Driving Growth, Productivity & Performance 1

KONIGs VisionWe will be a premier growth company, delivering unsurpassed customer and shareholder value through talented people and innovation.2

Year 2000 GoalsDelight customers at every opportunityMake the numbers Accelerate growth and productivity via Six Sigma

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Six Sigma:KONIGs overall strategy to:Accelerate improvements in all processes, products & servicesReduce cost of poor quality by eliminating waste and reducing defects and variations4

Why Six Sigma?Proven way to drive financial & performance excellenceEnables our business strategy by:Identifying customer needsCrafting a value propositionDesigning business models5

Why Six Sigma?Appropriate for every business & functionProvides many tools, aids, skillsPromotes fact-based decision making & breakthrough thinking6

Is Six Sigma Worth Effort?2004--$1 Million2005--$2 Million2006--$4 Million7

Sigma--Our MeasurementSix Sigma is our strategy

Sigma (s) is our measurement of quality to know how effectively we eliminate defects & variations8

Sigma--Our Measurement9Defects/millionError-free RateSix Sigma3.499.9997%Five Sigma 23399.977%Four Sigma6,210 99.4%Three Sigma 66,81093%

Why Strive for Six Sigma?If electricity worked at:4s: no lights about 1 hour/week6s: no lights about 2 seconds/weekDriving 40 miles per hour if your car operated at: 4s: 30 repair minutes every 3,000 miles 6s: 30 repair minutes every 6,000,000 miles10

Reaching Six Sigma PerformanceUse this method to solve problems:Define problems in processesMeasure performanceAnalyze causes of problemsImprove processes -- remove variations and non value-added activitiesControl processes so problems dont recur11DMAIC!

Implementing The DMAIC MethodMany tools, aids & skills help to:DefineMeasureAnalyzeImproveControl12DMAIC!

Among Our Tools ...Process MappingFailure Mode & Effect AnalysisMeasurement System EvaluationStatistical TestsDesign of ExperimentsControl Plans13

Among Our Tools Quality Function Deployment (QFD)Activity Based ManagementEnterprise Resource PlanningLean Enterprise14

Learning About Six SigmaEveryone learns basics of 6sManagers/supervisors and those responsible for processes become Green BeltsBlack Belt, Lean, Activity-Based Mgmt. and Total Productive Maintenance Experts & Masters, all available to help businesses16

Six Sigma Plus CompetenciesGreen Belt

Black Belt

Master Black Belt17

Six Sigma Plus CompetenciesLean Experts & MastersActivity Based Management Experts & MastersTotal Productive Maintenance Experts & Masters18

Sharing Six Sigma Plus KnowledgeQuest for Excellence Share best practicesImprove participants skillsCelebrate Six Sigma Plus resultsSelect Premier Achievement Award team19

Six Sigma Plus in ActionAt the warehouse:Less waste, more first quality production & greater efficiencyEmployee satisfaction increased: smoother running process eased frustration associated with equipment breakdowns.21Example!

Six Sigma Plus in ActionBetter Service: Customers benefit via use of Activity Based Management, Lean Manufacturing & other tools: And these improvements led to increased revenue & productivity for KONIG!22Example!

Six Sigma Plus in ActionAdministratively: An Industrial Automation and Control team:Reduced errors on 100,000 freight invoicesDecreased invoice cycle time from 35 to 25 days; more reductions planned using electronic invoicing23Example!

26You know my methods. Apply them.

--Sherlock HolmesSign of Four by Arthur Conan Doyle, 1890

This is our companys vision.

To be a premier growth company, we must continuously delight our customers, because without them, we have no company.

And in todays highly competitive environment, we can delight customers only by continuously improving our work processes.

To achieve our vision, we must reach these goals.

Over the years, we used a variety of different terms to describe the pursuit of excellence. Today, we include all of our efforts to achieve excellent performance under a strategy called Six Sigma Plus.

In addition, Six Sigma Plus adds new techniques and tactics.

As an overall strategy, Six Sigma Plus accelerates the dramatic changes necessary to create performance breakthroughs.

The reasons are simple: This strategy works. It is not a gamble. We have example after example of Six Sigma Plus teams that are achieving dramatic quality improvement, cost savings and growth opportunities.

Six Sigma Plus helps us use the Internet as effectively as possible as we implement E-business strategies. For example, today our company-wide on-line purchasing amounts to about $40 million a year. By 2002, we expect on-line purchases to increase to $5 billion a year. Six Sigma Plus will help us maximize the benefits of the Internet by improving the integrity of data, reducing defects and variation in processes, and speeding the flow of information and physical assets across the supply chain.

Six Sigma Plus is appropriate in every department, function and business throughout Honeywell. (i.e., Manufacturing, Administration, E-Business, Product Development, Marketing, Sales.)There are many tools, aids and skills to help support our disciplined method of solving problems.The results speak for themselves objectively.

Honeywell is investing considerable time, effort and money to make Six Sigma Plus a vital part of our corporate culture.

Is is worth it?--As you can see, the payoff is huge and can give us a true competitive advantage across all of our businesses.

Within the Six Sigma Plus strategy, the measurement we use to evaluate performance is called Sigma. Note the symbol that represents Sigma.

Sigma levels--ranging from One Sigma through Six Sigma--indicate the level of quality a company has achieved. Six Sigma is the near-perfect goal for which we strive.

The processes in a project operating at Six Sigma result in only 3.4 defects for every million opportunities in that project--or 99.9997% error-free.

If the difference between 99.4% and 99.9997% error-free performance doesnt seem like much, consider the huge difference in defects from level to level.

Most companies operate at about Three Sigma. At the beginning of 2000, Honeywell overall was at about the Four Sigma level, although many individual processes are well beyond that mark.

Four Sigma looks pretty good, and you may wonder why we bother to strive for the near-perfect goal of Six Sigma performance.As you cans see from these examples, Four Sigma performance is not good enough for critical services and activities.

And lets say a process has 15 activities and each one operates at Four Sigma. That means we lose quality at every step, because only about 91% of the finished product would be first quality the first time through. That results in a lot of rework and waste. In fact, if we could eliminate all poor quality today, it would save our company $4 billion!

You want better than Four Sigma when you buy critical products and services. So do our customers. They want Six Sigma.

Of course, no company can afford to have every single process at Six Sigma levels. Honeywell has set a goal of Six Sigma quality for processes that are critical to meeting our commitments to customers. So each of us needs to know which characteristics of products or services our customers want at Six Sigma levels and which processes must be at Six Sigma levels to meet those requirements.

Then we must use a disciplined method to make sure we understand what needs to be done.

To achieve Six Sigma, we must approach every problem the same logical way, using the concepts described in this slide: Define, Measure, Analyze, Improve and Control. We sometimes refer to this as DMAIC.

When we use this DMAIC method effectively, we understand the problems in existing processes. We know where and how we fail to delight customers in the areas of cost, quality and service. We know where our waste or rework is, what slows our processes and what it will take to speed them up.

By the way, you will see the term variation on the slide. This means a defect, or a deviation from the ideal results of a process. You might wonder what we need to do in order to define, measure, analyze, improve and control.

The beauty of Six Sigma Plus is that there numerous tools, aids and skills to help at each step of the way, depending on the process we are trying to improve and the problems we uncover.

In fact, Honeywell has the most comprehensive set of aids available at any company, anywhere, to enhance performance.

Thats like giving a good cook a well-stocked kitchen. Imagine the possibilities!

Here are some examples of the Six Sigma Plus tools:

These tools may sound complicated, but theyre really not. They are logical, structured ways to attack a problem. Some help identify problem areas or anticipate future needs. For example:Process Mapping allows teams to identify the order of events in providing a product or service, eliminate waste, uncover problems and compare the ideal work flow to what actually happens at work.Failure Mode & Effect Analysis helps identify likely process failures, minimizes their frequency and provides better detection of factors leading to failure.Measurement System Evaluation helps assess measurement instruments to better separate important process variation from measurement noise.Statistical tests help separate significant effects of variables from random variation.Design of Experiments identifies and confirms cause & effect relationships.Control Plans allow us to monitor and control processes to maintain the gains that have been made.Here are some other powerful improvement tools:

Quality Function Deployment is a tool for defining what is important to customers.

Activity Based Management helps us view product and process costs in a comprehensive and realistic way--and subsequently manage them better--by studying the activities that create the costs in the first place.

Enterprise Resource Planning uses special computer software to integrate, accelerate and sustain process improvements throughout an organization.

Lean Enterprise skills increase understanding of actions essential to achieving customer satisfaction. These skills simplify and improve work flow, help eliminate unnecessary tasks and reduce waste throughout a process.

Honeywell has a very specific program to help every organization learn the skills necessary to implement our Six Sigma Plus strategy. This includes a course for all employees on how to use Six Sigma Plus fundamental tools.

And we expect managers, supervisors, and those professionals who have responsibility for a process to become certified as Green Belts.

In case youre not familiar with the terms we use to designate Six Sigma Plus expertise, heres a brief overview:Green Belt--A person with working knowledge of Six Sigma Plus methodology and tools, who has completed six days of classroom learning and a project with high-impact business results.

Black Belt--A highly skilled Six Sigma Plus expert who has completed four weeks of classroom learning and, over the course of 4-6 months,demonstrated mastery of tools by completing a major process improvement project. Black Belts also train and mentor Green Belts.

Master Black Belt--The Six Sigma Plus expert who is most highly skilled in the methodologies/tools of variation reduction. After a year-long project-based certification program, Master Black Belts train and mentor Black Belts, help select and lead high-value projects, maintain the integrity of the Sigma measurement, and develop Six Sigma Plus learning materials.

Lean Expert--A person who has completed 4 weeks of Lean training and 1 or more projects demonstrating significant, auditable business results and the application of Six Sigma Plus Lean tools. Lean Experts teach Lean methods and lead teams. Lean Master--A person highly skilled in implementing Lean principles and using Lean tools utilization. Certification involves a year of intense study and practice in advanced Lean tools, teaching, and mentoring.

ABM Expert--A person proficient in ABM through a business project involving product costing, process costing, or customer profitability analysis. Certification involves attending the ABM training course, defining a meaningful project, displaying knowledge of the ABM tools and using the data for key decision making. ABM Master--A person with all the skills of an expert plus the ability to develop and deliver ABM learning courses. Certification typically takes a year and involves demonstrating the use of ABM data for multiple purposes with repeatable and sustainable results.TPM Expert--A person who applies Total Productive Maintenance (TPM) and reliability methodologies / and tools to assist and/or lead teams in optimizing asset capacity-productivity at minimum life cycle cost. A TPM expert is responsible for determining critical equipment and measuring its overall effectiveness, thus enabling growth and productivity through optimum asset utilization. who can work in any environment. TPM Master--An individual highly experienced using TPM and reliability tools/methodologies. Responsibilities include assisting leadership in identifying high leverage asset improvement opportunities; leading critical, high leverage improvement projects, and leading cultural paradigm shifts from reactive to proactive asset management.When you hear the term QFE, that stands for Quest for Excellence, Honeywells annual events to advance Six Sigma Plus continuous process improvement learning. Through the Quest events, our businesses share best practices for growing revenues and minimizing costs.

Hundreds of teams around the world, involving thousands of employees, participate in local and business-level events, vying for the right to represent their business or function at one of the annual Quest events. Customer and suppliers often take part as team members.

Three Quests are held annuallyin the Americas, European (including Africa and the Middle East) and the Asia-Pacific regions. At each, one team earns the companys highest employee honor, the Premier Achievement Award.

Six Sigma Plus doesnt promote the same techniques used by the fictional detective Sherlock Holmes to solve murder cases in London in the 19th century.

But like this legendary sleuths tactics, the Six Sigma Plus strategy achieves consistent, reliable results.