June 11, 2012 Alex D‘Anci, QO – Operations...

1.1.5 –Workforce Development Integration (Operational Excellence)

June 11, 2012 Alex D‘Anci, QO – Operations Development Group

© ABB Group 090914_QO_Quality & OPEX Vision 2012_1_1 June 8, 2012 | Slide 1

© ABB Group June 8, 2012 | Slide 2

Introducing ABB ABB Group presentation

April 2012


A global leader in power and automation technologies Leading market positions in main businesses

135,000 employees in about 100 countries

$38 billion in revenue (2011)

Formed in 1988 merger of Swiss and Swedish engineering companies

Predecessors founded in 1883 and 1891

Publicly owned company with head office in Switzerland


Power and productivity for a better world ABB’s vision

As one of the world’s leading engineering companies, we help our customers to use electrical power efficiently, to increase industrial productivity and to lower environmental impact in a sustainable way.


How ABB is organized Five global divisions

Power Products

Power Systems

Discrete Automation and Motion

Process Automation

$10.9 billion 35,300

employees

$8.1 billion 19,600

employees

$8.8 billion 28,500

employees

$8.3 billion 28,300

employees (2011 revenues, consolidated)

Low Voltage Products

$5.3 billion 21,400

employees

Electricals, automation, controls and instrumentation for power generation and industrial processes

Power transmission

Distribution solutions

Low-voltage products

Motors and drives

Intelligent building systems

Robots and robot systems

Services to improve customers productivity and reliability

ABB’s portfolio covers:


Power and automation are all around us You will find ABB technology…

crossing oceans and on the sea bed,

orbiting the earth and working beneath it,

on the trains we ride and in the facilities that process our water,

in the fields that grow our crops and packing the food we eat,

in the plants that generate our power and in our homes, offices and factories

Tackling society’s challenges on path to low-carbon era Helping customers do more using less

Source: IEA, World Energy Outlook 2011

12,

500

Terawatt-hour (TWh)

10,000

20,000

30,000

17,

200

2009 2035

34,

350

+99.7%

ABB power and automation solutions are:

Meeting rising demand for electricity

Increasing energy efficiency and reducing CO2 emissions

Improving productivity to raise competitiveness of businesses and utilities

Rise in electricity demand by 2035 (under current policies)

Electricity demand is calculated as the total gross electricity generated less own use in the production of electricity and transmission, and distribution losses.


Improving capacity, reliability and efficiency in the grid A pioneer in smart technologies

Transmission at ultrahigh voltage

Minimal losses with direct current solution

Challenge ABB solution China: deliver 6,400 MW of

hydropower over 2,000 km

US: Increase capacity and reliability for Texas utility

World’s largest installation enabling existing lines to carry more power

Also enables integration of renewable energy

India: Improve reliability in grid serving state of Karnataka (pop. 53 million)

Network management with real-time control

Key building block for smart grid


Renewable energy Key growth driver for both power and automation

Generation and transmission solutions for:

Hydro

Wind

Solar

Wave

Xiangjiaba-Shanghai (China)

Wind Capital (US)

Totana solar (Spain)

Pelamis wave energy (Portugal)

Project examples ABB scope

Grid connection

Transformers

Turnkey execution

Customized generators


Boosting productivity and energy efficiency Example: Stora Enso, world’s biggest paper maker

Skoghall mill, Sweden: No. 1 maker of board for drink cartons

Two-year revamp boosted productivity and cut CO2 by 170,000 tons/year

ABB provided key control systems:

For boiler, collecting and analyzing data on pressure, flow, temperature, etc. from thousands of instruments

For total control over power supply with real-time data


Leading power system’s biggest-ever transformation Smarter, greener grid for more efficiency and reliability

Merging power and automation technologies makes electricity network more reliable, flexible, secure and efficient. Smart grid benefits include:

Lower power consumption

Greater use of renewable energy

ABB’s broad offering in both power and automation technologies positions it uniquely to support this evolution

Transformation of grid to take place over several decades


Ground-breaking and nation-building projects Pushing the boundaries of technology

Longest underground power link

Longest and highest capacity power link

Longest underwater power link

Largest gearless mill drive (for crushing ore)

Largest SVC installation

Most remote offshore wind farm linked to grid

First platform connected to mainland grid

Europe’s largest thermal solar power plant

First commercial wave power plant

First 600 kV power link

Longest conveyor belt

Substation in world’s tallest building

Power and automation of largest chemical cellulose plant

Automation of largest alumina plant

Largest battery

Mine hoist for largest potash mine

Largest reverse-osmosis desalination plant

Largest SCADA network


Shaping the world we know today through innovation Pioneering technology since 1883

Founding fathers

1900

Industrial robot

Turbochargers

HVDC

Ultrahigh voltage

Gas-insulated switchgear

Variable-speed motor drives

Extended control systems

Steam turbine

1920 1930 1940

Electric propulsion systems

1990 2000

1960 1970

Gas turbine

1950

Gearless motor drives

1980

Electrical drive system for locomotives


Innovation is key to ABB’s competitive advantage Leadership built on consistent R&D investment

More than $1.3 billion invested annually in R&D 7,500 scientists and engineers Collaboration with 70 universities

MIT (US), Tsinghua (China), KTH Royal Institute of Technology (Sweden), Indian Institute of Technology (New Delhi), ETH (Switzerland), Karlsruhe (Germany), AGH University of Science and Technology (Poland)


Fashioning the world we will live in tomorrow Tackling challenges with customers and partners

R&D programs focus on incremental and breakthrough developments to address challenges including:

Integrating renewable power sources into the grid

Enhancing power network efficiency, reliability and flexibility

• Improving industrial resource efficiency and asset productivity

• Optimizing flexibility and reliability


Developing sustainability of products and operations Lowering environmental impact and costs

Sustainability in product development

Focus on resource and energy efficiency of equipment over life cycle

Independently verified Environmental Product Declarations for main products

Sustainability in ABB’s operations

Cuts targeted in use of energy, raw materials, hazardous substances

eg, China: 63% cut in energy use per unit of revenue between 2002 and 2010


People make the difference The best want to work in a first-class environment

ABB is one of the world’s most global companies

A culture of openness, flexibility and inclusiveness helps to attract top performers

ABB strives for excellence in personal development, operational execution, health and safety, business ethics

A Group-wide staff development program aims to bring a culture of leadership to every level of the organization


Committed to the highest standards of business ethics Integrity as bedrock of ABB’s global culture

Code of Conduct defines relationships with all stakeholders

Employees acknowledge Code of Conduct and take compulsory training courses

Zero tolerance toward violations

Several reporting options in place for employees to report suspected violations; each report thoroughly investigated

“Whatever change may be going on in the world around us, one thing remains unchanged: ABB’s commitment to maintain the highest standards of business ethics and integrity.”

CEO Joe Hogan in ABB’s Code of Conduct

0%2%4%6%8%10%12%14%16%18%20%

0

10000

20000

30000

40000

50000

2010 2011 2012





Revenue (US$ million) by quarter and annual operational EBITDA margin (Q1 margin for 2012)

13-19% operational EBITDA margin corridor targeted for period 2011-2015

Q4

Q3

Q2

Q1

Main investments 2011/12 Main acquisitions and investments Plant expansion New plant 2011 2012 Switzerland Sweden, Italy, China, India, Estonia

Brazil China, Bulgaria, US, India

Baldor, Obvient, Epyon, Validus, Mincom, Trasfor , Lorentzen & Wettre, Novatec Solar**, Ecotality**, Aquamarine Power**

Newave

A successful business and a reliable partner Strong financial position is competitive advantage

**ABB equity investments


Power systems

Discrete automation and motion

Europe

Asia

Americas

Middle East and Africa

Well-balanced business and geographic portfolio Capturing growth opportunities, wherever they arise

Share of employees 2011

47%

Mature markets

Emerging markets

Power products

Process automation

Low voltage products

53%

25%

21%22%

12%

20%

Orders by division % of total orders 2011 (non-consolidated)

38%

30%

23%

9%

Orders by region % of total orders 2011


Innovation, passion and diversity are hallmarks of ABB

“ABB is a dynamic, multicultural team that spans the globe, working in a fascinating world of high technology.”

“Our portfolio is vast, but the benefits are straightforward: we help to provide reliable power supplies and improve productivity, while lowering environmental impact.”

CEO Joe Hogan


September 2009 Quality & Operational Excellence - Vision 2012


ABB Quality Policy To ensure that we meet our responsibilities and obligations to our customers, our people, our

partners, our suppliers and to our shareholders we are committed to the following Quality Objectives:

1. Deliver on-time & on-quality products, systems and services that meet or exceed our customer's expectations.

2. Identify and understand our customer's expectations, measure customer perceptions, and implement improvements to increase customer satisfaction.

3. Enable and engage our people at all levels in a relentless drive to improve operational performance along the value chain from suppliers to customers.

4. Increase the motivation and skills of our people to add value to our customers and our businesses, through continual training and development.

5. Leverage our partners & suppliers strengths to improve our products and our businesses from product design through production, installation and operation.

6. Embed social responsibility & company ethics policies in our business practices.

7. Continually improve environmental, health and safety performance through all products, operations, systems and services.


ABB Quality Policy to QO Key Actions Deliver on-time & on-quality products, systems and services

that meet or exceed our customer's expectations

Identify and understand our customer's expectations, measure customer perceptions, and implement improvements to increase customer satisfaction

Leverage our partners & suppliers strengths to improve our products and our businesses from product design through production, installation and operation

Enable and engage our people at all levels in a relentless drive to improve operational performance along the value chain from suppliers to customers

Increase the motivation and skills of our people to add value to our customers and our businesses, through continual training and development

Embed social responsibility & company ethics policies in our business practices

Continually improve environmental, health and safety performance through all products, operations, systems and services

Driving Excellence in Operations

Drive “Customer Feedback” action follow-up (NPS & CCRP inputs)

Drive OPEX Projects in the units

Drive OPEX Projects in Partners & Suppliers (Supplier Qualification Process, Flop 10)

...

Supporting Flawless Project & Risk Management Lead Project Mgt Council (publish ABB

Project Mgt Framework)

Assess & Certify Project Mgrs & BU’s

Drive Project & Risk Mgt Training

...

Building an ABB Continual Improvement culture Gain GEF level awareness & support

Develop “ABB 4Q” methodology

Drive “ABB 4Q” training & coaching

...


>xxx PM’s Certified Project Risk Management; trained total >xxx

Streamline Internal Trading project launched

BU Project Mgt Maturity Cert in key countries

ABB On-Time, On-Quality,

On-Cost for all products

and projects

ABB 4Q skills development of >xxx people per month

2009 2011 2012 2010

Excellence in Operations

Continual Improvement Culture

>xx% of Large, and all GA, projects led by Senior PMs

Quality & Operational Excellence Vision 2012

ABB PM Framework of processes & tools published by PMC

ABB 4Q skills development of >xxx people per month

ABB 4Q program launched

PM Council launched

Flop 10 launched to boost supplier quality & delivery

>xxx OPEX projects launched & >xxx$ OPEX value delivered

Flawless Project & Risk Mgt

>xxx$ OPEX value delivered (>xxx$ cum.)

Supplier OTD/OQD >xx%

>xxx$ OPEX value delivered (>xxx$ cum.)

Customer action process launched

Joint ABB-Customer OPEX projects launched

Q&OPEX competency model implemented


ABB 4Q Approach agreed

Deploy SMT for OPEX Project Mgt

Upgrade Competency Model for Q&OPEX

Agree Q&OPEX Career Model & Mechanics

On-Time, On-Cost On-Quality Products, Systems, Services improving >xx%/year

Build Networks of Q&OPEX Leaders

2009 2011 2012 2010

One ABB “Core OPEX” Methodology & Tools with Training Materials

Collaborative Group Wide Improvement Projects

Q&OPEX Competency Development Widespread OPEX Engagement Across the Group

Operations Development Group – Vision 2012

Support Streamline Internal Trading Project – Sales & Ops Planning

Support “Flop 10” supplier development

Assess ODG Competences & develop actions to close gaps

Training & Awareness pilots for all levels

Training : awareness, fundamentals, basic, advanced & expert levels

>xx% ABB people “trained” in 4Q

Roll out training: >xx% ABB people trained (2012 Target : >xx%)

Implement Best Practice Spreading processes

Implement Q&OPEX Career Model

Support PMC OPEX projects

Redefine Job Descriptions & grading structure for Q&OPEX


2009 2011 2012 2010

PM Skills and Competencies

Local Engagement

Project Management Group - Vision 2012

On-time, on-profit, on-quality project execution

PM Competency assessments conducted in xx key countries >xxx trained in Project Risk Mgt

>xx% of Large/Complex & Group Accounts projects led by Senior PM

Company Senior PM recognized as key leaders & role models

Risk Review Application – Release 1.1

Project execution (& review) tools roadmap developed

LBU PM Maturity Certification( OPM3)

ABB PM Council (PMC) established

ABB PM Network defined

PM Network actively spreading best practices

ABB PM Network - social networking processes developed - peer to peer problem solving & On-line coaching support

PM processes and guidelines formalized in PM Framework

LBU PMgt Certification piloted

PM Processes and

Tools

>xx% PM assessed and certified


2009 2011 2012 2010

Supplier Qualification

(SQP)

Customer Quality

Supplier Surveillance (SSP) Supplier Improvement Process (SIP)

Customer & Supplier Quality Group - Vision 2012

Group Guideline issued for SQP SQ Reference Team Established

SQP applied to all new direct material suppliers

SQP applied to all new suppliers

Supplier performance is no longer impacting ABB customer deliveries and improving by xx% year over year

Group definitions for OQD and OTD agreed & published eSmart measurement fields aligned

OTD & OQD Scorecard implemented for top xxx Suppliers

Flop 10 Supplier List published

Public recognition of top performing suppliers

xxx Flop 10 Supplier Improvement projects running

xxx suppliers trained on ABB 4Q Continuous Improvement

xxx Flop 10 Supplier Improvement projects running

Group Guideline issued for SSP

Group Guideline issued for SIP

Customer action process implemented

CCRP performance published internally

Customer action process agreed with GAM’s & BU’s

Joint ABB-Customer OPEX projects launched

Process audit performed on suppliers with OTD/QOD <xx%

© ABB Group 090915_ABB Core Opex_Brief_0_6.ppt June 8, 2012 | Slide 30

Division B Core OPEX

Division A Core OPEX

ABB Core OPEX – Vision 2012

Basic

Advanced

Expert

4Q Skill Levels

Daily problem solving

activities $

More complex CI and problem solving projects

k$

CI Projects

M$

Number of initiatives

Eliminate Root cause

Process Redesign

Fundamentals E-Learning

10 hours over 5 days

1 Week

4 Week

Training depth

ABB Core OPEX

People Leadership Resources, Involvement, Motivation, Recognition

Value Stream Mgt Process Maturity

Continuous Improvement of Core OPEX itself with ideas from inside and outside ABB

4Q – Continuous Improvement People Skills Building

Improvement triggers from workplace daily rounds, CCRP, COPQ and Cost-out

Executive ½ Day


Basic

Advanced

Expert

4Q Skill Levels


activities $


k$

CI Projects

M$



Process Redesign



1 Week

4 Week

Training depth

ABB Core OPEX






Executive ½ Day

ABB Core OPEX – It comes from the top

Leaders understand how Operational Excellence can enhance:

Customer satisfaction

Efficiency and cost savings

Employee satisfaction and safety

Competitive advantage

Additionally, it is understood that in order to get maximum effect, the whole organization needs to be engaged.

This may require organizational changes to remove barriers to process innovation as well as new reward and recognition programs to encourage daily participation in continuous improvement.

The people who best know how to improve operations are the ones who are working in it every day.


Basic

Advanced

Expert

4Q Skill Levels


activities $


k$

CI Projects

M$



Process Redesign



1 Week

4 Week

Training depth

ABB Core OPEX






Executive ½ Day

ABB Core OPEX – Where do we start?

First we need to see and understand how we add value for our customers.

We deliver our customers wishes through a system of interconnected processes – a value stream.

If the processes are not mature and stable, the quality may be poor or it may take longer than expected to deliver goods and services.

Unstable processes need more inventory to guarantee delivery and maintain operational efficiency.

Our free cash is tied up in this inventory.

For us to have continuous improvement, we need stable processes as a baseline to start from.

Operational Excellence comes from continuously improving value streams of mature processes.


Basic

Advanced

Expert

4Q Skill Levels


activities $


k$

CI Projects

M$



Process Redesign



1 Week

4 Week

Training depth

ABB Core OPEX






Executive ½ Day

ABB Core OPEX – What tools do we use?

4Q was developed in ABB as a simple, yet powerful process improvement and problem solving methodology. We have many years of experience with 4Q.

4Q is an easy to learn framework for the systematic application of standard quality tools.

4Q solves problems in targeted processes by:

Measuring the process

Analyzing the measurements to determine problem root causes

Carrying out improvement activities to eliminate the root cause of the problem

Changing the process to sustain the improvement


Basic

Advanced

Expert

4Q Skill Levels


activities $


k$

CI Projects

M$



Process Redesign



1 Week

4 Week

Training depth

ABB Core OPEX






Executive ½ Day

ABB Core OPEX – What problems do we solve?

Opportunities for improvement are everywhere!

Which ones to attack first?

When our value stream is mapped and we understand its dynamics, we know what problems are hurting us more than others.

Every day when our process teams meet in the factory and in the office:

We discuss problems and initiate actions to fix them.

Uncover repeat problems that are solved with 4Q.

NPS & CCRP are a rich source of input for 4Q activities

4Q is also used for reducing Cost of Poor Quality

Cost out and capital efficiency management initiatives use 4Q well


Basic

Advanced

Expert

4Q Skill Levels


activities $


k$

CI Projects

M$



Process Redesign



1 Week

4 Week

Training depth

ABB Core OPEX






Executive ½ Day

ABB Core OPEX – Triggers for 4Q

Problem triggers from daily rounds in the factory, office, customers, NPS, CCRP, COPQ and Cost-out initiatives feed 4Q.

Daily rounds will expose many small problems and safety issues that need to be solved using the full cycle of 4Q or only parts of it.

Larger 4Q projects that eliminate problem root causes have business impacts in the tens to hundreds of thousands of dollars.

Eventually, we will want to redesign processes and even the whole value stream for a more efficient delivery process with business impacts in the millions of dollars.

Quality, customer satisfaction and safety improves every time 4Q is applied.


Basic

Advanced

Expert

4Q Skill Levels


activities $


k$

CI Projects

M$



Process Redesign



1 Week

4 Week

Training depth

ABB Core OPEX






Executive ½ Day

ABB Core OPEX – Workforce Development

Learning and applying 4Q is easy.

We do not need to know much of 4Q to start using it on our daily work

Awareness and Fundamentals training from ABB University on inside.abb will give enough knowledge to solve problems as part of a 4Q team. This training is always available online for refreshing skills.

Basic training is targeted for on-the-job training with real work examples. Training is by an Advanced or Expert level person who works in the organization. A person with Basic training can work on own 4Q projects on their own or as part of a team.

Advanced training gives a person the skills to identify problems and lead teams to solve them by root cause elimination and even process redesign

Experts can train others to the Advanced level and other Experts.

Each level is certified with a test.


Basic

Advanced

Expert

4Q Skill Levels


activities $


k$

CI Projects

M$



Process Redesign



1 Week

4 Week

Training depth

ABB Core OPEX






Executive ½ Day

ABB Core OPEX – Improves with experience

ABB Core OPEX is a living thing.

Many ABB businesses and divisions already have Operational Excellence initiatives, so where does ABB Core OPEX fit in?

ABB Core OPEX is a minimum framework and set of tools that can efficiently and effectively improve the order to cash cycle.

Parts from ABB Core OPEX can be included on other Operational Excellence initiatives.

Parts from other Operational Excellence initiatives, from inside and outside ABB can be incorporated into ABB Core OPEX.

By pooling our best practices, ABB Core OPEX helps us to become One ABB.


ABB Core OPEX Basic Methodologies

Value Stream Mapping and Value Stream Development

Process Maturity

Workforce development (train-the-trainer)

7 wastes of Lean

5S + Workplace Safety

4Q and the 7 classic quality tools

Gemba Rounds (daily stand up meetings at the workplace)

Pull and Theory of Constraints

Supplier Integration

© ABB Group 090907_ABB Core Opex_0_5.ppt June 8, 2012 | Slide 39

The OPEX Cycle

Map Value Stream & Process Maturity

Bottleneck Management & Pull

Eliminate Waste Smooth Loading

New Selling Model


5S Safety

Gemba Rounds 4Q


The OPEX Cycle Step by Step to Operational Excellence

The OPEX cycle. 4Q is used for problem solving and continuous improvement.

Quick VSM, identify processes

Process Maturity Assessment, assign owners.

Steps 1, 2 & 3 of TOC, include Future VSM and scheduling

Parallel to TOC:

5S + Safety

7 Wastes

Establish Gemba rounds


Get process maturity to level 3

Level loading & new selling model

Work to level 4 process maturity

Start over when major changes or every 5 years


Core OPEX Skill Levels Skill building

Training Course Objective Roles & Responsibilities Duration

Executive 4Q To provide senior managers with an understanding of 4Q and how to deploy it in their own organizations

• To support & deploy 4Q improvement initiatives 0.5

Fundamental 4Q To give participants the knowledge to identify & support 4Q projects

• Understand the 4Q methodology • Sponsoring 4Q projects • Conduct regular 4Q project reviews

E-Learning

Basic 4Q To provide all employees with basic skills to improve on-time, on-quality, on-cost delivery performance

• Participate within 4Q improvement projects • Lead local improvement actions using 4Q methodology

10 hr

Advanced 4Q To equip selected employees with detailed skills & knowledge to improve on-time, on-quality, on-cost delivery performance

• Lead 4Q improvement projects • Coach and disseminate 4Q methodology across ABB

business units 5 Days

4Q Expert To provide high performing employees with advanced skills to support strategic deployment & internal coaching

• To act as improvement consultant for executive/senior management

• Train and coach people within the 4Q programme 20 Days

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2010

-04-

08

2010

-04-

29

2010

-05-

20

2010

-06-

10

2010

-07-

01

2010

-07-

22

2010

-08-

12

2010

-09-

02

2010

-09-

23

2010

-10-

14

2010

-11-

04

2010

-11-

25

2010

-12-

16

2011

-01-

06

2011

-01-

27

2011

-02-

17

2011

-03-

10

2011

-03-

31

2011

-04-

21

2011

-05-

12

2011

-06-

02

2011

-06-

23

2011

-07-

14

2011

-08-

04

2011

-08-

25

2011

-09-

15

2011

-10-

06

2011

-10-

27

2011

-11-

17

2011

-12-

08

2011

-12-

29

2012

-01-

19

2012

-02-

09

2012

-03-

01

2012

-03-

22

2012

-04-

12

2012

-05-

03

4Q Basic training participants performance over time

# of certified 4Q Basic

# of Trained4Q Basic

# of SMT projects

2072

736

250

ABB 4Q Basic Program - Participants status & results May 21th 2012


36%

12%

% %# of

Training Classes

# of Participants

# thereof 4Q certified

# of 4Q SMT

projects

MUSD savings out of these

projects

MUSD savings out of these participants

total SMT savings MUSD

4Q as % of Total

all as % of Total

2010 31 430 46 246 6.2 10.3 165.0 3.7% 6.2%

2011 94 1191 131 412 44.7 77.4 559.9 8.0% 13.8%

2012 32 451 73 79 68.3 102.8 709.3 9.6% 14.5%

SUM 157 2072 250 737 119.1 190.6 1434.3 8.3% 13.3%

June 11, 2012 Alex D‘Anci, QO – Operations...

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