HID Global. Lean Operations & Finance. Overview: ASSA ABLOY (HID Global Parent Company) Teaming Up at HID Global September 2010

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1 HID Global Lean Operations & Finance Overview: ASSA ABLOY (HID Global Parent Company) The worldwide leader in locking solutions Annual revenues of $4.8 billion in companies in 50 countries Over 29,000 employees Dedicated to meeting customer needs for safety, security, and convenience Teaming Up at HID Global September

2 HID Global Product Portfolio ACCESS CONTROL READERS NETWORKED ACCESS SOLUTIONS MIFARE DESFire ACCESS CREDENTIALS IDENTITY & ACCESS MANAGEMENT MIFARE DESFire Access Control and Identity HID Global North Haven, CT The factory is located in a single leased building in North Haven, CT U.S.A. The facility manufactures custom access cards with various technologies. (Value Add) The location is also a distribution center of HIDG readers and programmable white cards Production/Shipments 18.4 million units Workforce - Total 110 DL 65 Four Value streams 3 4 2

3 Why we chose Lean: Need For Change was recognized in 2005 Why Lean?? Poor Performance High Scrap Low Morale No growth in a Growing Market Measure 2005 Shipments $1.15M # cards/month 480k On time (12 month average) 69% Lead time (days) 25 Scrap % sales 6.10% Inventory turns 7 Employee Driven Improvements Few Capability Morale Turnover Cross training Customer satisfaction Basic customization Low High Seldom Low 5 6 3

4 The Results Attribute 2005 Mar 09 Aug 10 Shipments/month $1.15 M $3.3 M # cards/month 480 k 1.7 M On time (12 month average) 69% 95% Lead time (days) overall Scrap % sales 6.10% 2.6% HID Finance History Information Sharing North Haven Is a Cost Center Finance COO Local Mgmt!!! Lock Packs Moving to Regionalize Inventory turns Employee Driven Improvements Few 2,524 Capability Limited to basic customization Extensive Morale Low High Turnover High Low Cross training Seldom Extensive...and we still have a long way to go!!! 7 8 4

5 Policy Deployment to Attain Mission Statement North Haven Value Streams RFID We will provide our customers with the highest quality trusted solutions, on time, every time, through our relentless pursuit of world class practices 9 Wiegand RFID Priority Plus Program IoD Identity on Demand IoD Wiegand Readers Wiegand PPP 10 5

6 Policy Deployment - Matrix

7 Policy Deployment Bowler Metrics Balanced Score Cards Wiegand Value Stream PPP Value Stream BSC BSC

8 Balanced Score Cards - PPP Balanced Score Cards

9 Value Stream Income Statements Once we identified the value streams, we recognized the need to publish financial results for each one. We follow Standard Costing reporting requirements from HIDG and Assa Abloy. Support departments had to be allocated due to cross departmental activity and low headcount. We wanted to show global sales results from the efforts of the Value Streams, not just local l sales $$. For the first iteration, we replicated the detailed income statement. You can guess the reaction from the value streams leaders

10 We knew we had to simplify the information. We met with the V/S & OP s leaders Decided on more meaningful categories for expenses Remembering advice from previous Lean Accounting Summit session presenters. Just Try It! Created Plain Language Income Statement

11 Communication Focus would be on what their teams can affect. Mapped from original I/S format Able to drill down for detail Added run rate % for easier comparisons Meetings Daily 9:15 Meeting Weekly VS report metrics (all ops) Monthly VS PD meeting Bi-Monthly Town Halls Reports Daily scrap, WIP, Inventory Weekly Inventory Monthly All (VS income statement) New Data Warehouse Other metrics reported Cycle Count Results Labor Cost per unit shipped Overhead cost per unit shipped Asset Productivity Energy Consumption per unit and sales dollar

12 Plant Wide Visuals Plant Wide Visuals 5S layout Heijunka Kanban Visual scheduling replenishment scheduling

13 Month End Close Corporate Finance Office was closing in 3 days We wanted to get it down to 1 ½ days. First step was to map all processes and interdependencies. We asked each person to make a task list Lists were combined with day and time Master List also showed what tasks were required before another could be started t Was put on a share drive for everyone to log in and note when they were complete with a task. Month End Close: Example of Task List

14 Month End Close The next step was to challenge why a task was needed at all or if it could be performed prior to month end. Payroll entries, Accruals, Depreciations, etc. were moved up to the days before a month end. Increased usage of software enhancements reduced d time reqs. Reviews in mid-month help to minimize time spent on day one of the close. Month End Close After a year, we were able to eliminate using the master task list. A/P kaizen for subledger closing reduced processing time from 2 days to 5 hours Number of Journal Entries have been reduced. Communications between departments has improved. Hand-offs have been reduced. We are now down to 1 ½ days

15 Office Kaizen Streamline the Accounts Payable Process A/P Kaizen: Starting the Process We recognized that a lot of effort was being made by the AP personnel. Was all of this effort necessary? How do we find out? A Kaizen event with process mapping was needed We decided to map the process for a 4- way match. We needed to include the entire process which starts with the purchasing department placing a PO to buy an item. The item is received The invoice is received and processed A check is sent to pay for the invoice

16 A/P Kaizen: Process Mapping After we finished the current state, we then mapped out a leaner process. This reflected our decisions to eliminate waste. The results of the AP Kaizen 194 Steps in the before process, 139 steps in the after process hours saved per day 7 hours, matching invoices to packing slips 4 hours, by changing the filing process hours, attaching packing slips and eliminating loops 1 hours, logging key supplier process.28 hours, eliminate on-hold root causes Understanding of the process across various departments within the company Documentation of the accounts payable process which can be used for training A baseline to start our next improvement event 5S of the accounts payable department to improve quality (sort, straighten, set in order, shine, &standardize) Reduced check runs to minimize down time

17 Additional Finance Improvements Recognition that processes needed to standardized globally among all finance offices sharing best practices along with local Kaizen events. Eliminating gprocessing silos that do not share with each other. Kaizen events (Germany, Irvine, Argentina, Payroll -HR) Outsourced cutting checks and have vendors sign up for EFT. Automated manual Payroll processes. Reviewed, modified, and or automated intercompany cross charges and netting payments. A/P implemented Expensables software usage for expense report processing and approvals. Large factor in our success: CULTURE CHANGE If you do what you always did, you ll get what you ve already ygot! Get everyone pulling in the same direction Supporting each other

18 Culture and Community Events Other Activities Created a Morale Team Volunteers from all over the plant sign up for one year by signing up on a posted sheet. The employee must be active on the Team to get credit for being on Team. Volunteers are selected from the sign up sheet, and HR makes sure the participation i does not hit any one department t too hard. Volunteers represent their peers on the Team Includes off shifts Time is shared company time and personal time is used Team is tasked with developing creative ways to foster a team atmosphere combined with learning lean and the team concept Uses fun activities to boost morale and demonstrate lean lessons Events are planned quarterly Can be around a holiday such as Valentine s Day or Mother s Day Plan the holiday party and summer outing Team leader serves 2 years first year as the leader, 2 nd year as a member to help the new leader

19 Other Activities Created a Community Relations Team Management Committee selects 3-5 charities to support each year, but can also accept requests throughout year from community organizations to support. This committee and HR is filtering all the requests that can come in during a year. Employees can suggest events to support to the Management Committee. American Red Cross American Cancer Society Connecticut Food Bank Animal Haven No Kill Shelter Volunteers from all over the plant sign up for each event planned by the Management Committee by signing up on a posted sheet that describes the current event. The employee must be active in the event to get credit for being on the event team. Volunteers are selected from a sign up sheet, and HR makes sure the participation does not hit any one department too hard. Includes off shifts Time is shared it is often on own time due to nature of event Moneys that may be collected at Morale Committee events are given to this committee to donate to the charities 37 Employee Morale Team Events Some of the culture changing events Shingo Picnic, Team building, Points for Progress 2006 Ice Cream Truck Chair Massage Pumpkin Carving Scavenger Hunt Count the Candy Corns Thanksgiving Deserts Gingerbread Contest Christmakwanhanukkah Chili Cook-off 2007 Year Beginning Celebration Valentine s Day Tea and Coffee Green Bagels and Cake Spin the Wheel on Mother s Day Spin the Wheel on Father s Day Ice Cream Social Company Picnic at Holiday Hill Family open house Bake sale Family Day Dunking Booth HID Bowling Walk-A-Dog Mohegan Sun Bus Trip Chair Massage 2008 Year Beginning Celebration Valentine s Day Chocolate Fountain Mother s Day roses Father s Day Lunch Company Picnic at Anthony s Bake sale For World Vision HID Summer Olympics Holiday Lunch 2009 Survivor Team Building Event Mother s Day Pot Luck DeFEET Hunger Walk Lean Problem Solving Event Carnival Day Holiday Luncheon 38 19

20 Improvements 2 per employee per month Next Steps: Dec-06 Jan-07 Feb Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Implemented Improvements Implemented improvements Target Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar Apr-10 May-10 Jun-10 Jul-10 Aug Automate the VS income statements More reports to provide visibility downward One source of the truth (Data Warehouse) Continue develop the culture of speaking to and understanding your data (Make it Ugly) For upcoming Oracle R12 implementation internal review of all processes looking for uniformity between all global locations. Kaizen between HR and Payroll to smooth out processing issues. Automating Inter-Org Invoicing. Look for more opportunities to improve