6/11/90-06110-5

GOALS

METRICSSOLVING

IS

QUALITY IMPROVEMENT PROCESS

culture scorecard

projectsPROBLEM

TOTAL QUALITY MANAGEMENTArt Schneiderman

Analog Devices

ANALOG DEVICES "at a glance"

Nolan-Norton, July 19, 1990

c. 2/13/90-PREZ_1

Analog Devices at a Glance

• Headquartered in Norwood

Massachusetts

• Publicly Held (NYSE Symbol ADI)

• $453 Million in Sales (FY1989)

• 48% of Sales Outside United States

• 5200 Employees Worldwide

c. 1990-PREZ-1a

ANALOG DEVICES AT A GLANCE

Products: ICs, assembled products, subsystems

Applications: precision measurement & control

Markets: data acquisition

Integrated supplier

(cont)

40% industrial/instrumentation30% military/avionics13% computer17% other

designmanufacturing (8 locations)direct sales (100 locations)

4/8/90-QIP-15a

ADI CORPORATE QIP COUNCIL

Jerry Fishman

Kozo Imai

Larry LaFranchi

Bill Manning

Art Schneiderman, Chairman

Ray Stata

Tom Urwin

MEMBERS:

CHARTER:QIP Goals Deployment

QIP Organization

priorities

Training Juran

Monitoring metrics

Incenting/Rewarding

Suzanne Thomson

Executive VP

VP, Japanese Operations

Operations Controller

Division GM

VP, Quality/Productivity Improvement

Chairman of the Board and President

VP, European Operations

Director, Training & Development

Doug Newman VP, Sales and Marketing

Goodloe Suttler Division GM

c. 1990-PREZ-11

1989 Top Customers WorldwideCustomer Bookings

$MCumulati

ve%

IBM (US, Japan & France) 26.8 6.0GE/RCA 10.5 8.3Fuji (Japan) 10.3 10.6HP (US, UK & Germany) 9.1 12.6Honeywell (US, Germany) 7.4 14.2General Dynamics (US) 5.4 15.5Raytheon (US) 5.1 16.6Siemens (US, Germany) 5.1 17.7TI (US) 4.1 18.6Mitsubishi (Japan) 4.0 19.5Fujitsu (Japan) 4.0 20.4Toshiba (Japan) 3.7 21.1Marconi (US, UK) 3.6 22.0Hughes (US) 3.4 22.8Rockwell (US) 3.3 23.5Hitachi (Japan) 3.3 24.3Westinghouse (US) 3.1 25.0Philips (US, Europe) 3.1 25.6Motorola (US) 3.0 26.3DCASR (US) 2.7 26.9

6/11/90-06110-4

CUSTOMER PREFERENCE RATINGSD/A and A/D CONVERTERS

Source: EDN, 1/90

Analog DevicesBurr-Brown

NationalMotorola

PMILinear Technology

MaximIntersil

TISignetics

HarrisTRW

AnalogicCrystal

Teledune Philbrick

1 2 3 4 5

Preferencemostleast

2/16/90-02140-1

TOP 10 MIXED SIGNAL IC SUPPLIERS

Source: VLSI Research

ADINEC

NationalTI

PhilipsToshiba

HitachiMatsushita

SanyoMotorola

0

50

100

150

200

250

300Sales $M

RMS=1.4

c. 2/13/90-PREZ-10

PROJECTED WORLDWIDE GROWTH RATES

1987-1992

Electronic Equipment

Semiconductor Sales

ADI's Growth Goal

0

5

10

15

20

25

avera

ge a

nn

ual gro

wth

rate

, %

/year

11%

13%

20%

3/11/90-03110-1rev 4/8/90

GOALS

METRICSSOLVING

IS

QUALITY IMPROVEMENT PROCESS

culture scorecard

projectsPROBLEM

c. 1/17/89-?/3/12/90-03120-2rev 4/8/90

CUSTOMERS

EMPLOYEES

partnership growth

returnSTOCK-HOLDERS

ADI's

BUSINESS

OBJECTIVES

capital

ADI's CONSTITUENCIESMETRICS

IS

culture scorecard

projects

GOALS

SOLVINGPROBLEM

c. 1/17/89-AMS-5rev. 4/8/90-04080-2

METRICS

ISculture scorecard

projects

GOALS

SOLVINGPROBLEM ADI QIP GOALS

MARKET LEADERSHIP (RMS)

REVENUE GROWTH

PROFITABILITY

BE RATED #1 BY OUR CUSTOMERS

TOTAL VALUE DELIVERED

PRODUCTS

DEFECT LEVELS

ON-TIME DELIVERY

LEADTIME

PRICE

RESPONSIVENESS

TIME TO MARKET

PROCESS PPM

MANUFACTURING CYCLE TIME

YIELD

BUSINESS

OBJECTIVES:

DRIVERS:

EXTERNAL LEVERS:

INTERNAL LEVERS:

IN

Source: Kenzo Sasaoka, PresidentYokagowa-Hewlett-Packard 7/84

Process Quality Improvement (Dip Soldering Process)

Counter Action I

Counter Action IIICounter Action II

%

ppm

0.4%0.4

0.2

0.1

0.3

0

Failure R

ate

11 1 4 7 10 1 4 7 10

Masking MethodImprovement

Omit Hand ReworkProcess

40ppm

Dip Solder wasmade to oneworker job

Basic WorkingGuide Manual

Revision of ManufacturingEngineering Standards

PC Board DesignInstructions 3ppm

78 79 80 81 82 FY

10 1 4 7 10 1 4 7 10 1 4 7 10 month

40

20

10

0

30

12/12/85-ZD4

YOKOGOWA HEWLETT PACKARD

60483624120

Failu

re R

ate

%

1

.1

.01

.001

.0001

months

10,000

1,000

100

10

1

PPM

50 % improvement each:3.6 months

Dip Soldering Defects

3/19/87-imp-9rev. c. 1989-hflf-2

PROPOSED HALF-LIFE MODEL VALUES

PROJECT TYPE

EXAMPLES

MODEL HALF-LIFE

EXPECTED RANGE

uni-functional

cross-functional

multi-entity

operator errors

WIP

new product cycle time

outgoing PPM

vendor quality

warranty costs

3

9

18

0 to 6

6 to 12

12 to 24

MONTHS

6/11/90-06110-1rev. 5/28/91

hi

med

low

himedlow

Org

aniz

ati

onal C

om

ple

xit

y

Technical Complexity

1 3 5

7 9 11

14 18 22

TARGET HALF-LIVESmonths

3/12/90-03120-3rev 5/27/91

THE DEMING CYCLE

GOALS

METRICS

ISculture scorecard

projectsSOLVINGPROBLEM

PLAN

DO

CHECK

36

18

927

MPI

HALFLIFE

SU

ET

S

OC

E

RS

L

R

P

S

ACT

2/18/90-02180-2

Embodies the concept of KAIZEN

Easy to understand

Makes sense

Data not negotiation based

Accepted by line organization

Works

Hard to understand

Doesn't reflect where we need to be

Hard to use

manual vs. computerized

assumes instant startup

assumes constant rate of learning

focuses on results not processfocuses on results not process

realistic

"...the rate at which individuals and organizations learn

may become the only sustainable competitive advantage..."

Ray Stata

Supporters Critics

ADI RESPONSE TO HALF-LIFE CONCEPT

2/19/90-02190-1arev 5/28/91

1 3 5 7 9 11 13 15 17 19 21 23 25 27 290

0.5

1

1.5

2

2.5

3

months

defect level

SAMPLE IMPROVEMENT CURVE

linear scale

2/19/90-02190-1rev 5/28/91

1 3 5 7 9 11 13 15 17 19 21 23 25 27 290.1

0.2

0.3

0.5

1

2

3

months

defect level

SAMPLE IMPROVEMENT CURVE

logarithmic scale

c. 7/12/87-QIP-16/QS-16Brev. 7/25/87

ADI QIP GOALSIC OPERATIONS, ESTABLISHED PRODUCTS

METRIC 1987 HALF-LIFE 1992

On time delivery

Lead time

Manufacturing Cycle Time

Yield

Outgoing defect levels

Time to Market

EXTERNAL

INTERNAL

CORPORATE-WIDE COST MANAGEMENT

WHILE AGGRESSIVELY PURSUING

Process Defect Levels

85%

10 wks

500 PPM

9

9

9

>99.8%

<10 PPM<3 wks

15 wks

20%

9

9 >50%

5000 PPM 6 <10 PPM

4-5wks

36 mths 24 6 mths

c. 1989-Scorecard

FINANCIAL

SALES

SALES GROWTH YTY

CONTRIBUTION MARGIN

ROA (CM)

QIP

ON TIME DELIVERY (To FCD)

% CRDs NOT MATCHED

EXCESS LEADTIME

LABOR TURNOVER

MANUFACTURING METRICS: IC PRODUCTS

OUTGOING PPM

PROCESS PPM

CYCLE TIME

YIELD

MANUFACTURING METRICS: ASSEMBLED PRODUCTS

OUTGOING PPM

PLUG-IN YIELD

CYCLE TIME

% COST OF SCRAP/REWORK

FY1990 CORPORATE SCORECARD

NEW PRODUCTS

BOOKINGS POST-85 PROD

FORECAST 3rd YR BOOKINGS of new product releases

End FY89ACTUAL

Q1 90BHMK ACTUAL

Q2 90BHMK ACTUAL

Q3 90BHMK ACTUAL

Q4 90BHMK ACTUAL

FY 90BHMK ACTUAL

ACTUAL FY87 PLAN ACTUAL FY87 PLAN ACTUAL FY87 PLAN ACTUAL FY87 PLAN ACTUAL FY87 PLAN ACTUAL

FY904Q903Q902Q901Q90FY89

1Q90-Scorecard-1

?1990 Scorecard

ADIQtr 2 1990

12

Line Item Actual Budget Variance % Var.

QIP:On Time Delivery % (To FCD) % 96.10 97 -1.00 -1 #CRDs Not Matched % 52.10 41 10.70 26 #Excess Leadtime WKS 2.80 3 -.10 -3Employee Turnover % 8.40 19 -10.70 -56

IC Outgoing PPM 1210.00 908 302.00 33 #IC Process PPM 1624.00 1516 108.00 7 #IC Cycle Time DYS 50.10 62 -12.30 -20IC Yield % 40.40 38 2.80 7

AP Outgoing PPM 1483 1977 -494.00 -25Plug In Yield % 91.40 91 .50 1AP Cycle Time DYS 21.90 29 -6.70 -23Scrap/Rework Cost % 7.70 14 -6.40 -45

Retrace Utilities 1989 Scorecard Commentary Return

1Q90-Scorecard-2

?1990 Scorecard

ADIQtr 2 1990

12

Line Item Actual Budget Variance % Var.

NEW PRODUCTS:Post 1985 Products $M 40.30 42 -1.60 -4 #Forecasted 3rd Year Bookings $M 9.90

FINANCIALS:Sales $M 116.40 117 -.30 -0 #Sales Growth (YTY) % 1.20 2 -.30 -20 #Contribution Margin % 6.30 8 -2.00 -24 #ROA (Contribution Margin) % 7.50 10 -2.00 -21 #

Retrace Utilities 1989 Scorecard Commentary Return

5/22/90-05220-4

GOALS

ISculture scorecard

projectsMETRICS

SOLVINGPROBLEM

PERFORMANCE MEASUREMENT

does not mean

measurement improvement

If you don't measure it,

it will not improve.

4/8/90-04080-3rev 5/13/90

GOAL:IMPROVE CUSTOMER SERVICE

CUSTOMER SERVICE METRICS

ON TIME% late% early % on time

RESPONSIBILITYfactorywarehouse

creditcustomer

LATENESS/EARLINESSshipped late, how late?shipped early, how early?still late, how late?

months to ship late backlog

LEAD TIMEcustomer requested lead time% CRD's matchedexcess lead time

RESPONSIVENESStime to schedule an order

GOALS

ISculture scorecard

projectsMETRICS

SOLVINGPROBLEM

4Q89-% Late

ADS MED CLD IPD DSP MDL ADIADBV

On Time Customer Service ImprovementQuarterly Data (1Q87 – 4Q89)

100

1

10

0.1Half Life

In Months

10.8 16.5 8.4 18.0 13.8 6.9 54.9 13.2

% Late May 90

HalfLife (In months)

Percent Of Lines Shipped Late (Jun 89 through May 90) ADBV ADS CLD DSP IPD MDL MED ADI

NS NS NS NS N/A 7 NS NS

100

10

1

0.1

++ +

++

+

5/16/90-05160-1a

0 50 100 1500

0.02

0.04

0.06

0.08

0.1

0

0.2

0.4

0.6

0.8

1

lead time113

0.95

Market requirements: OTD > 95%

leadtime < 100

Our requirements: OTD < 50%

or

leadtime > 113

LOSS OF MARKET SHARE

RELATIONSHIP BETWEEN LEADTIME

AND ON-TIME DELIVERYAD XXX

5/16/90-05160-2

IMPROVING ON THE

1. increase inventory

2. build to good forecasts

3. reduce manufacturing cycle time

OTD/LEADTIME TRADEOFF

5/16/90-05160-1a+b

0 50 100 1500

0.02

0.04

0.06

0.08

0.1

0

0.2

0.4

0.6

0.8

1

lead time113

0.95

Market requirements: OTD > 95%

leadtime < 100

Our requirements: OTD < 50%

or

leadtime > 113

LOSS OF MARKET SHARE

RELATIONSHIP BETWEEN LEADTIME

AND ON-TIME DELIVERYAD XXX

c. 1990

ADI Half-Lives by month 5/89 to 4/905/89 9

6/89 7

7/89 7

8/89 7

9/89 8

10/89 10

11/89 11

12/89 15

1/90 47

2/90 60

3/90 60

4/90 N/A

Hlf Life

60

50

40

30

20

10

0May

89Jun Jul Aug Sep Oct Nov Dec Jan

90Feb Mar Apr

Apr 90-CRDs not matched

HalfLife (In months)W/ICRD %

Percent Of CRDs Not Matched (Jun 89 through May 90) ADBV ADS CLD DSP IPD MDL MED ADI

NS 48 NS NS N/A NS NS 60+

100

10

Dec 89-Excess LT

HalfLife (In months)W/ICRD %

Weeks Of Excess LT - NonExcess Orders Excluded (Jun 89 - May 90) ADBV ADS CLD DSP IPD MDL MED ADI

NS 15 NS NS N/A 35 NS NS

61 57 15 25 38 20 29 49

100

10

1

+

+

++

+

++

c. 7/90-VRS Database

48 CUSTOMERS INVENDOR RATING DATABASE

ABBAGFAAllen BradleyAllied SignalAmetekApolloAT&TBrown EngineeringCompugraphicCurrie-Peak-FraziEatonFinneganFordGeneral ElectricGECGouldHewlett-PackardHoneywellHughesInstronJET ElectronicsKodakLoralLucas

M/A-COMMartin MariettaMarquette ElectricMasscompMicrocircuits SemiconductorMcDonald DouglasParker Air & SpacePenastarPerkin ElmerRaytheonReliance ElectricRockwellSandersSiemensSikorskyTektronixTelecoTeledyneTeradyneTexas InstrumentsTrilliumUnited TechnologiesWaters AssociatesWestinghouse

Feb 90-CMD

ON TIME DELIVERY, CUSTOMER MEASURED

%

LATE

100.00

10.00

1.00

Fe

1987

Ap Ju Au Oc Dec Fe

1988

Ap Ju Au Oc Dec Fe

1989

Ap Ju Au Oc Dec Fe

1990

HALF-LIFE = 10 MONTHS

QIP STARTED

Actual Data

(Ave: 21 C9ompanies per point)

Trend

5/22/90-05220-1

HEWLETT-PACKARD VENDOR RATINGS

year ADI rank total suppliers category

linear IC suppliers

all IC suppliers

linear IC suppliers

all IC suppliers

16

8

15

12

8

5

5

1

1986

1987

1988

1989 *

*tied with one other supplier

6/11/90-06110-2

ELIMINATORS

DESIGNER TASK FORCE LAYOUT TASK FORCE

HANDOVER

ADS SAFETY COMMITTEE

ON TIME DELIVERY

PPM STEERING

TTM STEERING

WIRE BOND SPC

YIELD STEERING

DIRTY HARRYS PLANNING QIP TRANSIT WIP QIP

ALCATRAZ BENT LEADS DIPS

COG PPM FINAL TEST ESD HERMEDICS SLASHERS TEST EQUIPMENT

DESIGN & LAYOUT

FABCATS PROCESS DEVELOPMENT

TEST TRIM VISUAL

FAB STEERING BMW'S DIRT DEVILS ELIMINATORS ERRORBUSTERS ETCH JIT ON TIME DELIVERY PROMIS ECN WAFER SAVERS

SETUP TIME REDUCTION

SPC GROUP 1 707 SPC GROUP 11 OP07/27 SPC GROUP 12 574 SPC GROUP 14 521/534 SPC GROUP 3 711/712

SPC GROUP 4 569 SPC GROUP 8 570/1/3 SPC SOLDER DIP

ADS QIP TEAM STRUCTURE

6/11/90-06110-3

8 FAB LINE OPERATORS2 FAB TECHNICIANS2 FAB ENGINEERS3 FAB SUPERVISORS

6 FAB LINE OPERATORS3 FAB TECHNICIANS1 FAB ENGINEER1 FAB MANAGER

2 FAB LINE OPERATORS2 YIELD ENHANCEMENT1 FAB SUPERVISOR1 Q.C. INSPECTOR1 FAB TECHNICIAN1 EQUIPMENT REPAIR

2 BUSINESS PLANNING2 MANUF. SUPERVISORS5 P.C. PLANNING1 FINANCE1 PURCHASING1 CUSTOMER SERVICE

5 TEST OPERATORS2 BRAND OPERATORS1 Q.A. ENGINEER1 BRAND SUPERVISIOR

1 C.A.S. OPERATOR1 MASK FAB MANAGER1 Q.C. MANAGER1 FAB MANAGER1 P.C. PLANNING2 P/L COORDINATORS1 FAB COORDINATOR

BMW'S

ERRORBUSTERS

DIRT DEVILS

PLANNING QIP

ALCATRAZ

FABCATS

YIELD

YIELD

YIELD

ON TIME DELIVERY

PPM

TIME TO MARKET

REDUCE THE QUANTITY OF BROKEN/MISSING WAFERS PER MILLIONMOVES

REDUCE MISPROCESSINGIN PHOTO

REDUCE PARTICLE COUNT IN FAB

INCREASE CUSTOMERSERVICE WHILE REDUCING CYCLE TIMEAND MINIMIZINGINVENTORIES

ELIMINATE FACTORYESCAPES

MINIMIZE TAT ON NEWPRODUCT DEVELOPMENT LOTS

NAME MEMBERS PROJECT METRIC

TYPICAL QIP PROJECTS

4/8/90-04080-1

PROBLEM SOLVINGGOALS

METRICS

ISculture scorecard

projectsSOLVINGPROBLEM

Participants:

Cross Functional Problem Solving Teams (QIP Teams)

Task Forces

QC Circles

Individuals

Systematic Approach:

Deming Cycle (PDCA)

Tools:

7 QC Tools (fishbone, histogram, ...)

7 Management Tools (KJ Method, affinity diagram,...)

Design of Experiments (Taguchi, etc.)

SQC (control charts)

SPC (Cp, Cpk)

Quality Cost (failure, prevention, appraisal)

QFD

Hoshin Kanri

SMED

TPM

EI

JIT/Kanban (cycle time, WIP reduction)

5/22/90-05220-3

PLAN WHAT

PERCEPTION OF PROBLEM

EVALUATION OF

WHY ANALYSIS OF CAUSES

WHO

WHEN

WHERE

HOW

PLANNING OF

IMPLEMENTATION OF COUNTER-MEASURES

EVALUATION OF RESULTS

STANDARDIZATION

SUMMARY & FUTURE PLANS

DO

CHECK

ACTION

1

2

3

7

6

5

4

8

CURRENT SITUATION

COUNTER-MEASURES

PROBLEM SOLVINGGOALS

METRICS

ISculture scorecard

projectsSOLVINGPROBLEM

The Deming Cycle (PDCA)

4/24/90-04240-2

CENTRAL PRINCIPLES OBSERVED

IN TQM IMPLEMENTATION

Primacy of the Customer

customer first

customer satisfaction

market-in

Use of the PDCA cycle for continuousimprovement

Strong CEO and top management leadership

policy deployment

Education and training for all

Respect for all people

teamwork

participative management

4/8/90-04080-4rev 7/9/90

culture

GOALS

IS

scorecard

projectsMETRICS

SOLVINGPROBLEM THE QIP CULTURE

We each have a

daily job SDCA cycle

process improvement PDCA cycle

We are committed to improving

We are dedicated to (kaizen)

We are part of a

We are a continuously

dual function

customer satisfaction

continuous improvement

parallel organization: functional and cross-functional

learning organization

12/16/85-ADI-2

REQUIREMENTS FOR QUALITY IMPROVEMENT

Top Management

CommitmentSense of Urgency

Systematic

Method

Pilot ProjectsCompany Wide

Involvement

Organization/

Systems

leadership

changed objectives

hands-on management

visibility

support

profit opportunity

competition

fuel for change

proven results

kaizen

data driven

cross-functional

overcome skepticism

build credibility

get ball rolling

develop champions

weakest link

internal customers

policy deploymentvendors/customers

trainingguiding

:monitoringrewarding

: