual audits Includes Decision criteria and process for consistent ratings. • IT Enabler: • Electronic Protocol Distribution • How Much: • 100% of 25-30 Compliance modules completed by January 1, 2004 • 100% of 14 Systems modules completed by June 1, 2004 • 100% of Manufacturing Operations audited by 31 December, 2004 Sub-Team with geographic representation, to compile, review and standardize modules. In-depth protocols and decision criteria deliver consistent and fair audits

18. D M A D V Audit Program – Process Flow Audit reporting activities designed to meet ISO-19011 Report Audit Performance Determine Audit Needs Execute Audit Plan Secure Resources Level 2 Summarize Audit Data Communicate Detailed Audit Findings Communicate Summarized Information Level 3 • Detailed Audit report issued to Auditee that identifies critical and systemic risks • Auditee uses report information to drive program improvement • Formalized communication of high risk findings to appropriate management levels. • Gather, analyze and trend data to create a summary report that includes identification of high risk issues, status of corrective action, successful practices and learnings. • Audit summary to provide comparative data of Division / BU performance against our performance. • Incorporate reporting of audit information into established management routines for Quality performance at the BU level. Information can be used to drive resource allocation at the BU and Division level. • Audit summary provided to BOD. Information will be used as input to resource allocation, and greater understanding of the risks in the organization. • IT Enabler: • Searchable Audit report Database How Much: Provide bi-monthly reports for BOD meetings; provide monthly reports to Executive Committee, Quality Division and BU/Vision heads by February 5, 2004 Actionable audit information available - Auditee to BOD

19. Detailed design ideas related to the process flow generated through: High level design review with extended team Surveys Quality Managers) Idea generation within the Core Team D M A D V Audit Program – Detailed Design Ideas QUALITY AND TECHNICAL Audit SURVEY As you are aware, a team under the sponsorship of Jim Power is working to design a Quality Audit program for implementation beginning January 2004. The immediate focus is the program design for audits of Manufacturing Operations. Early on in the project, SBU heads, Division Presidents and other senior leaders were surveyed. Their expectations for the program are: It is reliable Audits the right things in the right places The program design requirements to meet these high level needs are: Certified auditors Match audit type and audit team appropriate for the auditee’s facility status, in collaboration with local BU/Division Standardized, modular, protocols and work aids for Systems and Compliance audits Decision criteria and process for consistent ratings of individual findings and overall facility performance Audit program certified by recognized third party to ISO 19011 Combination of external/internal audit teams

20. D M A D V Audit Project - Determine Audit Needs QFD #1 High Level Design Elements Detailed Design Options QFD #2 CTQs Preliminary Flowchart High Level Design Elements Final Flowchart Error Proofing Productivity Analysis Value-Added Analysis Detailed design options selected, flowcharted and measures identified

21. D M A D V • Recordkeeping • Plant maturity and operational data • Audit reports • Field for high risk, corrective action status and successful practices • Status of corrective action receipt • Audit schedule status • Search of reports by: • Risk • BU • Division • Auditor Capability • Personnel information: • Education • Work Experience • Auditor training • Auditor experience • Auditor qualifications (incl. Auditor Certification status) • Auditor internal/external • Languages, nationality, location • Course and skill profiles • Filter/search capability Audit Program – Features of Electronic Management System • Document Management • Audit program, management of procedures and modules, incorporating: • Document creation • Document review • Document distribution • Document archiving • (Above done with electronic workflow) • Document revision • Document approval • Document control This functionality is available with current solutions and/or off-the-shelf software

22. Conclusions: Improved consistency in applying the definitions Auditors did not have a good understanding of the findings used (and/or lack of context or different context) Most auditors did well with the audit format Next Steps: Incorporate above into development of ongoing Auditor Training and Calibration exercises (already built into Auditor Development and Certification) D M A D V Individual Ratings - Revalidation Exercise

23. D M A D V Mfg. Manufacturer

24. Summary • The Design was completed on schedule and full scale implementation began January 5, 2005 • Preliminary results indicate all CTQs will be met • An estimated $2.0 million in cost saving from improved productivity and global contracting • Audit process design can be created and implemented in 4 months