© Arthur M. Schneiderman All Rights Reserved. Slide 1 2/13/90-PREZ-1 rev. 5/7/91 ANALOG DEVICES AT A GLANCE Headquartered in Norwood Massachusetts Publicly Held (NYSE Symbol ADI) $485 Million in Sales (FY1990) 48% of Sales Outside United States 5600 Employees Worldwide

© Arthur M. Schneiderman All Rights Reserved. Slide 2 5/8/91-PREZ-1a ANALOG DEVICES AT A GLANCE Products: ICs, assembled products, subsystems Applications: precision measurement & control Markets: data acquisition Integrated supplier (cont.) 50% industrial/instrumentation 25% military/avionics 13% computer 12% other design manufacturing (8 locations) direct sales (100 locations) distribution

© Arthur M. Schneiderman All Rights Reserved. Slide 3 9/12/ doc PeriodAccomplishmentsKey WeaknessesCorrective Action CEO awareness of TQMTQM organization TQM goal setting process established Corporate TQM staff established goals/metrics QIP teams 10x improvement its real top management involvement focus on management not everyone involved incomplete TQM infrastructure training slow progress -> plateau seek outside help expert: Professor Shoji Shiba networking: CQM business restructuring financial focus TQM planning TQM activity on back burnerrevitalize TQM implement TQM infrastructure Creating the New Analog >10x improvement ?? todayBetter understanding of the challenge TQM skills of senior managers Alignment of TQM with business goals Low quality of management systems Total participation CQM course(s) Rigorous Hoshin deployment Baldrige self-assessment, benchmarking, process redesign TQM diffusion TQM at ANALOG DEVICES

© Arthur M. Schneiderman All Rights Reserved. Slide 4 3/24/

© Arthur M. Schneiderman All Rights Reserved. Slide 5 9/12/ ADI CONTINUOUS IMPROVEMENT HISTORY year defect level 12 month halflife 6 month halflife

© Arthur M. Schneiderman All Rights Reserved. Slide 6 10/28/86-QIP-7 rev: 4/22/ a METRICS IS culturescorecard projects GOALS SOLVING PROBLEM ADI QIP GOALS MARKET LEADERSHIP (RMS) REVENUE GROWTH PROFITABILITY BE RATED #1 BY OUR CUSTOMERS TOTAL VALUE DELIVERED BUSINESS OBJECTIVES: DRIVERS: IN TIME TO MARKET PROCESS PPM MANUFACTURING CYCLE TIME YIELD EXTERNAL LEVERS: INTERNAL LEVERS: PRODUCTS DEFECT LEVELS ON-TIME DELIVERY LEADTIME PRICE RESPONSIVENESS GENERALIZED CYCLE TIME

© Arthur M. Schneiderman All Rights Reserved. Slide 7 10/29/ rev 10/31/91 GETTING TO THE BENCHMARK defect level time today us best in class

© Arthur M. Schneiderman All Rights Reserved. Slide 8 Source: Kenzo Sasaoka, President Yokagowa-Hewlett-Packard 7/84 Process Quality Improvement (Dip Soldering Process) Counter Action I Counter Action III Counter Action II % ppm 0.4% Failure Rate Masking Method Improvement Omit Hand Rework Process 40ppm Dip Solder was made to one worker job Basic Working Guide Manual Revision of Manufacturing Engineering Standards PC Board Design Instructions 3ppm FY month

© Arthur M. Schneiderman All Rights Reserved. Slide 9 12/12/85-ZD4 YOKOGOWA HEWLETT PACKARD Failure Rate % months 10,000 1, PPM 50 % improvement each: 3.6 months Dip Soldering Defects

© Arthur M. Schneiderman All Rights Reserved. Slide 10 3/11/87-IMPDATA1 OBSERVED HALF-LIVES HALF-LIFEIMPROVEMENT DESCRIPTION (months)CYCLESR2R2 operations sheet errors days late in delivery rejects due to bends and dents process sheet errors PCB photo imaging resist flake errors in purchase orders aluminum smears from IC test pads yield loss, die coat inspection scrap costs, die coat inspection defective stockings yield loss, PCB photo imaging typing errors in bank telegram dept late orders to customers defects in PCB edge polishing insertion defect rate failure rate, dip soldering process down time of facilities COPQ, goggles manufacturer scrap and repair costs scrap and repair costs in-process defect rate late spare parts to customers defects due to pits, piston rings defects in vacuum molding vender defect level, capacitors customer returns due to admin. error WIP accounting miscodes manufacturing scrap vender defect level, transformers vender defect level, IC linears WIP failure rate, line assembly manufacturing cycle time defects per unit

© Arthur M. Schneiderman All Rights Reserved. Slide 11 3/11/87-IMPDATA2 OBSERVED HALF-LIVES (cont.) HALF-LIFEIMPROVEMENT DESCRIPTION (months)CYCLESR2R2 rework rate off-spec rejects set up time vender defect level, transistors defect levels, customers incoming QC defects software documentation errors error rate, perpetual inventory customer returns due to product missing product features equipment downtime scrap costs absenteeism due to accidents defects at turn-on manufacturing cycle time defects on arrival non-conformances vender defect level, microprocessors post release redesign field failure rate accident rate defective lots received from vendors failure rate, PCB automatic test first year warrantee costs computer program execution errors late deliveries to customers warranty fail rates failure costs (internal + claims) product development cycle time AVERAGE:

© Arthur M. Schneiderman All Rights Reserved. Slide 12 6/11/ rev. 5/28/91 hi med low himedlow Organizational Complexity Technical Complexity TARGET HALF-LIVES months

© Arthur M. Schneiderman All Rights Reserved. Slide 13 1/22/ PLAN WHAT IDENTIFICATION OF THEME WHY CAUSAL ANALYSIS WHO WHEN WHERE HOW SOLUTION PLANNING EVALUATION OF RESULTS STANDARDIZATION DO CHECK ACTION AND IMPLEMENTATION DATA COLLECTION AND ANALYSIS REFLECTION AND NEXT PROBLEM THE PDCA CYCLE and THE 7 STEPS

© Arthur M. Schneiderman All Rights Reserved. Slide 14 5/9/ a rev. 5/28/91 AUTOMOTIVE RELIABILITY IMPROVEMENT Consumer Reports, April year problems per 100 cars GM Ford Chrysler Toyota Nissan Honda

© Arthur M. Schneiderman All Rights Reserved. Slide 15 5/9/ rev. 5/28/91 AUTOMOTIVE RELIABILITY IMPROVEMENT Consumer Reports, April 1991 problems per 100 cars year GM Ford Chrysler Toyota Nissan Honda halflife (mths)

© Arthur M. Schneiderman All Rights Reserved. Slide 16 QS-16B ADI QIP GOALS IC OPERATIONS, ESTABLISHED PRODUCTS METRIC1987 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 >99.8% <10 PPM <3 wks 15 wks 20% 9 9>50% 5000 PPM6 <10 PPM 4-5wks 36 mths 24 6 mths

© Arthur M. Schneiderman All Rights Reserved. Slide 17 ADI QIP GOALS IC OPERATIONS, ESTABLISHED PRODUCTS METRIC EXTERNAL On time delivery85%96%>99.8% Outgoing defect level500 PPM230 PPM<10 PPM Lead time10 weeks5.4 weeks<3 weeks % CRDs matched31%50%n/a excess leadtime3.9 weeks2.8 weeksn/a INTERNAL Manufacturing cycle time 15 weeks8 weeks4-5 weeks Process defect level 5000 PPM1100 PPM<10 PPM Yield 20%38%>50% Time to market 36 months?6 months 11/12/ doc

© Arthur M. Schneiderman All Rights Reserved. Slide 18 5/7/ a

© Arthur M. Schneiderman All Rights Reserved. Slide 19 5/22/ rev. 5/7/91 GOALS IS culturescorecard projects METRICS SOLVING PROBLEM PERFORMANCE MEASUREMENT does not mean measurement improvement + monitoring If you don't monitor it, it will get worse. If you don't measure it, it will not improve.

© Arthur M. Schneiderman All Rights Reserved. Slide 20 4/8/ rev 5/13/90 GOAL: IMPROVE CUSTOMER SERVICE CUSTOMER SERVICE METRICS ON TIME % late % early % on time RESPONSIBILITY factory warehouse credit customer LATENESS/EARLINESS shipped late, how late? shipped early, how early? still late, how late? months to ship late backlog LEAD TIME customer requested lead time % CRD's matched excess lead time RESPONSIVENESS time to schedule an order GOALS IS culturescorecard projects METRICS SOLVING PROBLEM

© Arthur M. Schneiderman All Rights Reserved. Slide 21 % Late 3Q91

© Arthur M. Schneiderman All Rights Reserved. Slide 22 c ON TIME DELIVERY HALF LIFE - IN MONTHS Analog Devices, Inc Q884Q881Q892Q893Q894Q891Q902Q903Q904Q901Q

© Arthur M. Schneiderman All Rights Reserved. Slide 23 % Late Sep 91

© Arthur M. Schneiderman All Rights Reserved. Slide 24 3/91-VRS Database 64 CUSTOMERS IN VENDOR RATING DATABASE ABF AGFA AirResearch Allen Bradley Allied Signal Amdahl Ametek Analogic Apollo AT&T Becton Dickinson Bendix Avionics Brown Engineering Compugraphic Coulter Electronics Digital Instrument Eaton Electronics & Space EMC Finnegan Fluke Ford (Aerospace) GEC General Dynamics General Electric Gould Hewlett-Packard Honeywell Hughes Instron JET Electronics Kodak Litton Loral Lucas M/A-COM Marquette Electric Martin Marietta Masscomp McDonald Douglas Measurex Microcircuits Semiconductor Parker Air & Space Penastar Perkin Elmer Pitney-Bowes Raytheon Recognition Reliance Electric Rockwell Sanders Siemens Sikorsky Spectra Physics Tektronix Teleco Teledyne Teradyne Texas Instruments Trillium United Technologies Walkins-Johnson Co. Waters Associates Westinghouse

© Arthur M. Schneiderman All Rights Reserved. Slide 25 c Delivery Performance Customer Measured % Late HALF LIFE = 9* QIP STARTED FeApJuAuOcDeFeApJuAuOcDeFeApJuAuOcDeFeApJuAuOcDeFe MrMyJlSeNoJaMrMyJlSeNoJaMrMyJlSeNoJaMrMyJlSeNoJaMr Actual Data Trend * Half Life is only calculated over the period of time that improvement occurred Note: There is an average of 22 companies per point

© Arthur M. Schneiderman All Rights Reserved. Slide 26 5/22/ HEWLETT-PACKARD VENDOR RATINGS yearADI ranktotal supplierscategory linear IC suppliers all IC suppliers linear IC suppliers all IC suppliers * *tied with one other supplier

© Arthur M. Schneiderman All Rights Reserved. Slide 27 3/24/

© Arthur M. Schneiderman All Rights Reserved. Slide 28 3/25/ rev 4/1/91 SOME LESSONS LEARNED (One Person's Opinion) "97% is good enough" -> no planned improvement PMI acquisition Reorganization (centralization) Manufacturing, QA Consolidation CLD+MDD+MED+IPD=IED (ACE+LSP)+DSP=SPD ADBV+ADS+PMI=? New business planning process Product/Market/Function Strategy Managers Eventually, you run out of "slack" need for cross-functional problem solving need for management participation If you don't monitor it, it will get worse! Fundamental re-evaluation of our QIP efforts Center for Quality Management (CQM) Shoji Shiba It's easy to be distracted (even by the right things) Input / Output Data Base TQM / CQM anti-Hawthorn Effect 7 steps weakness -> standardization -> control