SIX SIGMA : A STRATEGIC INITIATIVE IN RANHILL

YAP YUEN THYE CHIEF EXECUTIVE OFFICER RANHILL BERSEKUTU SDN BHD Representative of RANHILL GROUP OF COMPANIES

Why Ranhill Chose Six Sigma

Competition is stronger than ever, customer have more choices and are demanding higher quality and better value for their investments. Customer will walk away the moment they have an alternative.
To thrive and effectively compete in this kind of environment and deliver on our commitments to shareholders and customers, we need to explore new ways to improve our performance. We need to develop a strategy that will widen our gap within our company and competitors. That strategy is six sigma.

Tan Sri Hamdan Mohamad President Ranhill Berhad Six Sigma Leadership Jumpstart 2002

Topics of Presentation
Ranhill in Brief
About The Company & Nature of Business

Six Sigma Deployment In Ranhill

Implementation Approach

Challenges In Deploying Six Sigma

Critical Challenges

Revitalization of Ranhill Six Sigma

Executive Black Belt Balanced Scorecard Six Sigma Governance Infrastructure

Success Story
SAJH ( Syarikat Air Johor Holdings) RBSB ( Ranhill Bersekutu Sdn. Bhd)

Ranhill In Brief

Ranhill Berhad Corporate Information

Feb 2001 : Listed Main Board KLSE Paid-up Capital : RM 597 Million

Scope of Activities

EPCM EPC

Engineering, Procurement, Construction Management

Engineering, Procurement, Construction

Assets

Asset Ownership

Ranhill : Group Structure

Ranhill : Group Structure

Ranhill : Sectors Involved

Revenue (%)
Infrastructure, 21% Oil & Gas, 20%

Power, 10% Water, 49%

Our Global Reach

Six Sigma Deployment In Ranhill (2002 ~ 2006)

Implementation Approach (2002~2006)

1. Management Jumpstart Top Management workshop SWOT Analysis Brainstorm Potential Project List

4. Six Sigma Project Execution

2. Project Selection

Motorola University coached the project Co-coached by Six Sigma Office Project progress reporting to top management by Six Sigma Office

BB : 23 GB : 44
3. BB / GB Training

Six Sigma Office propose short listed potential projects Top Management to decide which projects to be executed

Top Management to select BB / GB candidate & send for training

No. of Staff Trained in BB & GB ( 2002~2006)

50 45 40 35 30 25 20 15 10 5 0
2003 - BB 2003 - GB 2004 - BB 2004 - GB 2005 - BB 2005 - GB 2006 - BB 2006 - GB

44
BB , 23,
No of GB & BB

GB , 44,

MG SDE RUB R POWER

9 7 7

REC RBSB R BERHAD

Challenges In Deploying Six Sigma

Challenges In Deploying Six Sigma

Resistance To Change
* Understanding of Six Sigma methodology * Linkage to the business strategy & objective * Commitment to drive the initiative * Inherent organisation inertia

Governance Infrastructure
* Six Sigma Council * Establishment of Policy & Procedure

Revitalization of Ranhill Six Sigma

Revitalization of Ranhill Six Sigma

Six Sigma Governance Infrastructure

Executive Black Belt

Balanced Scorecard

Revitalization of Ranhill Six Sigma

1. Six Sigma Governance Infrastructure
* Establish Six Sigma Council * Establish Policy & Procedure * Enhance Six Sigma Office Roles & Responsibilities * Full Time Black Belt at Subsidiary * Establish Web-base Project Tracking System

2. Balanced Scorecard
* Identify Business Strategic Objective & Initiative (As a platform for Six Sigma Project Selection) * Linking Six Sigma Project with the Business Strategic Objective

3. Executive Black Belt

* Leadership program * To equip Top Management with the knowledge of Six Sigma Methodology * Culture Change Agent

Governance Infrastructure
Executive Champion President
Web-base system for project progress tracking System to track completed project performance for at least 2 years

Six Sigma Council

Monitor overall Six Sigma implementation

Guideline for deployment; systematically Align the initiative to Business Strategic Plan

Web-base Project Tracking System

Set Standard Develop training material Conduct training Monitor overall project progress Reporting to Council

Policy & Procedure

Group Six Sigma Office

Full Time BB At Subsidiaries

Coach Six Sigma project Identify best approach for Six Sigma deployment Identify training required Reporting to Group SSO

Ranhills Six Sigma Council

Head of Council President Deputy Head DIV CEO Secretariat Six Sigma Office Advisor Motorola University

GCAD

GHR

GCOO

DIV CEO

DIV CEO

Roles and Responsibilities of Six Sigma Council: 1.Set direction for Six Sigma initiative in Ranhill. 2.Select strategically important projects linked to corporate objectives. 3.Establish and maintain alignment of key metrics linking to balanced scorecard. 4.Allocate resources such as human and financial to drive Six Sigma initiatives. 5.Establish reward and recognition system for Six Sigma and other continuous improvement initiatives. 6.Establish project governance structure. 7.Hold senior management review for strategically important projects.

Executive Black Belt

Executive Black Belt Leadership Program
CEO COO CCO CFO SVP VP GM Ranhill Group Subsidiaries

Top Management of the company to be certified as Black Belt To equip Top Management with the knowledge & skill of Six Sigma methodology Culture Change Agent & Driver For Six Sigma Deployment

Balanced Scorecard Linking Six Sigma to Group Strategic Initiatives

STRATEGY ENTERPRISE RISK MANAGEMENT
Vision, Mission, Values Goals, Strategies Strategy Map Corporate Scorecard Departmental Scorecards

Balanced Scorecard
PERFORMANCE MANAGEMENT SYSTEM
(Managing Individual Performance)

Objectives, Measures & Targets INITIATIVES

Six Sigma Projects

Success Stories (SAJH & RBSB)

Success Story : SAJH

Ranhill Group

REC

SDE

RUB

RP

RE

RBSB

RWS

SAJH

RWT

SAJH : Six Sigma Implementation Approach Since 2003

Management Jumpstart Project Selection BB / GB Training

BSC Management Retreat

Report Six Sigma Project progress & achievement in detail Next Action Plan

Monthly Project Reporting

Report latest progress

Six Sigma Project Execution

SAJH : Project List

IMPROVE BILLING CYCLE TIME & ACCURACY ORGANIZATIONAL CLIMATE CHEMICAL COST REDUCTION ENERGY COST SAVING PRESSURE MANAGEMENT SYSTEM ENHANCE ASSET MANAGEMENT SYSTEM MINOR LEAK REPAIR CYCLE TIME

Six Sigma Project Impact

* Average Leak Repair Cycle Time reduced from 60 * Operation Cost Saving of RM

hrs to 24 hrs.

656,000 per year, due to reduction in NRW.

Minor LeakJRepair hr u by M onth1 I C ha r t of ohor B a Cycle Time

80 70 Individual Value 60 50 40 30 20 1 4 7 10 13 16 Obs e r v a t io n 19 22 25 A pr-04 O ct-04 A pr-05

Before Improvement : Average 60 Hours

After Improvement : Average 24 Hours

UC L=29.86 _ X =24.67 LC L=19.48

Six Sigma Project Impact

* Chemical
Lime (RM) Soda ASH (RM) Cost/m3 16,000 14,000 12,000 10,000

Cost reduced from 1.6 cent/m3 to 0.5 cent/m3.

Chemical Cost For Sungai Lebam

Previous
1.72 1530 1.51 1.56 1623 1.67 3266 0.88 0.50 1378

After Improvement
0.55 0.50 0.51 0.55 0.49 0.47

2.00 1.50 1.00 0.50 0.00 -0.50

RM

8,000 6,000 4,000 2,000 0

Lime (RM) Jan 1530 Feb 1378 Mac 1623 May 3266 12005 9457 10388 8575 3869 3153 3136 April 3153 0 June 3869 0 July 4327 0.00 0.55 0 Aug 3784 0.00 0.50 0 Sept 3438 0.00 0.51 0 Oct 3768 0.00 0.55 0 Nov 3385 0.00 0.49 4327 3784 3438 3768

3385

3323

-1.00 -1.50

0 Dec 3323 0 0.47

-2.00

Soda ASH (RM) 12005. 9457.0 10388. 8575.0 3136.0 0.00 Cost/m3 1.72 1.51 1.56 1.67 0.88 0.50

Month

11

Success Story : RBSB

Ranhill Group

REC

SDE

RUB

RP

RE

RBSB

RBSB : Project List

PROJECT COST MONITORING CUSTOMER FEEDBACK INDEX SURVEY PRODUCTION OF DRAWINGS STAFF UTILIZATION RATE IMPROVE BOOK ORDER FOR PROJECTS OUTSIDE GROUP IMPROVE ENGINEERING EFFICIENCY

Six Sigma Project Achievement

86% 84% 82% 80% 78% 76% 74%

85%

80% 70% 60% 50%

70%

77%

40% 30% 20% 10%

29%

72% Staff Utilization: Before Satff Utilization : After

0% Customer Feedback Index : Before Customer Feedback Index : After

Improve Staff Utilization Rate from 77% to 85%

Total Manhour/drawing Before & After
35

Improve Customer Feedback Index from 29% to 70%

1600% 1400% 1200%

15

Manhour/drawing

30

1000% 800%

25

23.02 19.97

600% 400%

20

200% 0% PACC Report : Before PACC Report : Before

15 Before After

Reduce Total Man Hour / Drawing, 23 to 20 man hour

Improve PACC Reporting Date from 15th to 7th of the month.

Lessons Learnt
1. Business Strategy & Direction - without clear business strategy / direction, Six Sigma project will be very difficult. 2. Project Selection Without Linkage to Business Objective - low financial impact - low top management support - low momentum ( project will take a long time to be closed) 3. Top Management Exposure - top management who are unexposed to Six Sigma methodology will have difficulty in supporting Six Sigma initiative. 4. Governance Infrastructure - project with proper governance infrastructure (Six Sigma Council, Policy & Procedure, etc) will be carried out expediently. 5. Conviction & Commitment - one of the most important factor to ensure of success of Six Sigma initiative and its continuous engagement is in fact the conviction and commitment of all stakeholders.

SAJH :Asian Award Winning

Asian CSR Award 2005
Congratulations! On behalf of the Organizers, Partners and Sponsor of the Asian CSR Awards, Philippine Investment-Management (PHINMA) Inc., it is my pleasure to inform you that Six Sigma-Organizational Climate Project submitted by SAJ Holdings Sdn Bhd is deemed the most outstanding project (winner) in the Best Workplace Practices category of the Asian CSR Awards 2005. 2005 With 160 projects from 91 companies in 12 countries vying for the Awards in five categories, the judges had a difficult time evaluating the entries. Your company merits our genuine congratulations. More often than not, and as indicated in our entry rules, CEOs of the winning companies attend the Award ceremonies to accept their organization's award. This year's awards will be presented at the Gala Dinner Ceremonies of the Asian Forum on Corporate Social Responsibility on September 9, 2005 at the Hilton Hotel in Jakarta, Indonesia. Over 300

RBSB Award : COMPANY OF THE YEAR (2006) BY MALAYSIA CANADA BUSINESS COUNCIL

Thank You