Lean Six Sigma: A Critical Value Driver for 3M

Jerome Hamilton – Vice President, Lean Six Sigma, Quality & Acquisition Integration

© 2012 3M. All Rights Reserved.

2 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.
© 3M 2012. All Rights Reserved.
3 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.
 2012 Corporate Overview

3M is the Innovation Company That Makes

Progress Possible
 Create transformational products and solutions that enable customer
success and improve people
people’ss lives around the world
 Collaborative, high-energy approach to solving the toughest
problems across industries and markets:
 Constantly exchange and build on each other’s ideas
 Uncover new connections
U ti between
b t seemingly
i l unrelated
l t d markets
k t
and more than 40 diverse technology platforms
 Culture of intellectual curiosity and creativity that pushes boundaries

4
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 2012 Corporate Overview

Enabling Customer Success: Our Five Market-leading

Business Groups
Through our five market-leading business groups, we turn our ideas into
ingenious products and solutions that make life better for our customers and end
end-
users every day
Consumer Industrial
Simplifying life and work From purification to aerospace –
changing how industry works

Electronics & Energy Safety & Graphics

Enabling the global power and Keeping you safe, your world secure and
t l i ti
telecommunications t k and
networks d th ld'
the world's h i visual
enhancing i l communication
i ti and d
electronic devices interactivity

Health Care
Promoting health and improving
quality care

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© 3M 2012. All Rights Reserved.
 2012 Corporate Overview

Acknowledged by Opinion Formers

Most Innovative Companies Most Reputable Companies

3M Ranks 3rd 3M Ranks 4th

Most Admired Companies 3M Ranks 15th Most Respected Companies Best Global Green Brands
3M Ranks 7th 3M Ranks 2nd

7 time ENERGY STAR® Sustained European Best Multi-national

E ll
Excellence A d Winner
Award Wi Workplaces
3M Ranks 16th

Based on 2011 information

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© 3M 2012. All Rights Reserved.
 2012 Corporate Overview

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 2012 Corporate Overview

Working Together to Achieve More

 Innovate with a core focus on helping customers tackle challenges and enable
progress in our fast-changing world
 3M innovations are born from the contributions of many,
many working together to share
and reshape ideas in a way that creates more than could be done alone
 Borderless exchange
g and expansion
p of ideas between
 84,000 employees
 65 countries, including growing footprints in developing markets
 46 technology platforms
 5 market-leading businesses
 R&D engine with consistent prioritization and investment
 Partnership between 3M and our customers yields tangible success
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 2012 Corporate Overview

One Strong Brand, Complemented by Many

Strategic Brands
 3M named one of the Best 100 Global Brands by strategic brand consultancy,
Interbrand in 2012
 Proud of the household names we have created with our market leading strategic
brands
 Our strategic brands play an integral role in strengthening the 3M brand and allowing
us to deliver tangible results that enable customer success
At 3M, we continuouslyy build on each other’s ideas…

+ + + + +
+ + + + +
…to innovate unexpected solutions and make progress possible
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 2012 Corporate Overview

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 2012 Corporate Overview

Ideas Connect Across Diverse Technologies

Ab Bi Em Pm Sm
Abrasives Biotech Electronic Polymer Melt Specialty
Materials Processing Materials

Ac Ce Es Nt Po Su
Acoustics Ceramics Electronics & Nano- Porous Surface
Software technology Materials & Modification
Membranes

Ad Dd Fc Mi Nw Pp Tt
Adhesives Drug Delivery Flexible Microbial Nonwoven Precision Track & Trace
Converting & D t ti &
Detection Materials Processing
Packaging Control

Am Di Fe Fs Is Me Mo Op Pr Vp
Advanced Display Flexible Filtration, Integrated Metal Matrix Molding Opto-electronics Process Design Vapor
Materials Electronics Separation, Systems & Composites & Control Processing
Purification Design

An Do Fi Im Lm Mf Mr Pd Rp We
Analytical Dental & Films Imaging Light Mechanical Micro- Particle & Radiation Accelerated
Orthodontic Management Fasteners replication Dispersion Processing Weathering
Materials Processing

As Ec Fl In Md Pe Se Wo
Application Energy Fluoro materials
Fluoro-materials Inspection & Medical Data Predictive Sensors Wound
Software Components Measurement Management Engineering & Management
Modeling

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 2012 Corporate Overview

Making Progress Possible All Around Us

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 2012 Corporate Overview

Driving Progress Around the World Switzerland

 Ukraine Romania
Latvia Poland Hungary  
Sweden  

Finland 
Denmark Lithuania
 Austria
 
Puerto Rico Norway  Russia
Dominican Germany 
Czech Republic Estonia
  
Canada Jamaica Republic  
   Korea
China
UK 
Netherlands 


Japan

Mexico
Hong Kong


Guatemala
 Taiwan
Philippines



El Salvador Vietnam
Costa Rica   Thailand
 
Malaysia
Trinidad & 
Tobago Panama
Singapore
  Italy
Australia 


Colombia Venezuela Peru
Spain
   Greece Kenya New Zealand
   Indonesia
India 

Turkey 
Ecuador Uruguay Pakistan
 Israel
    Sales & Marketing
Portugal 
Morocco
Chile Argentina  
South Africa Sri Lanka  Manufacturing/Converting
Brazil Belgium  
  France Egypt

  UAE Kazakhstan  Technical Capabilities
  

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 2012 Corporate Overview

Working from a Position of Leadership and Growth

 Global Sales: $29.6 Billion (66% International)

 Net Income: $4.3 Billion
 R&D & Related Investment: $1.6 Billion
 Earned 514 U.S. Patents
 Global Reach: Sales in ~200
200 Countries
 One of 30 companies in DJIA Stock Index
 Five Market-Leading Business Groups
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© 3M 2012. All Rights Reserved.
 2012 Corporate Overview

The 3M Opportunity
An Ecosystem
of Ideas

World Class Trusted

Innovation Partnership

Collaborative Unparalleled
Culture Quality

Curious Problem Creative Passion

Solvers
Uncommon
Connections
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 Lean Six Sigma Evolution

2001 – 2004 2005 – 2006 2007 – 2008 2009-2011 2012

Inception Establishment Cultural Transformation
Six Sigma / DMAIC Lean Six Sigma Business Execution Process / Hoshin Kanri

• 2012 and beyond, deeper Lean penetration in emerging

markets
• LSS deployment in Acquisition Integration
• Increase Supply Chain Optimization Focus

• 65,000 employees trained

• 73,000 Projects Closed or in-Process
• 450+ full-time, committed resources globally
• 720 Customer Projects either In Process or Closed from inception

16 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

 Lean Six Sigma is Creating Natural Deep Connections

Business
Units

Finance
Supply Chain
• Common Leadership Language
3M Lean Six
g
Sigma • Leadership Development
Sales &
Manufacturing
Marketing
• Best Practice Replication
IT

Lean Six Sigma Is Established At 3M As the Common Language, Connecting Functions Across 3M Globally…

17 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

 The Correlation Between Six Sigma Resources and Benefits
Six Sigma Cerrtified Black Beelt Population

3,000

2,500

2,000

1,500

1,000

500

-
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Black Belts in every region Over 90% of all employees Six Sigma trained (GB) 99% of executives Six Sigma trained

There is Opportunity for Greater Savings

18 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

 Lean Six Sigma is a major contributor to 3M’s success

LSS projects needed in order to . . .

Annual LSS Cost Project Savings
• Fund additional technology development and new
$Billions
product launches
$1.0 • Finance new plant start-ups
$0.9
$0.8
$0 8 • Offset inflation and other cost increases

…while at the same time, 3M continues to deliver premium returns

• Low 20s operating margins and 20% + ROIC

2010 2011 2012e

Creating the fuel to drive continued growth in sales and profits

19 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

 These Lessons Influence Our Manufacturing & Supply Chain House of Excellence
“fortifying further”
fortifying our operating framework even further
Vision
Highest quality, lowest total cost & shortest lead-time

Primaryy Lever Extended Value Stream Improvement

Key Principles Design Material Flow Quality and Service

COGS Improvement Inventory Reduction

Improvement Targets
Product Development Productivity Speed & Cycle time System design
•NPI and Product •Waste elimination • Process continuous • Global footprint
Redesign • Plant productivity improvement • Regionalization /
Primary Initiatives •Multi
Multi Sourcing • Asset utilization SNOP Rigor
•SNOP localization
•Supplier Mgmt • Lean revitalization • Consolidation
•Package design • HISC focus • Bus process redesign

Material Cost Muti-Source Yield / T-OE, OEE, Unit cost, Turns, Cycle days, OTIF RSS, T-OE, Tax rate

Key metrics DPPM

Lean manufacturing and supply chain
Lean Six Sigma
Foundational
F d ti l enablers
bl S f tLean
Safety d Six
and Sigma
responsibility
ibilit att workplace
k l
Safe and Business
responsible workplace
Transformation
For stability Business Transformation

Foundational stability tools •Visual Management

•Standardized Work
Kaizan
•Kaizan Preventive Maintenance
•Preventive
•Early Supplier Involvement •PDCA Scientific Method
•Waste Elimination •Robust Products and Processes

20 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

 Big Questions… Business Execution
 What are the vital few priorities / attributes that MUST be in place in order for an
organization to successfully deliver business results?

Three Words to Remember

Resource Allocation & Alignment
• Focus on Vital Few
• Cross functional prioritization to deliver “the business plan”

Accountability
• Key business metrics have an Owner (A3 owner)
• Key business metrics are aligned directly to employee
contribution & development plans

Execution
• Execution and development mindset is elevated (plans in
balance / align with organization’s capacity to implement)
• Continuous and step-change improvements through
business improvement process

21 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

 2012 3M Quality Achievement Award

F
From LLeadd to LLead-free
df S ld i on Si
Soldering l P
Single Pairi P i plugs,
Protection l ffor outstanding
di achievements…
hi

ACHIEVEMENTS
 Yield improvements of over 90%
 Shift Output improvement by 20%
 Rework reduction of over 65%
 Reduction in power use by 10%
 ZERO customer defects GOLD Award
A d Team
T

3M Pondicherry, India
Simpler Sol
Solution
tion Greater Results
Res lts Team

22 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

 Customer Voices
5
3 4 6
1 2
Reduced They are more
oversight
g on than just a
quality! Supplier

Our Mission Of Customer Success Is Paying Off Everywhere…

23 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

 Looking Ahead, We Are Accelerating Lean Penetration Even Further…
“To Cash Reduce Cost and Support Growth”
To Generate Cash, Growth

Building
Shareholder
Value

St t i IImperatives
Strategic ti 2013
2013-17
17

24 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

 In Summary
 3M’s key focus is to drive superior levels of Operational Excellence company wide to
improve :
― Cost
― Cash
― Growth
 We are building from a solid foundation and structuring ourselves to further support
high growth opportunities
 Working to further “cement” Lean Six Sigma as the foundation of all operations and
growth
 Building to expand our successes in Acquisition Integration

We Have Made Significant

g Strides In Lean Six Sigma
g Deployment,
p y
However, There is Much More to Do And We Are On It !

25 Investor Meeting – November 8, 2012 © 2012 3M. All Rights Reserved.

2012 Corporate Overview

Questions?
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2012 Corporate Overview

© 3M 2012. All Rights Reserved.