Using Six Sigma to Gain Market Share and Improve Margins

Who is Shaw Industries?Shaw, a subsidiary of Berkshire Hathaway, Inc.,

is headquartered in Dalton, Georgia. Shaw produces and sells carpet, rugs, ceramic,

hardwood, and laminate flooring for residential and commercial applications throughout the world. To be exact, we

manufacture more than 600 million square yards of floor covering every year--enough to

wrap a 6-foot wide path around the earth's equator 7 times.

Who is Shaw Industries? Shaw got its start in 1946 as Star Dye Company,

a small business that dyed tufted scatter rugs. 1972 - purchases of its first yarn plant and

acquiring its first continuous dye plant in 1973. Created its own trucking subsidiary, dramatically

improving shipments nationwide

Who is Shaw Industries?Today

Over 30,000 employees Worldwide Over 25,000 Styles and Colors 2001 Was Purchased by Berkshire

Hathaway – one of their most profitable investments

Shaw is a full-service flooring company with $4 billion in annual sales

Who is Shaw Industries?

Six Sigma @ Shaw Industries Implemented 6 Sigma in 1999 Company-wide Initiative

Sales / MarketingManufacturingCustomer ServiceDistribution Information ServicesCorporate Administration

Growth and Margin Project Objective 1– Utilizing the Six Sigma

Methodology we want to gain Market Share by Improving Growth

Objective 2 – Improve Margins

Growth and Margin Project Scope – Commercial Sales Group

Shaw Commercial Sales Group designs and delivers innovative flooring solutions to meet the requirements of its customers in the health care, education, corporate office, government, and retail sectors.

Growth and Margin Project Scope – Each Selling Group by Region

(Stratify Data)

Growth and Margin ProjectOperational Definitions:

Low Performers – Sales Reps who had the biggest decline in Growth (Volume) or in Margins from 2003 to 2004.

Region Growth – The Growth (Volume) or Margin from year to year on a monthly basis, excluding the Low Performers.

Difference – The difference in Growth (Volume) or Margins between the Low Performers and the Region

Growth and Margin ProjectGoal:

Each Month, we will Measure the Difference between the Low Performing Territories and the Balance of the Region.

The Goal of the Project is to Improve the Low Performing Territories so that this Difference is Eliminated.

Month

Data

Dec-04Nov-04Oct-04Sep-04Aug-04J ul-04J un-04May-04Apr-04Mar-04Feb-04J an-04

15000

10000

5000

0

-5000

-10000

LP GrowthRegion Growth

Variable

LP Growth, Region Growth

Monthly Average $ Margin / Growth

Margin / Growth for Low Performing Territories

Margin / Growth for Region

Each Month, we will Measure the Difference between the Low

Performing Territories and the Balance of the Region.

201 217INVOICE_MONTH Growth Low Performers Growth of Region Delta

200401 5368 5625 -257200402 1622 6108 -4486200403 -6507 2183 -8690200404 -1887 1876 -3763200405 -995 6359 -7354200406 -3793 5160 -8953200407 -11957 9766 -21723200408 -4638 5550 -10188200409 -5849 9105 -14954200410 -12565 187 -12752200411 -2507 -2041 -466200412 -10155 309 -10464

201 217INVOICE_MONTH Growth Low Performers Growth of Region Delta

200401 5368 5625 -257200402 1622 6108 -4486200403 -6507 2183 -8690200404 -1887 1876 -3763200405 -995 6359 -7354200406 -3793 5160 -8953200407 -11957 9766 -21723200408 -4638 5550 -10188200409 -5849 9105 -14954200410 -12565 187 -12752200411 -2507 -2041 -466200412 -10155 309 -10464

Month

Data

Dec-04Nov-04Oct-04Sep-04Aug-04Jul-04Jun-04May-04Apr-04Mar-04Feb-04Jan-04

15000

10000

5000

0

-5000

-10000

LP GrowthRegion Growth

Variable

LP Growth, Region Growth

Month

Diffe

rence

Dec-04Nov-04Oct-04Sep-04Aug-04Jul-04Jun-04May-04Apr-04Mar-04Feb-04Jan-04

-4000

-5000

-6000

-7000

-8000

-9000

-10000

-11000

-12000

Difference Between Region and LP's

Month

Diffe

rence

Dec-04Nov-04Oct-04Sep-04Aug-04Jul-04Jun-04May-04Apr-04Mar-04Feb-04Jan-04

-4000

-5000

-6000

-7000

-8000

-9000

-10000

-11000

-12000

Difference Between Region and LP's

Better

Month

201 Y

ard

s Diff

2005

12

2005

10

2005

08

2005

06

2005

04

2005

02

2004

12

2004

10

2004

08

2004

06

2004

04

2004

02

5000

0

-5000

-10000

-15000

-20000

-25000

Baseline

-8823

Time Series Plot of 201 Yards Diff

The Goal of the Project is to Improve the Low Performing Territories so that this Difference is

Eliminated.

Goal

In Time, We want to move

the process so that the

Difference on Average is 0

Difference Between Region and LP’s

Growth and Margin ProjectKIV’s:

Product Mix

Experience

Price Lists Accuracy

Project Management and Organization

Partnering and Networking

Coaching and Mentoring*

Growth and Margin Project

Improvements thru June 2005:

Margins Improved in 39% of the Regions

Margin Improvement: 88% in Low Performers

Growth Improved in 42% of the Regions

Additional Volume: 55% Yards in Low Performers

Growth and Margin Project

Questions?