1. ACARP Conference – September 2007 Lessons from Manufacturing

2. Within the Australian Coal Mining community today BHP Billiton - Six Sigma BMA- Six Sigma Rio Tinto- Lean Six Sigma Peabody- Lean Six Sigma 24 April 2007 2 Within Manufacturing there are two dominant philosophies that are driving productivity improvement and quality – Lean Thinkingand Six Sigma

3. Six Sigma The aim of Six Sigma is to systematically improve processes by eliminating defects. One standard deviation - around 68 percent. Two standard deviations 95 percent. Three standard deviations about 99 percent. Six sigma quality – 6 standard deviations from the mean represent defect levels below 3.4 defects per one million opportunities 24 April 2007 3

4. Productivity Improvement If the aspirational aim of Six Sigma is to eliminate defects to less than 3.4 per million… Why are so many Six Sigma projects themselves defective? 24 April 2007 4

5. Motorola has reported over US$17 billion in savings from Six Sigma as of 2006 (20 years implementation) 2006 results were impressive. Sales grew 22% to a record $42.9 billion. Net earnings were $3.7 billion. 24 April 2007 5

6. Lean is built around the concepts of the Toyota Product System. Lean’s focuses on improving the 'flow' or smoothness of work, eliminating waste / variation and the pursuit of perfection. 24 April 2007 6 In 2006 Toyota’s Sales grew 13.4% to a record $179 billion. Net income was $11.7 billion.

7. What are the lessons that the mining industry should learn from manufacturing? 24 April 2007 7

8. Lesson – reduce variability Both Lean and Six Sigma have different philosophical approaches but share many common tools. 24 April 2007 8 Perhaps the most striking common philosophical feature is the pursuit of the continual reduction of variability and the elimination of waste. Why is this important?

9. Continually reduce variability Law 11 of Factory Physics # (Pay me now or pay me later) 24 April 2007 9 If you have high variability you will pay for it through. Long Cycle times and high WIP levels Wasted Capacity (low utilisation of resources) Lost throughput Factory Physics – Hope & Spearman pg 623.

10. 24 April 2007 10 Case Study - Utilisation Focus on reduced variability 66% Utilisation 3.75 m / operating hr  Better conditions 15% Utilisation 1.0 m / operating hr X

11. Lesson – Implement the Philosophy Implement the philosophy not just the tools. 24 April 2007 11

12. Lesson – Learn by Doing People Learn by doing! 24 April 2007 12 Teach and practice the use of tools in the context of real work problems. They don’t teach the tools and then go looking for a problem.

13. Lesson – Go and have a look Go to the place where value is added! Ohno – who is credited with the development of the Toyota production system said... “Management should walk the factory floor at the rate of 100m per hour.” 24 April 2007 13 Slow down. Observe. Talk to the people adding value. Involve these people in the improvements.

14. Lesson – Learn to See Learn to see non Value Adding Activities 24 April 2007 14

15. 24 April 2007 15 Learning to See Total Available Time 24 * 7 Scheduled Production Time Scheduled Down Time Scheduled Down Time Reduced by maintenance shifts Available Run Time Set-up Time Set-up Time Reduced by panel advances Reported Run Time Unplanned Recorded Stoppages Impacted by breakdowns as per Deputies reports Net Run Time Minor Unrecorded Stoppages Unrecorded Stoppages Reduced by getting supplies to face / wait on car / ventilation extensions Efficient Net Run Time Slow Speed Slow Speed Proficiency (speed) of bolters and miner driver Value Add Time Rejects Rework Rejects Rework Repairing roadways, intersections, off-centre or over-wide roadways The proportion of time spent “Adding Value” (cutting and supporting) can be very small Equipment Value Adding Time

16. 24 April 2007 16 Big productivity gains - Its about the people There are enormous productivity paybacks in eliminating non value adding time. And These productivity gain do not require big capital investment There are enormous productivity paybacks in eliminating non value adding time. And These productivity gain do not require big capital investment Net Run Time Reported Run Time Available Run Time Scheduled Production Time Total Available Time Efficient Net Run Time Reported Run Time Available Run Time Scheduled Production Time Total Available Time Value Add Time Net Run Time Reported Run Time Total Available Time Efficient Net Run Time Net Run Time Reported Run Time Available Run Time Scheduled Production Time Total Available Time Value Add Time

17. 24 April 2007 17 Big productivity gains - Its about the people Net Run Time Reported Run Time Available Run Time Scheduled Production Time Total Available Time Efficient Net Run Time Reported Run Time Available Run Time Scheduled Production Time Total Available Time Value Add Time

18. 24 April 2007 18 Big productivity gains - Its about the people Net Run Time Reported Run Time Available Run Time Scheduled Production Time Total Available Time Efficient Net Run Time Reported Run Time Available Run Time Scheduled Production Time Total Available Time Value Add Time Net Run Time Reported Run Time Total Available Time Efficient Net Run Time Net Run Time Reported Run Time Available Run Time Scheduled Production Time Total Available Time Value Add Time

19. Lesson – Think Systemically Think systemically – not just locally… Map the Flow of Value 24 April 2007 19

20. Lesson – Measure Success Develop a “dashboard” that measures success – not just failure 24 April 2007 20

21. 24 April 2007 21 Developing the “Dashboard” - Measurements for Success Defects Unnecessary Inventory Transporting Over Production Under-utilisation of employees Unnecessary or excessive motion Inappropriate Processing Waiting Under performance on Production Rates The 7 Wastes (plus 1) Lots of other ways to help develop the dashboard - safety/cost quality/delivery and Can Do metrics

22. Lesson – Ask your people to solve problems Ask your people to help you solve the problems 24 April 2007 22

23. 24 April 2007 23 Jim Womack, Jan 2006 “A Lean management system involves managers at every level posing the key problems that need to be solved and asking the teams they lead to develop and implement the answers. This practice of asking the correct questions rather than providing the correct answers… is perhaps the starkest contrast between Lean Thinking and orthodox mass production and the hardest to implement.”

24. Lesson – Audit and improve front line management Build into “Standard Work”… processes that audit the way work is done… Develop front line managers into coaches and mentors 24 April 2007 24

25. 24 April 2007 25 Supervising and auditing improvement programs Formal Audits

26. Lesson – Pick up Good Ideas Take on board ideas that work and roll them out… But remember Lean is a philosophy not a series of tools 24 April 2007 26

27. Development Panel Out bye heading Pit Top Drift Pit bottom Lay down area 24 April 2007 27 Pull system for supplies? Belt

28. 24 April 2007 28 Panel Lay Down Area BoltOilMesh Bolts Oil Mesh Bolt

29. 24 April 2007 29 Panel Lay Down Area BoltOilMesh Bolts Oil Mesh Bolt

30. 24 April 2007 30 Panel Lay Down Area Bolt OilMesh Bolts Oil Mesh

31. Bolt 24 April 2007 31 Panel Lay Down Area BoltOilMesh Bolts Oil Mesh Bolt

32. 24 April 2007 32 Panel Lay Down Area Bolt OilMesh Bolt Bolts Oil Mesh

33. 24 April 2007 33 Panel Lay Down Area Bolt OilMesh Bolt Empty Pit Bottom Lay Down Area Bolts Oil Mesh

34. 24 April 2007 34 Panel Lay Down Area Bolt OilMesh Bolts Oil Mesh Empty Pit Bottom Lay Down Area Bolt Oil Kanban Card Box Mesh

35. 24 April 2007 35 Panel Lay Down Area Bolt OilMesh Bolts Oil Mesh Empty Pit Bottom Lay Down Area Bolt Oil Kanban Card Box Mesh

36. 24 April 2007 36 Panel Lay Down Area Bolt OilMesh Bolts Oil Mesh Bolt Oil Mes h Kanban Card Box Pit Bottom Full Supplies for Panel Oil Mesh

37. 24 April 2007 37 Panel Lay Down Area Bolt OilMesh Bolts Oil Mesh Bolt Oil Mes h Kanban Card Box Pit Bottom Full Supplies for Panel Oil Mesh

38. 24 April 2007 38 Panel Lay Down Area Bolt OilMesh Bolts Oil Mesh Bolt Oil Mes h Kanban Card Box Pit Bottom Full Supplies for Panel Oil Mesh

39. 24 April 2007 39 Panel Lay Down Area Bolt Oil Mesh Bolts Oil Mesh Bolt Oil Mes h Kanban Card Box Pit Bottom Full Supplies for Panel Mesh Oil

40. Mes h 24 April 2007 40 Panel Lay Down Area Bolt OilMesh Bolts Oil Mesh Bolt Oil Mes h Kanban Card Box Mesh Oil Empty Pit Bottom Lay Down Area

41. Lesson – Manage the doing Manage the doing 24 April 2007 41

42. 24 April 2007 42 Manage the Doing Ensure:  The people doing the work adhere to standard operating procedures.  The people doing the work managing their performance by-the-hour, shift-to- shift against the agreed metrics.  Supervisors, and managers auditing performance and providing feedback and guidance on progress, by-the-hour, shift-to-shift, week-to-week, month-to- month.  Regular after action Reviews to capture the positive and negative aspects of work activity and resource “problem solution”.

43. 24 April 2007 43 Continually reduce variability Implement the philosophy not just the tools People learn by doing Go to the place where value is added Learn to see non Value Adding Activities Think systemically – not just locally… Map the Flow of Value Develop a “dashboard” that measures success – not just failure Ask your people to help you solve the problems Build into “Standard Work” processes that audit the way work is done Develop front line managers into coaches and mentors Take on board ideas that work and roll them out Manage the doing In Closing

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46. 24 April 2007 46