1. Iron River Paper Mill Cost of Quality Analysis Jessica Brown & Jeff Hern April 22, 2004 GSM 645

2. Agenda Mike Lawson, Quality Assurance Dept. Ken Gibson, Mill Manager WelcomeWelcome Customer AnalysisCustomer Analysis ProfitabilityProfitability Cost of QualityCost of Quality Your InvolvementYour Involvement

3. Iron River Paper Mill Founded in 1906Founded in 1906 Paper for Magazines & CatalogsPaper for Magazines & Catalogs $220 Million Sales$220 Million Sales 632 Employees632 Employees –1 Mill Manager –12 Managers –22 Departments (10 Production, 12 Admin & Support)

4. Customer Analysis Printers & PublishersPrinters & Publishers Deadlines  Quick Supply, ReliabilityDeadlines  Quick Supply, Reliability Need for QualityNeed for Quality –Runability –Printability Need for ServiceNeed for Service –Timely Delivery –Supplier Loyalty

5. Customers & Profitability Commodity vs. Product DifferentiationCommodity vs. Product Differentiation Recent Industry TrendsRecent Industry Trends Searsport Maine MillSearsport Maine Mill Quality Matters

6. Quality Costs Conformance CostsConformance Costs –Prevention –Inspection Non-Conformance CostsNon-Conformance Costs –Internal Failure –External Failure $7.6 million $35.3 million $42.9 million Is it better to know when we’ve made a mistake, or to know when we’re about to make a mistake?

7. Cost of Quality Analysis 18% Conformance Costs 82% Non-Conformance Costs

8. Your Involvement Where are our opportunities for quality improvement?Where are our opportunities for quality improvement? Who can answer this question?Who can answer this question? The Front-Line Workers

9. Your Involvement Are you willing to give these workers the power to make these changes?Are you willing to give these workers the power to make these changes? What can we do to facilitate this?What can we do to facilitate this?

10. Brainstorming TrainingTraining IncentivesIncentives What would “the good manager” do?What would “the good manager” do? Organizational changeOrganizational change

11. Follow Up What ONE THING will you change in your department as a result of today’s discussion?