“Six Sigma for Managers” Top-Down Six Sigma Implementation for American Society of Quality

1. “Six Sigma for Managers”Top-Down Six Sigma ImplementationforAmerican Society of Quality Breakfast Meeting March 18, 2004

2. 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 Two Key Aspects to Six Sigma Hoerl, Roger W., and Ronald D. Snee. (2003). Leading Six Sigma; p. 5

3. Six Sigma Project Outlook Practical Problem Statistical Problem Statistical Solution Practical Solution

4. 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

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

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

7. 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 • 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 workon 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

8. 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

9. 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

10. Davison Six Sigma Savings • Hard orEBIT 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.

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

12. Six Sigma – Evolution at Grace Sept - Oct. 1999 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

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

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

15. Some of the tools we use Define Measure Analyze Improve Control • 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.

16. 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.

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

18. 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.

19. 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

20. 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

21. The Roadmap “funnels” down the Xs from the trivial many to a “vital few” Multi-vari Multi-vari studies help develop association between the Y and key Xs Reproducibility (people / methods) What the Six Sigma Project Has Accomplished We begin with the “Y”: Process Map Y = f (x1, x2, x3, x4, . . . xn) } Performance of the Y over Time Initial Capability Assessment C&E Matrix Variation of the Y FMEA FMEA reduces variation and effects for “inputs gone wrong” x1, x7, x18, x22, x31, x44, x57 Actual variation Measurement variation Multi-Vari identifies Noise variables and reduces the x’s for DOE Repeatability (equipment) Y = f (x7, x22, x57) DOEs identify the Critical x’s and their relationship to the Y Reduced measurement error , “true” capability assessment ! Controls in place for Critical x’s

22. 30+ Inputs 10 - 15 8 - 10 4 - 8 3 - 6 Summary • Six Sigma • Grace, and Davison • Six Sigma at Grace • Evolution • Strategic, infrastructure • Tactical, execution • Results • Questions... • Drawing...