Introduction to the Tools of Lean and Six Sigma (“LSS”) Yellow Belt Training

1. Introduction to the Tools of Leanand Six Sigma (“LSS”)Yellow Belt Training Building new skills to improve quality and management practices across HBD Yellow Belt Training

2. What You Should Learn Today • How We Will Teach • What is Lean Six Sigma? • Key Aspects of Lean and Six Sigma Improvement Methodologies • Overview of HBD’s Lean Six Sigma Implementation • Prior Projects’ Areas of Focus • DMAIC Methodology Overview • Tools to be Learned as a Yellow Belt Yellow Belt Training

3. How We Will Teach • Focus for Approx. 60 Minutes in Class • Deliver Pre-Class Reading Materials (“Pre-Work”) • Introduce Key Concepts for Recognition and Everyday Usage • Provide Real-life Examples and Opportunities for Discussion • Encourage Participation by All • Quiz Students to Encourage Learning and Memory Recall • Ask for Immediate Feedback and Benefits & Concerns (“B’s & C’s”) Yellow Belt Training

4. Why Teach Me This Stuff? • Culture is common thinking. • Thinking drives behavior. • Behavior drives results. • Results create opportunities and security. The Lean Six Sigma curriculum combines the discipline and analytical tools of Six Sigma with the time-based focus of Lean. Our goal is to build and enhance skills among employees that can improve quality and strengthen management practices across HBD. Yellow Belt Training

5. Why Teach Me This Stuff? (con’t) • The tools and methodologies in Lean Six Sigma are useful not only in LSS projects, but in everyday tasks. These include: • Understanding Customer and Stakeholder Needs • Identifying, Analyzing and Presenting Key Business Information • Brainstorming on, Deciding upon, and Solving Complex Issues • Revising and Simplifying Production-Related Processes • Streamlining Administrative Processes and Support Tasks • Understanding Variation • Managing Cross-Functional Projects • The more you understand what these tools are and the underlying philosophy behind them, the better you will be as an active team member in future projects. Yellow Belt Training

6. What is Lean Six Sigma?For HBD, Lean + Six Sigma = Profit Power! Per-Unit Profit = Per-Unit Price – Per-Unit Cost; Net Profit = Sales – Product Costs – Overhead Expenses Lean Six Sigma offers you the power to transform operations into flexible, efficient plants needed to profitably survive and thrive in a competitive business landscape. Yellow Belt Training

7. The Money Map Profit (or Loss) =(Unit Prices x Volume Sold) – Costs Incurred • Productivity • Efficiency • Quality • Speed • Flexibility Yellow Belt Training

8. Key Aspects of Lean • Lean is Not New • Popularized by Toyota more than 30 years ago. • Many of its tools and concepts have been around for decades. • Lean is Both Methodology and Philosophy • Lean aims to eliminate ‘waste’(in Japanese, “muda”) in every area of a business, including production, customer relations, product design, supplier networks, and factory and business administration. • Its goal is to incorporate less effort, less inventory, less time to develop products, and less space in order to become highly responsive to actual customer demand and to produce top-quality product in the most timely, efficient and economical manner possible. • Lean Focuses on Customer-Defined Value • A process step ‘adds value’ if the activity adds form, fit or function to the product that is desired by the customer, and the customer is willing to pay you to conduct that activity. Yellow Belt Training

9. Key Aspects of Lean, con’t • Toyota Defines Seven Key Types of Muda (Waste) • Overproduction: Producing more than demanded or before it is needed, e.g., stored materials or inventories. • Inventory or Work-in-Process (WIP): Material between operations due to large lot sizes or long process cycle times. • Transportation: Material movements, by definition, add no value to products, as they do not affect form, fit or function. • Processing Waste: Unnecessary or inefficient process steps simply add cost and time. • Motion: Effort to move workers and machinery or to transport materials adds cost and delay. • Waiting: Long changeover times, slow processing times, and materials handling tasks limit opportunities to make on-time deliveries. • Defective Products: Items that fail to meet customer specifications are pure waste, e.g., returns, rework, scrap, and warranty costs. Yellow Belt Training

10. Key Aspects of Six Sigma • Six Sigma is Not New • In existence for more than 20 years; at HBD since 2002. • Many of its tools and concepts have been around for decades. • Six Sigma packages the tools and concepts into a clear and systematic roadmap for process improvement. • Six Sigma is a Methodology • The ‘DMAIC’ problem-solving methodology is a disciplined thought process and tool guide used to solve business issues. • Define / Measure / Analyze / Improve / Control / (and Verify). • Variation is Bad (‘Evil’) • For most processes, a repeatable and predictable result is crucial. • Six Sigma is designed to identify the key sources of variation and drive them out of the process, by understanding the key inputs, processes and outputs of business activities. “Fix the process to get good results.” Yellow Belt Training

11. Key Aspects of Six Sigma, con’t • Six Sigma has a Customer Focus • Processes and problems must be viewed from the customer’s perspective. • Internal customers (i.e., downstream departments) can be just as important as external customers (i.e., those who pay the bills). • Six Sigma is Not Just for Manufacturing or Large Businesses • Success can be found in all types of companies and all kinds of processes – including at HBD. • AND…Six Sigma and Lean are Not Mutually Exclusive • Without a basic understanding of both methodologies, you risk trying to ‘use a screwdriver to drive a nail.’ • Ask, ‘What tool or technique is most useful to help solve my problem?’ Yellow Belt Training

12. Overview ofHBD’s LSS Implementation • LSS supports HBD’s long-standing corporate strategies • Customer Satisfaction • Marketing Excellence • Working Capital Management • Cost Reduction and Containment • LSS was introduced into HBD in 2002, first with the Executive Office and General Managers and then locally at the plants • 88 individuals in all 17 business locations trained in LSS (at 7/30/07) • Projects have successfully touched both production and back-office (paperwork) processes • 112 LSS projects initiated (as of 7/31/07) plus 29 documented kaizens • Over $6.65MM in hard-dollar and soft-dollar savings, cost avoidance, new-revenue opportunities, and working capital improvements • LSS represents one key tool for on-going improvement efforts Yellow Belt Training

13. LSS Projects’ Areas of Focus • Cost Reduction • Product and Unit Costs, Overhead and Period Expenses, Scrap and Rework • Cost Avoidance • Regulatory Expenses, Capital Equipment Needs • Capacity Increase • Production Availability, Quick Changeovers, Equipment Utilization • Customer Satisfaction • On-time Delivery, Quotation and Production Lead-time, Quality, Cost (Pricing) • Health & Safety • Ergonomics • Flow • Process Speed, Travel Distance, On-time Delivery, Lead-time • Working Capital Reduction • Finished Goods, Work-in-Process and Raw Materials Inventories • New Revenue • Revised or New Products Yellow Belt Training

14. Who’s Who inHBD’s LSS Project Teams • Corporate Champion (Nelson Law – Dublin, OH) • Helps identify possible projects; Selects / approves projects for launch • Team Facilitator (Black Belt or Green Belt) • Formally-trained team leader who guides team’s analyses and activities • Project Sponsor • Process owner with responsibility / authority over process under study • Accountable for long-term sustainability of project’s gains and results • Core Team Members (managers, supervisors, operators) • Cross-functional subject matter experts who “live with the process”; Mandated to meet regularly to make project progress • Ad Hoc Team Members (managers, supervisors, operators) • Additional subject matter experts who may be called upon occasionally for help • Supporting Supervisors, Managers & Coworkers of Team Members • Not direct part of project team activities; Must plan for / support ways to allow core team members to meet regularly Yellow Belt Training

15. Dynamics of Process Improvement:The Funnel Effect Project Charter Define Phase Ideas; Guesswork 30 - 50 Inputs 10 - 15 KPIVs Measure Phase Data; Information 8 - 10 KPIVs Analyze Phase Root Causes Improve Phase Experiments; Changes 3-6 Critical KPIVs Control Phase Documentation; Controls KPIV = Key Process Input Variable KPOV = Key Process Output Variable Optimized Process Yellow Belt Training

16. DMAIC Methodology Overview:The Five Phases of Every LSS Project • DEFINE • Define opportunity, project scope, potential benefits and resource needs • MEASURE • Determine process map and metrics; Get baseline performance levels; Define customer requirements for success; Display collected data • ANALYZE • Explore root causes of process variation, poor process flow and current underperformance • IMPROVE • Brainstorm and prioritize potential solutions; Pilot-test selected changes; Select and implement preferred solutions • CONTROL • Complete transition back to process owner; Confirm that new process is stable; Document control plans; Identify and transfer best practices Yellow Belt Training

17. Yellow Belt Curriculum Objectives • Through the Yellow Belt curriculum, every employee should: • Understand that Lean and Six Sigma are all about ensuring quality in terms of the Voice of the Customer • Understand how data analysis drives business decisions • Understand how root cause analysis drives solution implementation • Understand the basics of metrics to describe overall business health • Understand the use and presentation of data to develop insights and achieve goals • Understand the importance of identifying and controlling process variation and thus costs • Understand the application of control mechanisms to sustain changes Yellow Belt Training

18. Tools to be Learned • Team Problem Solving and Team Effectiveness (Working in Teams) • Cross-Functional Teams • Characteristics of Effective Team Meetings • Project Charters and Meeting Agendas • Voice of the Customer (Knowing What is Important) • Sources of the Voice of the Customer • Critical-to-Quality Factors and Critical Customer Requirements • Idea Generation and Grouping (Working with Ideas) • Brainstorming; Force Field Analysis • Cause-and-Effect Diagram / 6Ms; Root Cause Analysis / 5 Why’s • Affinity Diagram; Nominal Group Technique; Multi-voting • Data Collection, Analysis and Presentation (Working with Numbers) • Process and Business Metrics • Data Collection Plan • Check Sheet, Process Study Log and Other Data Collection Forms • Data Stratification and Segmentation • Histogram, Run Chart, Control Chart and Other Graphical Presentations of Data Yellow Belt Training

19. Tools to be Learned, con’t • Decision-making Tools (Working with Facts) • Pareto Analysis; Pareto Chart • Understanding and Explaining Process Variation • Cause-and-Effect Matrix and Other Prioritization & Selection Tools • Speed and Flow Implementation (Ensuring Value) • Process Mapping and Flowcharts • Value-Add vs. Non-Value-Added • 5S / Workplace Organization • Spaghetti Diagram (Workflow) and Work Cell Layout • Quick Changeover: Setup and Changeover Reduction • Pull-based Flow and Replenishment • Defect Prevention and Mistake-Proofing (Quality at the Source) • Standardized Work and Best Practices • Visual Workplace: Visual Aids and Learning Tools • Poka-Yoke (Mistake-Proofing) Devices • Preventative Maintenance (Total Productive Maintenance) • Design Simplification and Parts Rationalization Yellow Belt Training

20. Continuous Improvement through Lean Six Sigma (summary) • Observe processes • Identify problems and gather data • Determine root causes of the problems • Identify countermeasures / solutions, and • Regularly participate in activities to simplify processes and eliminate waste, unevenness, and unreasonableness. And…Practice non-blaming and non-judgmental behaviors, as these are required for realizing genuine continuous improvement. Yellow Belt Training

21. Takeaways • Every person has a hand in generating profit and, in turn, job security. • Lean Six Sigma is not solely about statistics or SPC (statistical process control) but is a very successful method to enable continuous improvement. • Lean Six Sigma provides a powerful set of problem-solving tools and team effectiveness techniques to address complex issues. • These proven tools and techniques can be used anywhere – and we do mean, anywhere! • Lean Six Sigma emphasizes team-based creativity, analytical thinking, and data-driven decision-making. Yellow Belt Training