Headquartered in Norwood Massachusetts
Publicly Held (NYSE Symbol ADI)
$485 Million in Sales (FY1990)
48% of Sales Outside United States
5600 Employees Worldwide
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 1
2/13/90-PREZ-1 rev. 5/7/91

(cont.)
Products: ICs, assembled products, subsystems
Applications: precision measurement & control
Markets: data acquisition
50% industrial/instrumentation
25% military/avionics
13% computer
12% other
Integrated supplier design manufacturing (8 locations) direct sales (100 locations) distribution
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 2
5/8/91-PREZ-1a

Period Accomplishments Key Weaknesses
1984-1986 CEO awareness of TQM TQM organization
TQM goal setting process
1987-1990 established goals/metrics
QIP teams
10x improvement
“it’s real” top management involvement focus on management not everyone involved incomplete TQM infrastructure training slow progress -> plateau
TQM activity on “back burner” 1991-1992 business restructuring financial focus
TQM planning
1992-1994 Creating the New
Analog >10x improvement
?
today Better understanding of the challenge
Corrective Action established Corporate TQM staff seek outside help expert: Professor Shoji Shiba networking: CQM revitalize TQM implement TQM infrastructure
?
• 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
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 3
9/12/91-09121-1.doc

1
GOAL
SETTING
ORGANIZATION
SETTING
7 REQUIRED COMPONENTS
2
TRAINING &
EDUCATION
5
DIAGNOSIS
6
MONITORING
PUSH
TQM
ACTIVITY
PULL OUTPUT
3
PROMOTION
7
INCENTIVES
REWARDS
4
DIFFUSION
ORIENTATION EMPOWERMENT
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
SYNCHRONIZATION
Slide 4
3/24/91-03241-1

100
0.3
0.1
30
10
3
1
12 month halflife
0.03
0.01
1986 1987 1988 1989 1990
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
1991
Slide 5
6 month halflife
1992 1993 1994
9/12/91-09121-1

GOALS culture
IS
PROBLEM
SOLVING projects scorecard
METRICS
BUSINESS
OBJECTIVES:
MARKET LEADERSHIP (RMS)
REVENUE GROWTH
PROFITABILITY
DRIVERS: BE RATED #1 BY OUR CUSTOMERS
IN TOTAL VALUE DELIVERED
EXTERNAL LEVERS:
PRODUCTS
DEFECT LEVELS
ON-TIME DELIVERY
LEADTIME
PRICE
RESPONSIVENESS
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 6 10/28/86-QIP-7 rev: 4/22/91-04080-2a

GETTING TO THE BENCHMARK us
1
.3
.1
.03
best in class
.01
.003
today time
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 7 10/29/91-10291-1 rev 10/31/91

%
0.4
Counter Action I
0.4%
(Dip Soldering Process)
0.3
0.2
Counter Action II
Counter Action III
0.1
40ppm
Omit Hand Rework
Process
Masking Method
Improvement
0
11 1 4 7 10 1 4 7 10
78 79 ppm
40
30
20
10
Dip Solder was made to one worker job
Revision of Manufacturing
Engineering Standards
Basic Working
Guide Manual PC Board Design
Instructions
3ppm
0
10 1 4 7 10 1 4 7 10 1 4 7 10 month
80 81 82
FY
Source: Kenzo Sasaoka, President
Yokagowa-Hewlett-Packard 7/84
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 8

YOKOGOWA HEWLETT PACKARD
Dip Soldering Defects
1 10,000
.1
.01
50 % improvement each:
3.6 months
1,000
100
.001
10
.0001
0 12 24 36 months
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
48 60
1
Slide 9
12/12/85-ZD4

DESCRIPTION
HALF-LIFE IMPROVEMENT
(months) CYCLES R 2 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
3.3
3.3
3.7
4.5
4.7
2.4
2.4
2.7
2.9
2.9
3.0
0.6
0.8
1.3
1.4
1.9
2.3
2.4
1.9
3.4
8.6
1.3
1.9
2.3
2.0
2.2
2.3
2.0
2.7
4.2
7.6
1.7
2.1
3.3
1.5
5.1
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
5.0
5.0
5.3
5.3
5.5
5.6
5.7
1.6
0.8
1.1
1.1
3.5
4.6
6.3
0.918
0.746
0.550
0.471
0.968
0.882
0.812
--------------------------------------------------------------------------------------------------------customer returns due to admin. error 6.3
3.8
0.941
WIP 6.3
1.1
0.979
accounting miscodes manufacturing scrap
6.4
7.0
2.5
3.9
0.709
0.530
vender defect level, transformers vender defect level, IC linears
WIP failure rate, line assembly manufacturing cycle time defects per unit
7.2
7.4
7.5
7.5
7.6
7.6
5.0
4.9
2.1
3.2
2.7
4.6
0.842
0.906
0.759
0.886
0.741
0.948
0.834
0.774
0.590
0.535
0.748
0.531
0.717
0.733
0.754
0.843
0.843
0.754
0.838
0.188
0.738
0.980
0.562
0.942
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 10
3/11/87-IMPDATA1

OBSERVED HALF-LIVES
(cont.)
DESCRIPTION
HALF-LIFE IMPROVEMENT
(months) CYCLES R 2 rework rate off-spec rejects set up time vender defect level, transistors defect levels, customers incoming QC
8.0
8.8
9.5
9.6
10.1
1.4
5.1
0.6
3.7
7.1
0.801
0.513
0.690
0.997
0.989
defects software documentation errors
10.4
10.5
5.2
1.2
0.965
0.173
--------------------------------------------------------------------------------------------------------error rate, perpetual inventory customer returns due to product
12.1
12.4
3.0
2.9
0.862
0.974
missing product features equipment downtime scrap costs absenteeism due to accidents defects at turn-on manufacturing cycle time defects on arrival
12.5
13.1
13.8
14.8
14.9
16.9
16.9
2.9
2.1
1.7
4.0
1.3
2.5
2.0
0.947
0.940
0.805
0.956
0.624
0.937
0.848
non-conformances vender defect level, microprocessors post release redesign field failure rate accident rate
16.9
18.5
19.0
20.3
21.5
0.7
1.9
2.5
1.3
2.8
0.666
0.838
0.842
0.857
0.907
defective lots received from vendors failure rate, PCB automatic test
21.6
23.7
1.7
0.5
0.976
0.182
--------------------------------------------------------------------------------------------------------first year warrantee costs computer program execution errors
27.8
29.9
2.6
0.4
0.950
0.364
late deliveries to customers warranty fail rates failure costs (internal + claims) product development cycle time
30.4
36.2
37.9
55.3
0.8
2.5
1.9
1.1
0.994
0.769
0.909
0.733
AVERAGE:
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
10.9
2.8
Slide 11
0.77
3/11/87-IMPDATA2

hi
months
14 18 22 med
7 9 11 low
1 3 5 low med
Technical Complexity
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 12 hi
6/11/90-06110-1 rev. 5/28/91

THE PDCA CYCLE and THE 7 STEPS
1 IDENTIFICATION OF THEME
WHAT
DATA COLLECTION
AND ANALYSIS
PLAN
2
WHY 3 CAUSAL ANALYSIS
DO
WHO
WHEN
WHERE
HOW
4
SOLUTION PLANNING
AND IMPLEMENTATION
CHECK 5 EVALUATION OF RESULTS
6 STANDARDIZATION
ACTION
7
REFLECTION AND
NEXT PROBLEM
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 13
1/22/91-01221-1

AUTOMOTIVE RELIABILITY IMPROVEMENT
120
GM
100
80
60
Ford
Chrysler
Toyota
Nissan
Honda
40
20
0
1980 1985 year
Consumer Reports, April 1991
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
1990
Slide 14
1995
5/9/91-05091-1a rev. 5/28/91

AUTOMOTIVE RELIABILITY IMPROVEMENT
500
200
100
50 halflife
(mths)
80
GM
Ford
76
Chrysler
79
Toyota
205
Nissan
73
Honda
94
20
10
5
1980
Consumer Reports, April 1991
1985 year
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
1990
Slide 15
1995
5/9/91-05091-1 rev. 5/28/91

ADI QIP GOALS
IC OPERATIONS, ESTABLISHED PRODUCTS
METRIC
EXTERNAL
On time delivery
Outgoing defect levels
Lead time
1987
85%
500 PPM
10 wks
HALF-LIFE
9
9
9
INTERNAL
Manufacturing Cycle Time
Process Defect Levels
Yield
Time to Market
15 wks
5000 PPM
20%
36 mths
9
6
9
24
WHILE AGGRESSIVELY PURSUING
CORPORATE-WIDE COST MANAGEMENT
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 16
1992
>99.8%
<10 PPM
<3 wks
4-5wks
<10 PPM
>50%
6 mths
QS-16B

IC OPERATIONS, ESTABLISHED PRODUCTS
METRIC
EXTERNAL
On time delivery
Outgoing defect level
Lead time
% CRDs matched excess leadtime
INTERNAL
Manufacturing cycle time
Process defect level
Yield
Time to market
1987 1990
85%
500 PPM
10 weeks
96%
230 PPM
5.4 weeks
31% 50%
3.9 weeks 2.8 weeks
15 weeks 8 weeks
5000 PPM 1100 PPM
20%
36 months
38%
?
1992
>99.8%
<10 PPM
<3 weeks n/a n/a
4-5 weeks
<10 PPM
>50%
6 months
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 17
11/12/90-11120-3.doc

FY 1991 ADI CORPORATE SCORECARD
FINANCIAL
SALES
SALES GROWTH YTY
CONTRIBUTION MARGIN
ROA (CM)
QIP
End FY 90
ACTUAL
485.2
7.0
6.0
7.1
BHMK
Q1 91
ACTUAL
140.0
27.7
5.7
7.0
133.1
21.4
4.6
5.7
ON TIME DELIVERY (to FCD)
% CRD's NOT MATCHED
EXCESS LEADTIME
EMPLOYEE TURNOVER
94.9
52.2
2.7
13.3
95.0
49.9
16.7
4.3
89.9
54.5
3.0
11.0
MANUFACTURING METRICS: IC PRODUCTS
OUTGOING PPM
587
PROCESS PPM
981
CYCLE TIME
65.4
YIELD
38.4
647
772
34.0
MANUFACTURING METRICS: ASSEMBLED PRODUCTS
OUTGOING PPM
1503 386
PLUG-IN YIELD 90.9
48.5
CYCLE TIME
23.0
10.6
% COST OF SCRAP/REWORK
8.1
5.9
NEW PRODUCTS
BOOKINGS POST-85 PROD
ACTUAL
165.3
FY 87 PLAN
56.7
541
816
35.6
849
48.8
8.6
4.1
ACTUAL
54.5
BHMK
Q2 91
ACTUAL
144.0
23.7
8.9
11.1
95.8
47.5
16.7
4.1
508
657
33.6
312
48.6
10.3
5.5
FY 87 PLAN
64.7
ACTUAL
BHMK
Q3 91
ACTUAL
146.0
21.1
20.2
12.7
96.4
45.7
16.6
4.2
411
546
37.9
296
48.8
10.2
5.2
FY 87 PLAN
70.5
ACTUAL
BHMK
Q4 91
ACTUAL
150.0
8.3
12.5
16.0
97.0
44.2
16.7
4.0
329
450
40.0
282
48.9
10.1
4.9
FY 87 PLAN
77.3
ACTUAL
BHMK
FY 91
ACTUAL
580.0
19.5
9.4
11.8
97.0
44.0
16.7
4.0
328
453
39.7
273
48.9
10.1
4.9
FY 87 PLAN
269.2
ACTUAL
Q1 91 Q2 91 Q3 91 Q4 91 FY 91
FORECAST 3rd YR BOOKINGS of new product releases
FY 90
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 18
5/7/91-05071-8a

GOALS culture
IS scorecard
PROBLEM
SOLVING projects
METRICS
PERFORMANCE MEASUREMENT
If you don't measure it, it will not improve.
If you don't monitor it, it will get worse.
does not mean measurement
+ monitoring improvement
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 19 5/22/90-05220-4 rev. 5/7/91

GOALS culture
IS scorecard
PROBLEM
SOLVING projects
METRICS
GOAL:
IMPROVE CUSTOMER SERVICE
CUSTOMER SERVICE METRICS
ON TIME
% late
% early
RESPONSIBILITY factory warehouse
% on time 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
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 20 4/8/90-04080-3 rev 5/13/90

100
ADS ADBV
Percent Of Lines Shipped Late
Quarterly Data 1Q86-3Q91
MED CLD IPD DSP MDL PMI ADI
10
1
Half Life
(in months)
15 19 14 21
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
20 9
Slide 21
53 NA 17
% Late 3Q91

ON TIME DELIVERY HALF LIFE - IN MONTHS
Analog Devices, Inc.
60 +
60
50
43.50
40
30
20
21.57
22.77
18.39
16.41
15.15
15.12
15.15
16.95
21.18
10
0
3Q88 4Q88 1Q89 2Q89 3Q89 4Q89 1Q90 2Q90 3Q90 4Q90 1Q91
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 22 c. 1991

Percent of Scheduled Lines Shipped Late
Customer Service Performance (Oct 90 Through Sep 91)
ADS BVADM MED CLD IPD DSP MDL PMI
100
O f
L
I n e s
L a t e e n t
P e r c
10
1
0.1
Half Life
(In Months)
N/A N/A N/A N/A N/A N/A N/A 6
+
ADI
N/A
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 23
% Late Sep 91

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
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 24
3/91-VRS Database

Delivery Performance
Customer Measured
% Late
100
50
30
20
10
QIP STARTED
5
3
2
HALF LIFE = 9*
1
Fe Ap Ju Au Oc De Fe Ap Ju Au Oc De Fe Ap Ju Au Oc De Fe Ap Ju Au Oc De Fe
Mr My Jl Se No Ja Mr My Jl Se No Ja Mr My Jl Se No Ja Mr My Jl Se No Ja Mr
1987 1988 1989 1990 1991
* Half Life is only calculated over the period of time that improvement occurred
Actual Data Trend
Note: There is an average of 22 companies per point
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 25 c. 1991

year
1986
1987
ADI rank total suppliers
8 16
5
5
8
15 1988
1989 1*
*tied with one other supplier
12
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 26 category linear IC suppliers linear IC suppliers all IC suppliers all IC suppliers
5/22/90-05220-1

©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 27
3/24/91-03241-3

(One Person's Opinion)
"97% is good enough" -> no planned improvement
It's easy to be distracted (even by the right things)
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
Input / Output Data Base
TQM / CQM
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! anti-Hawthorn Effect
7 steps weakness -> standardization -> control
Fundamental re-evaluation of our QIP efforts
Center for Quality Management (CQM)
Shoji Shiba
©1987-2000 Arthur M. Schneiderman All Rights Reserved.
Slide 28 3/25/91-03251-1 rev 4/1/91