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TABLE OF CONTENTS

Introduction.................................................................................................................................................. 3
Line Definition.............................................................................................................................................. 4

1. Production Line..................................................................................................................................................4
2. Resource Classification......................................................................................................................................5
3. Nominal Speed...................................................................................................................................................6
3.1. Notes on Nominal Speed definition........................................................................................................8
4. Multi-Resource Scenario....................................................................................................................................9

Measuring Line Performance...................................................................................................................... 11

1. Time Classification – Overview........................................................................................................................11

2. Asset Intensity and related measures.............................................................................................................13
2.1. Asset Intensity - AI (%).........................................................................................................................13
2.2. Planned Stoppages - PS (%)..................................................................................................................13
2.3. Estimated Unplanned Stoppages - EUPS (%).......................................................................................13
2.4. Unplanned Stoppages - US (%).............................................................................................................14
2.5. Speed Loss - SL (%)..............................................................................................................................14
2.6. Waste & Rework - WR (%)...................................................................................................................14
3. Capacity and related measures.......................................................................................................................15
3.1. Capacity Utilization - CU (%)...............................................................................................................15
3.2. Asset Productivity Index – API (%)......................................................................................................16
4. Example of Measures calculation....................................................................................................................17
5. Operational Machine Losses...........................................................................................................................20
5.1. Loss Classification Decision Tree.........................................................................................................20
5.2. Not Occupied (Non-Operational Losses)..............................................................................................21
5.3. Operational Losses – Planned Stoppages..............................................................................................23
5.4. Operational Losses - Unplanned Stoppages..........................................................................................25
5.5. Operational Losses - Speed Loss...........................................................................................................28
5.6. Operational Losses - Waste & Rework.................................................................................................28
5.7. Additional considerations about Asset Intensity tracking....................................................................29
Line Production Standards – Overview........................................................................................................ 32

1. Time Classification and Line Operating Conditions........................................................................................33

1.1. Not Occupied..........................................................................................................................................33
1.2. Runtime..................................................................................................................................................33
1.3. Planned Stoppages.................................................................................................................................33
1.4. Examples of Time Classification...........................................................................................................35
2. Production Versions.........................................................................................................................................36
2.1. Master Recipe.........................................................................................................................................37
2.2. Bill of Material (BOM)..........................................................................................................................38
2.3. Additional considerations on Production Version................................................................................38
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Line Production Standards – Labour............................................................................................................ 40

1. Proportional labour..........................................................................................................................................41
2. Product Related Changeover Labour..............................................................................................................41
3. Line Servicing Labour.......................................................................................................................................41
4. Examples of Labour Classification...................................................................................................................43

Line Production Standards – Energy............................................................................................................ 44

Line Production Standards - Materials........................................................................................................ 46

1. Overview...........................................................................................................................................................46
2. Analysis of deviations......................................................................................................................................47
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INTRODUCTION

One of the key success factors for any business is to ensure that resources such as Materials,
Labour, Energy and Lines are used in the most effective manner during the production of high
quality finished products.

In order to define how effectively a resource is being used, it is essential to have a common way to
define and measure its performance.

The purpose of this “Definition and Calculation” section is to detail the common ways of working
and therefore enable reliable and consistent Manufacturing Resource Performance Measurement.
Measuring performances is the starting point for processes improvement and for the identification
of opportunities to support Business Strategy in terms of Costs and Agility.
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LINE DEFINITION

The purpose of this section is to document how lines are defined for costing, production planning
and performance measurement purposes, especially as they are referred in GLOBE. The terms
“line”, “production line”, and “physical production line”, which all appear in the text, are
synonymous.

1. PRODUCTION LINE

A physical end to end production line is a combination of machines, processes or tasks able to
transform a Raw Material (ROH) or Semi-finished product (HALB) into a Finished Product (FERT) or
another HALB. It is defined for production planning & scheduling, costing, capacity management and
performance measurement.

End to end Production Lines must be able to operate, for an extended period of time, independently
from one another.

The output (FERT and/or HALB) of a physical end to end production line is held in stock ( Big Bags,
Silos, Tote Bins, pallets, etc.) and requires a quality usage decision as per batch management,
before dispatch or consumption on subsequent lines. It may also be released in transit prior to sale.

A physical end to end production line may be mapped into one or several GLOBE Resources
depending upon costing and planning needs. A Resource can include one or several machines.
Side stream or stand-alone transformation processes are equally important and can absorb
significant capital. Therefore, they must also be considered as Resources.

During production execution, Process Orders are used in GLOBE to collect information on
performance, including cost and quality. One and only one Process Order can run on a given
Resource at a given time, except in the case of multi-resource scenario.
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The picture illustrates how an end to end production line could result after Resource mapping and
Process Orders used during production.

For product costing purposes, it is important that the costs incurred by a production line (such as
depreciation, maintenance, etc.) are allocated to the products made on this line and not to other
products.
A Resource is always connected to a Cost Center. There could be the case of several Resources
connected to the same Cost Center.
Costing requirements must be considered when mapping Resources.

For example, let us assume that a group of machines is dedicated to a product or group of products,
while another group of machines with significantly higher depreciation, maintenance, etc. is
dedicated to another product or group of products. In the previous illustration, it could be the case
of Resource A and Resource B. To ensure that the products made on the first group of machines are
not penalised, the two groups of machines must be set up as two separate cost centres and they
must be considered as two Resources.

For details, refer to Costing Standard for Manufacturing.

2. RESOURCE CLASSIFICATION

Resource Classification consists in assigning specific attributes to a Resource, with the main purpose
to increase visibility and to enable benchmarking.

Attributes could refer to:

 Type of output:
- If output is a HALB then it is classified as a “Processing” Resource.
- If the output is a HALB in bulk packaging meant for repacking at sister factories or 3 rd
party it must be classified as “Processing” Resource.
- If the output is a HALB in primary or secondary packaging meant for consumer it must be
classified as “Filling & Packing” Resource.
- If output is a FERT then it is classified as a “Filling & Packing” Resource.
- If a Resource is a combination of processing and filling & packing operation, as the output
is a FERT it must be classified as a “Filling & Packing” Resource.
 Product Category and Group, Benchmarking clusters or Technology
 Reporting Relevancy, with focus on Asset Intensity and Capacity Utilization.

The following Decision Tree supports the assignment of Reporting Relevancy as

 Not Applicable
 Applicable
 Applicable & Bottleneck
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c
Note that the following are not criteria for determining Reporting Relevancy:
 Business Priority
 Capacity Utilization
 Start-up period
 Line cessation
 Resource performance

3. NOMINAL SPEED
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Nominal Speed is the highest sustainable speed achieved under optimal operating conditions for a
given resource and product, while allowing for safe, hygienic, reliable operation and safeguarding
product quality.

Nominal Speed is defined as the speed of the “bottleneck” machine, i.e. the machine limiting the
throughput of the Resource. Bottleneck machine could be made up of multiple machines running in
parallel.

The bottleneck machine must be established for each Resource, each product (or group of similar
products) and each production condition and bottleneck machine is the reference for measuring line
performance and tracking stoppages 1 of that Resource.
In an end-to-end line, bottleneck machine defines the speed of the overall production line.

In the example above, Machine 4, belonging to Resource C is the bottleneck machine as it limits the
throughput of the end to end physical production line.

Speed of all Resources on a physical line must be in synchronization with line Bottleneck machine to
ensure continuous end to end operation without any stoppages. In general, all efforts must be made
to ensure that the bottleneck does not stop unexpectedly. All downstream and upstream machines
must be able to operate at the same speed or higher speed than the bottleneck machine.
In the example above, Machine 1+2 can deliver 1300 each/min vs 800 each/min that bottleneck
machine can process. Since the line is a continuous flow, if speed is not synchronized Machine 1+2 will
1
Stoppages are usually recorded in SAM, NSAM or DMO.
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start-stop continuously, waiting for Bottleneck processing time. This will result in avoidable stoppages
or other effects as defects or waste or rework. Nominal speed for Machine 1+2 should be re-defined
(in this case, reduced) to ensure a continuous flow across the line.

Nominal Speed should be regularly reviewed and documented using Bottleneck Studies, to ensure
alignment between documented Production Standards and actual operating conditions. This should
happen in particular if changes or modifications have occurred with an equipment or product on the
line.
In the case actual speed is consistently over nominal speed, a review of nominal speed should occur.

Nominal Speed should be realistically and consistently achieved over an agreed period of time,
depending on technology, conditions and product specificities. 100 hours of Runtime are
recommended when validating Nominal Speed.

Optimizing the speed of the Bottleneck not only enables an increase of the capacity of the line but
also reduces or delays future investments.
Operators should know where the Bottleneck is and be aware that it is the key to line productivity.

3.1. Notes on Nominal Speed definition

Ideal conditions:
 Use the raw / packaging materials that are likely to give the best results (i.e. use the best raw
/ packaging materials according to the specifications to manufacture the product).
 Line is in perfect working condition (clean, correctly set-up, ...).
 Lines running without unplanned stops and without producing waste and rework.
 Machines do not cause any extra wear than the wear due to normal use (i.e. does not cause
any extra maintenance).
 Line runs under optimal temperature, humidity etc. with a well-trained and competent crew.
In case of Spray Drying technology, nominal speeds must be established for operating during
the different absolute air humidity conditions, based on a well-documented study.

People and Food Safety:

 Operations and machines are safe for workers and environment.
 Product complying with the defined quality specifications (all parameters within control
limits).
 Operations and workers fulfil the hygienic standards.

In some cases, there could be reason to reduce Nominal Speed.

A first example could be when changes in desired Product Specifications can only be achieved
through a lower speed. This must be aligned with recommendations from Application Group or the
Product specific TCU and supported by a cost/benefit analysis
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Another example could be when current Nominal Speed is the proven Root Cause for loss occurring
in the process. A cost/benefit analysis of the improvement actions should be prepared, documented
and shared with respective TCU for learning purposes, to evaluate the overall benefit in reducing
nominal speed.

Examples:
 reducing 5% in Nominal Speed will reduce 10% in Material Losses, resulting in a benefit of
2% in Cost of Production. In this case, there is an overall benefit in decreasing Nominal
Speed.
 reducing 5% in Nominal Speed will reduce 5% of machine losses, but without any impact on
other losses or on the crew and ultimately no benefit on cost, because the production time
needed for a specific quantity will remain the same. In this case, the change could happen
only after a Bottleneck study has been completed, proving the new Nominal Speed is the
highest sustainable speed achieved under optimal operating conditions.

4. MULTI-RESOURCE SCENARIO

The concept of multi-resourcing was developed by GLOBE to have the ability to plan the production
of multiple identical machines within a Resource. As a result, more than one Process Order (PO) can
run at the same time on the Resource.
Machines can be planned singularly or as a group depending on the planning needs.

The following illustrations show examples of singular or combined planning and the effect on the
number of Process Orders:
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Comparing to a scenario in which each machine is mapped as a Resource and according to the way
the scenario is set up and applied, this functionality could reduce transactions on the shop floor.
In the example of 1 SKU on 4 machines, 1 PO can be used instead of the 4 needed in 1 machine = 1
Resource mapping. At the same time, since PO is launched on the group of machines, production
have the flexibility to decide on which machine a PO will be executed, so optimizing time for set up
and organization.

On the other side, multi-resource concept is applicable and provides a positive effort/benefit
balance if all the following conditions apply:

 A Resource consists of multiple machines that behave identically, i.e. the nominal speeds of
all machines & production capabilities are identical.
 All machines within this Resource are treated in the same way for planning purposes.
 All machines are able to manufacture an identical mix of all products, i.e. more than one
product can be produced at the same time.

If these conditions are not applied, it could be that the flexibility of multi-resource scenario
generates an additional effort in tracking stoppages (Planned or Unplanned) or analysing Process
Order variances.

When defining a multi-resource scenario, Resource must be flagged in GLOBE as multi-resource (for
costing and planning purposes) and the relevant number of capacities should be defined. Each
Process Order should refer to the appropriate Production Standard, reporting the number of
occupied capacities.
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MEASURING LINE PERFORMANCE

1. TIME CLASSIFICATION – OVERVIEW

Time classification is based on how time is used on a Resource, as illustrated in the following
scheme:

Total Time

Occupied Time Not Occupied

Planned
Runtime
Stoppages
Unplanned
Production Time
Stoppages
Prod.Time @ Nominal Speed Speed Loss

Good Prod. Time Waste & Rework

Planned
Good Prod. Time Estimated Unplanned Stoppage Time Not Occupied
Stoppages

Total Time
Total time in the period considered (e.g. 1 day = 24h, 1 week = 7days = 168h, 1 year = 365 days =
8760h, etc.).

Occupied Time
Time during which the line is either occupied to produce or is occupied with any other activity while
not producing (e.g. maintenance, cleaning, repair).

Occupied Time=Total Time−Not Occupied Time

Planned Stoppage Time

Time during which the line is not producing, but is occupied with Planned activities as Cleaning,
Changeover, Planned Maintenance.

Runtime
Time during which the line is intended to produce.

Runtime=Occupied Time−Planned Stoppages

Production Time
Time during which the line is actually producing.
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Production Time=Runtime−Unplanned Stoppages

Speed Loss
Time lost because of the line operating at lower speed than the nominal speed.

Speed Loss=¿
Production Time−Good Production Time−Time lost ∈generation of waste∧rework

Production Time @ Nominal Speed

Time used to produce products (both good and defective) at Nominal Speed.

Good Production+Waste∧Rework
Production Time @ Nominal Speed=
Nominal Speed

Waste and Rework

Time lost at the bottleneck due to generation of waste and rework.

Q . ty of Waste∧Rework produced
Time lost ∈ generation of Waste∧Rework=
Nominal Speed

Good Production Time

Time to produce Good Products at nominal speed.

Good Production
Good Production Time=
Nominal Speed
Where,
Good Production=Quantity of product complyingwith quality specifications

Estimated Unplanned Stoppage Time

Time lost due to unplanned events during Runtime.
It consists of time lost due to unplanned stoppages, speed loss and generation of waste & rework.

Estimated Unplanned Stoppage Time=Runtime−Good Production Time

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2. ASSET INTENSITY AND RELATED MEASURES

2.1. Asset Intensity - AI (%)

Asset Intensity (in %) compares Good Production Time (the theoretical time required to produce
good products at nominal speed) to Occupied Time of the line.

Good Production Time

Asset Intensity ( % )= × 100
Occupied Time
Where,
Good Production( quantity)
Good Production Time=
Nominal Speed (quantity per hour )

Asset Intensity figure is based on what is assessed as “good product” at the end of the line. This is to
ensure that Asset Intensity is available as a “real time” indicator to be used in the relevant
Operational Reviews.
Some quality defects may be detected after the production during the quality release process. The
underlying assumption is that the overall impact of these occurrences is small enough to be
considered negligible in the long run. As a consequence, Asset Intensity figures do not need to be
corrected based on these occurrences.

2.2. Planned Stoppages - PS (%)

Planned Stoppages (in %) measures the percentage of Occupied Time used in performing Planned
Stoppages. This is primarily to support the longer term reduction effort of planned stoppage losses.

PS( %)=
∑ ( Actual Time used for Planned Stoppages) x 100
Occupied Time

Planned Stoppages are always planned with an established standard duration. In order to monitor if
planned stoppages comply with expected duration, at shopfloor level the following measure should
be used:

Actual Time used for Planned Stoppages

Ad h erence ¿ Planned Stoppages(% )= x 100
Expected Time for Planned Stoppages

2.3. Estimated Unplanned Stoppages - EUPS (%)

Estimated Unplanned Stoppages (in %) measures the percentage of Runtime lost due to the
contribution of Unplanned Stoppages, Speed Losses and generation of Waste & Rework.
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EUPS (%)=∑ Actual time lost due ¿(Waste∧Rework generation+Speed Loss+Unplanned Stoppages) ¿
RunTim

It is also calculated as:

EUPS (%)= ( RunTime−Good Production Time

RunTime ) ×100
2.4. Unplanned Stoppages - US (%)

Unplanned Stoppages (in %) measures the percentage of Runtime lost in Unplanned Stoppages.

US (% )=
∑ ( Actual Time of Unplanned Stoppages) x 100
Runtime

2.5. Speed Loss - SL (%)

Speed Loss (in %) measures the percentage of Production Time lost in running the line at a speed
that is lower that the nominal one.

SL(%)= 1− ( Average Speed

Nominal Speed )
× 100

Sometimes, it is not possible to determine the actual average speed, due to the nature of the
production process. When this is the case, the average speed must be calculated indirectly, using
the following formula:

Good Production quantity +Quantity of Waste∧Rework generated

Avg Speed=
Occupied time−(Plan stoppages Time+Unplanned Stoppages Time)

To monitor deviations above and below the nominal speed for immediate analysis and actions, a
specific measure could be used in the short term horizon (shift/day):

Average Speed (s h ift∨day)

Compliance wit h Nominal Speed = × 100
Nominal Speed

2.6. Waste & Rework - WR (%)

Waste & Rework (in %) measures the percentage of Production Time @ Nominal Speed lost in the
production of products that do not meet quality specifications. This product can be classified as
either Waste or Rework, depending on its destination.
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WR (%)=
∑ (Waste ∧Rework ) x 100
Good Production+ ∑ (Waste∧Rework)

The waste & rework to be taken into consideration for this indicator is only the one that impacts
(reduces) the output of the line. If the waste is generated before the bottleneck machine and it does
not reduce the overall output, then it will not be included in the calculation.

3. CAPACITY AND RELATED MEASURES

Capacity measures are relevant in showing how we “sweat our assets”. Capacity Measures provide
an indication as to which Resources are reaching high saturation and may require action in order to
avoid supply disruption. Low values also indicate which Resources require attention as their
business relevance may no longer be proven. Left unchallenged, unutilized lines could become a
drag on invested capital and on Total Delivered Cost.
Capacity measures may be evaluated considering time or quantity. Both approaches may support
decision making and highlight opportunities.

3.1. Capacity Utilization - CU (%)

Capacity Utilization time based (%)

Capacity Utilization time based is the ratio of Occupied Time over Total Time. It is a measure of how
much of the time a Resource is occupied with production or with non-production activity.

Occupied Time
Capacity Utilization time based ( % ) = × 100
Total Time

Aggregation of Capacity Utilization in hours is calculated by adding Occupied Time of several

Resources and dividing the result by the sum of Total Time for these Resources. Therefore a high
speed Resource is not weighted more than a low volume Resource.

Capacity Utilization quantity based (%)

Capacity Utilization quantity based is the ratio of Actual Output in KG over Maximum Estimated
Output in KG at current Asset Intensity if using all Total Time as Occupied Time.

Actual Output ∈ KG
Capacity Utilization quantity based ( % )= ×100
Maximum Estimated Output ∈KG @current AI
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Aggregation of Capacity Utilization quantity based is calculated by adding Actual Output of several
Resources and dividing the result by the sum of Maximum Estimated Output at current AI and
product mix.

At Resource level both Capacity Utilization calculations return the same result but at aggregated
level Capacity Utilization quantity based gives more significance to high speed Resources.

A quantity-based approach may better reflect how we try to maximize high speed Resources and
use low speed Resources to absorb demand fluctuations. It also provides a more useful information
as to how many extra tons are available rather than how many more hours.

3.2. Asset Productivity Index – API (%)

Capacity Utilization is impacted by current Asset Intensity: low Asset Intensity increases the amount
of time needed for a given production and therefore increases saturation of the Resource. To
complement this view, Asset Productivity Index (API) was introduced. API considers Good
Production Time and not Occupied Time, therefore shows a Capacity Utilization result as if AI was
100% (no Operational Stoppages)
This can be useful for evaluation of Capacity Increase investment projects, by indicating how much
potential extra volume with the same product mix could be produced by improving Asset Intensity
while considering investing in new assets.

Asset Productivity Index time based (%)

Asset Productivity Index time based is the ratio of Good Production Time over Total Time. It is a
measure of how much of the time a Resource is occupied with good production.

Good ProductionTime
API time based ( % )= ×100
Total Time

Aggregation of API time based is calculated by adding Good Production Time of several Resources
and dividing the result by the sum of Total Time for these Resources.

Asset Productivity Index quantity based (%)

Asset Productivity Index quantity based is the ratio of Actual Output in KG over Maximum Estimated
Output in KG at 100% AI if using all Total Time as Good Production Time.
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ActualOutput ∈KG
API quantity based ( % )= ×100
Maximum Estimated Output ∈ KG @ 100 % AI

Aggregation of Asset Productivity Index quantity based is calculated by adding Actual Output of
several Resources and dividing the result by the sum of Maximum Estimated Output at 100% AI for
those Resources.

It is important to notice that at Resource level time-based and quantity-based calculations for both
measures return the same result. When aggregating different lines, they give more significance to
high speed Resources.

A quantity-based approach may better reflect a strategy to maximize high speed Resources and use
low speed Resources to absorb demand fluctuations. It also provides a more useful information as
to how many extra tons are available rather than how many more hours.
When looking at actual values, quantity-based calculations are relevant only if the Resource has
produced in the considered period. Therefore, time-based approach could provide a complementary
visibility on not-utilized Resources.

4. EXAMPLE OF MEASURES CALCULATION

The following picture exemplifies how time is used on a Resource during a 5 days production.

During the process, some Planned Stoppages occurred as well as Unplanned Stoppages and
generation of Waste or Rework impacting the Bottleneck machine. For a certain period, bottleneck
machine ran at a speed lower than nominal speed.

Stoppage times and production output are summarized as follows:

Total Time = 1 week = 7 days * 24 h = 168 h
Occupied Time = 5 day * 24 h = 120 h
Planned Stoppages Time (standard) = 17 h
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Planned Stoppages Time (actual) = 18 h

Runtime = 120 – 18 = 102 h
Nominal Speed = 1000 kg/h
Good Production Quantity (= Output) = 93000 kg
Good Production Time = 93000 kg / (1000 kg/h) = 93 h
Estimated Unplanned Stoppages = 102 – 93 = 9 h
Unplanned Stoppage Time = 3 h
Speed Loss Time = 5 h * (1000 - 800 kg/h) / 1000 kg/h = 1 h
Waste & Rework Time = (2000 + 3000) kg / (1000 kg/h) = 5 h

Measures are calculated as follows:

Occupied Time 120

Capacity Utilization time based (%)= ∗100= ∗100=71.4 %
Total Time 168

Actual Output ∈ KG 93000

Capacity Utilization q . ty based ( % )= ∗100= ∗100=71.4 %
Max Estimated Output∈ KG @current AI 130200

where

Output 93000
Max Estimated Output ∈ KG @ current AI= ∗Total Time= ∗168=130200 kg
Occupied time 120

Good ProductionTime 93
API timebased ( % )= ∗100= ∗100=¿ 55.4%
Total Time 168

Actual Output ∈KG 93000

API quantity based ( % )= ∗100= ∗100=55.4 %
Max Estimated Output ∈KG @ 100 % AI 168000
where

Output 93000
Max Estimated Output ∈ KG @ 100 % AI = ∗Total Time= ∗168=168000 kg
Good production Time 93

The 2 capacity values are equal at Resource level, but may change the overall picture when aggregating
Resources with different nominal speed.

Good Production Time 93

Asset Intensity %= ∗100= ∗100=77.5 %
Occupied Time 120
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Planned StoppagesTime 18
Planned Stoppages %= ∗100= ∗100=15.0 %
Occupied Time 120

Actual Time used for Planned Stoppages 18

Adherence¿ Planned Stoppages ( % )= ∗100= ∗100=106 %
Expected Time for Planned Stoppages 17
Showing that the overall actual time is greater than the overall expected time.

Estim .Unplanned Stoppage Time 9

Estimated Unplanned Stoppage %= ∗100= ∗100=8.8 %
Runtime 102

Unplanned Stoppages Time 3

Unplanned Stoppages ( % ) = ∗100= ∗100=2.9 %
Runtime 102

(
Speed Loss ( % )= 1−
Average Speed
Nominal Speed )
∗100= 1−
989.9
1000 (∗100=1.0 % )
Where

Good Production quantity +Quantity of Waste∧Rework generated 93000+5000 98000

Avg Speed= = = =989
Occupied time−(Plan stoppages Time+Unplanned Stoppages Time) 120−(18+3) 99

Waste∧Rework (% )=
∑ ( Waste∧Rework ) ∗100=
5000
∗100=5.1 %
Good Production+ ∑ ( Waste∧Rework ) 93000+5000

It can be noticed that different measures may have different denominators and therefore they are not
intended to be summed up to give 100% as a result.

If considering the values of the calculated example, the sum of Asset Intensity, % Planned Stoppages and %
Estimated Unplanned Stoppages is greater than 100%.
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5. OPERATIONAL MACHINE LOSSES

To improve Asset Intensity, all losses affecting a line must be identified correctly so that they can be
prioritized, analyzed and addressed. This section defines the classification of line-related losses,
which are divided into:

 Non-Operational Losses: Not Occupied Time

 And the 4 Operational Losses associated with Asset Intensity:
- Planned Stoppages
- Unplanned Stoppages
- Speed Loss
- Waste & Rework

5.1. Loss Classification Decision Tree

The Decision Tree aims to support people in making correct decisions concerning time classification,
as seen before:

Total Time

Occupied Time Not Occupied

Planned
Runtime
Stoppages
Unplanned
Production Time
Stoppages
Prod.Time @ Nominal Speed Speed Loss

Good Prod. Time Waste & Rework

Planned
Good Prod. Time Estimated Unplanned Stoppage Time Not Occupied
Stoppages

When referring to manufacturing performances, time classification relates to actual time impact on
the bottleneck machine. The approach is also used for the classification of losses on individual
machines in a production line, also when the bottleneck has not been impacted, to highlight
opportunities and prevent impacts on the bottleneck.
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5.2. Not Occupied (Non-Operational Losses)

Time during which the line is not required for production or any other activity as a decision has been
taken not to occupy it. This includes Idle Time, Legal Restriction and time dedicated to trials and
tests (non-saleable product).

5.2.1 Idle Time

Time during which the line is not required for production as there are no volume / scheduling
requirements. No activity must be carried out on the line during Idle Time. If any activity
(e.g. Maintenance) is been carried out on the line, the time spent for this activity must be
classified as Occupied Time, as per decision tree.

Examples are weekends, holidays or 3 rd shift for an operation that is running 2 shifts, when no other
activities are taking place.
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In the Idle Time category, the following cases are also included:

Not Occupied due to planning decision.

In some instances, demand might exist, but no production is scheduled on the line due to the non-
availability of some required resources or considerations on resource optimization. If this is already
known at the time production is planned, this must be considered as idle time.
For example, this could be a planned shortage of raw materials (e.g. supply shortage of milk), or a
planned crew shortage (holiday season) where the production plan is established according to
planned availability.

This applies only in the case of a planned shortage of required resources that has been taken into
account within the production plan. Once the production plan is under execution, any unavailability
in terms of resources that affects the line that has not been considered during the planning is
classified as an Unplanned Stoppage.

Meals/Breaks and Trainings/Meetings.

Where a stop for Meals, Breaks, Training or Meetings was planned and the line is still physically
capable of producing, and no other activity is undertaken on the line, this time can be considered
idle in terms of line usage. For Costing purposes, the labour component is considered as part of Line
Servicing labour.

Finishing early because we run better than expected.

This time is considered idle in terms of line usage. For example, this could be a production planned
for 8 hours, where we completed the planned volume after 7 hours. The line becomes occupied
again upon commencement of the next Process Order or any other planned activity.

Natural disasters / Influence of Control.

All stoppages of the factory due to an event beyond the control of Nestlé, including natural disasters
(e.g. flood, earthquake, lighting, etc.), loss of services (e.g. electricity, water, steam, etc.) from
external providers, suppliers, local government intervention, etc. can be considered as idle until the
line is available to resume operations.

Industrialization Projects dedicated to a specific line

The period of time while a line is under installation or stopped for modifications due to an
Industrialization project is considered as Idle Time until the first saleable product is being
manufactured.
It could be Capital Investment Projects from any Investment Group, projects funded from Small
Purchases and also Innovation & Renovation (I2L) projects.

During the project, one or more tests or trials using materials or labour could be required. To track
these activities and related costs, in GLOBE a YGT2 Process Order type is created. All YGT2 Process
Orders are not in scope for Asset Intensity calculations.
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From the first commercial production on – including the start-up/learning period - PI01/YGT1
Process Order types should be used. Performance and production cost will be captured accordingly.

In case any other activity (e.g. maintenance) is executed in parallel to the project’s activities on this
line, the corresponding time spent on this activity is included in Occupied Time. All regular planned
maintenance shutdowns (such as Annual, rebuild or extraordinary maintenance) are classified as
Planned Stoppages (Planned Maintenance).

5.2.2 Legal Restriction

Time during which the factory cannot operate due to imposed national or local legal restrictions
that cannot be renegotiated.

Contractual agreements that prevent from producing during a holiday are not considered as legal
restrictions but are included in Idle Time.

5.2.3 Trials and Tests

When running small renovation activities on existing lines, trials or test may be required. These
events are usually episodic and included in annual budget agreed for tests and trials.
Time spent in running trials and test is classified as Not Occupied (Trials and Test) and YGT2 Process
Order type can be used to record material and labour utilization.
After the completion of the trial or test some products might be released for sale during the quality
release process. The overall impact of these occurrences is small enough to be considered negligible
in the long run. All YGT2 Process Orders have no impact on Asset Intensity.

5.3. Operational Losses – Planned Stoppages

Time used to perform planned non-production activities and during which the line does not
produce. Planned Stoppages are always planned with an established standard duration. They are
normally included in the line and labour standard.
While a standard duration exists, actual Planned Stoppage time should be recorded and used for
performance calculation, including Adherence to Expected Time measure.
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5.3.1 Changeovers

Planned stoppage to change from one product to the next, including cleaning, setting-up and
starting-up.
It is the time lost at the Bottleneck between the last good product from one run and the first good
product from the next run.
It includes changes of format, product, label or Process Order.

5.3.2 Start-up/shutdown

Planned stoppage for mechanical or operational adjustments required to prepare a production line
to produce or to stop (e.g. re-assemble equipment, check/adjust settings).
It includes the time required to fill up (or empty) the line when the line is not running continuously
(for example one shift). Start-up can occur after either “Not-Occupied time”, “Cleaning” or “Planned
Maintenance”.

5.3.3 Planned Maintenance

Planned stoppage for planned maintenance and repair activities occurring on the line, including
planned maintenance carried out on weekends and annual maintenance shutdowns.
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Planned maintenance is scheduled in advance with a specific time duration.

For optimizing Planned Stoppages, Planned Maintenance can be performed in parallel with other
activities like changeover, cleaning, etc., without compromising people safety and food safety.

If an end to end line is split into several Resources, then the scheduled planned maintenance is
recorded only against the Resource (or Resources) where it takes place. For the remaining
Resources, that time will be considered as Not Occupied.

Multiple maintenance work orders can be executed at the same time. The actual line stoppage time
required to complete all the work orders is recorded as planned stoppage time, not the sum of time
required to complete individual work orders.
This is valid also for extraordinary, annual or weekend maintenance: only the actual time occupied
with activities on the line is accounted as Planned Stoppage – Planned Maintenance.
Example: during one week (5 days) of annual maintenance, technicians work on the line 8 hours a
day. 40 hours (8 hrs x 5 days) of planned stoppages, should be recorded. This is to focus on cost
effectiveness while ensuring alignment with Planning priorities.

5.3.4 Cleaning, Inspection, Lubrication

Planned stoppage for planned Cleaning, Inspection and Lubrication activities performed both during
and at the end of production periods. It includes dismantling equipment and general sanitation.

5.3.5 Operational Stoppages

Stoppages imposed by the process, equipment or quality checks.

Typical examples: label roll change, but also date / lot code change, knife change, filter cleaning,
sampling.
Operational stoppages are classified as planned stoppages since a standard duration and a standard
frequency exist for them. The time when such activities take place, on the line, cannot be precisely
defined and scheduled. For example, reel changes occurring during the shift depends on expected
output and packaging consumption during the process.

5.4. Operational Losses - Unplanned Stoppages

Time lost due to unplanned events which prevent the line from producing. It includes the time
between the last unit produced and the first good unit produced after the interruption (including
any required start-up period).
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5.4.1 Minor Stops

Short unplanned stoppages with a duration less than or equal to 10 minutes. Usually due to
blockages or jams, dirty sensors etc. For simplicity’s sake, when automatic stoppage acquisition
systems are not implemented, Minor Stops can be captured on the line by counting the number of
stops and estimating the time lost for them.

5.4.2 Machine / Process Waiting

Unplanned stoppage due to external factors (external to the Resource itself) such as waiting for
materials (raw / packaging), utilities, operators or warehouse space.
It is different from “Not occupied due to planning decision” as in this case the shortage of resources
was not anticipated (and planned for).

In case an end to end line is split into several connected Resources, the one including the bottleneck
machine that determines end to end nominal speed could be considered as “end to end bottleneck
Resource”.
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When an unplanned event occurs on one Resource, since Resources are connected the stoppage
may affect the other Resources.

To avoid double counting of stoppage time, waiting time of other Resources which are part of the
physical production line caused by stoppage on the “end to end bottleneck Resource” is considered
as “Not Occupied” time instead of “Unplanned Stoppage”. This is applicable if and only if the other
Resource is not the cause of the stoppage.
If a downstream/upstream Resource on a physical production line is the cause of stoppage of the
“end to end bottleneck Resource” then the stoppage must be accounted on both the Process Order
containing the line bottleneck Resource and the Process Order of the Resource causing the
stoppage. Stoppage on Process Orders of other Resources of the physical production line in this case
must be classified as “Not Occupied – Idle time”.

The following illustration clarifies the 2 scenarios:

This scenario applies to End to end Production Lines. As defined before, End-to end production lines
must be able to operate, for an extended period of time, independently from one another.

5.4.3 Breakdown

A Breakdown is a situation when a technical component becomes partially or totally incapable to

perform one or more functions that it is designed and constructed for. It would need immediate
corrective intervention to re-establish normal function. It is performed either by a skilled operator,
mechanic or electrician. It usually requires a spare part and the creation of a work order.

In SAP-AMM, PM01-101 is created if it impacts the bottleneck machine and PM01-102 is created if it
does not impact the bottleneck machine.

5.4.4 Process Failure

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Process failure is a situation when machine cannot perform one of its product transformations
(gluing carton, filling jar, capping bottle, etc.) or functions (checking weight, moving product,
etc.) at desired performance level (quality, safety, waste, etc.), while the technical
components are capable to perform their functions. It may be caused by a deviation from
established standards for e.g. material properties, machine settings, operator competency,
etc...

5.5. Operational Losses - Speed Loss

Time lost because of the line operating at lower speed than the nominal speed, due to process,
input material, technical or human issue.

5.6. Operational Losses - Waste & Rework

Waste & Rework quantifies the time lost at the bottleneck due to the production of non-conforming
product. It does not quantify the overall material loss generated on a line, but represents the time in
which bottleneck runs at nominal speed but producing an output that is not contributing to “Good
Quantity”.

In the context of time classification, Waste & Rework machine hours can be equal to zero while
there is still material loss on the line, for example in form of overfilling or in a form that does not
impact the bottleneck (e.g. when the waste or rework occurs before the Bottleneck machine
without impacting Bottleneck output). See Chapter on Material for more details.
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5.7. Additional considerations about Asset Intensity tracking

A stoppage (e.g. change-over, breakdown ...) is considered a stoppage that impacts Asset Intensity
of the Resource only if it occurs at the bottleneck machine or if it causes a stoppage of the
bottleneck machine of the Resource where the Process Order is running.

In this example, if a 30 min breakdown triggers a 10 min stoppage at the Bottleneck (e.g. because of
a small buffer between the machine where the breakdown occurred and the bottleneck), then only
10 min are recorded as a breakdown for that Process Order in order to calculate Asset Intensity.

In general, the use of buffers should be minimized and – in case they are needed - designed to
protect Bottleneck from reducing speed or stopping.
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Only one event must be recorded at any time impacting the bottleneck. For example, if
maintenance occurs during end-of-week cleaning, the stoppage duration may be recorded as end-
of-week cleaning. The second activity may either be captured as an event that does not impact the
bottleneck or recorded as additional comments for the first stoppage. If the duration of the second
activity exceeds the duration of the first activity, then the additional duration is captured using the
correct stoppage class.

Stoppages that occur while the bottleneck is still running can be captured as stoppages that do not
affect the bottleneck. They do not impact the overall output, but may require additional operational
or mechanical labour to resolve them. Stoppages affecting the bottleneck normally become the first
priority for resolution.

On a line applying a multi-resource scenario, only the stoppage time affecting the bottleneck is
counted in order to calculate Asset Intensity.

The use of Asset Intensity measure in SHOs and DORs is not recommended, especially when used to
compare actual results with defined targets. The target is usually more meaningful over longer
periods (1 week or more, depending on the production cycle), where the impact of Planned
Stoppages is evenly distributed. Example: The Asset Intensity result for Monday can be heavily
affected by weekly start-up activities. The analysis at shift and day levels must then be done by
looking at the Loss components through contributors.

An actual Asset Intensity higher than 100% is not possible, and so is an actual Estimated Unplanned
Stoppage % lower than 0. This is often due to the fact that Occupied Time or Runtime are not
booked correctly, the line has run above nominal speed or good count and machine hours are
measured at different machines. This situation must trigger improvement initiatives on data
accuracy of machine hours or revision of Line Nominal Speed.

The accuracy of Asset Intensity depends on the accuracy of all the elements in the equation. It is
worth noting that the focus of Asset Intensity loss analysis must not be on achieving the highest
level of precision, but rather on gaining a pragmatic approach in understanding of all loss elements,
so supporting decision making.

Asset Intensity is mainly improved by eliminating unplanned stoppages and optimizing both the
duration and the frequency of Planned Stoppages. However, it should not be achieved through an
arbitrary reduction in the number of planned activities (such as changeovers) as this would impact
the level of agility required by the business.
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When having a breakdown and a spare part is not available, not allowing the production to restart

for a long period, then the time from stoppage of the bottleneck machine until the end of the shift
should be recorded as unplanned stoppage. After that, it can be considered as “Not Occupied Time”.
Once the spare part is available, the time needed to restart operations should be tracked as Planned
Stoppage, including Planned Maintenance, line start-up and/or cleaning.

This scenario could apply to Unplanned Stoppage - Machine or Process Waiting (example: extended
lack of material) preventing the line from producing any Process Order for a long period. The time
from stoppage of the Bottleneck machine until the end of the shift should be recorded as Unplanned
Stoppage (Machine or Process Waiting).
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LINE PRODUCTION STANDARDS – OVERVIEW

Production Cycle is the duration of the average manufacturing period for a line. It reflects batch size
and sequencing issues associated with product mix, economic and customer service considerations.
Production Cycle includes production run (Runtime) and activities ongoing on the line before, during
and after the production run, such as Set-up, Cleaning and Changeovers.

Other activities as meals and break, training or trials should be considered when defining production
cycle, in order to fulfil demand while optimizing line organization.

In order to build a realistic, effective and efficient production cycle, each production line needs to
have some information documented that outlines how the line typically operates.
In many cases the typical production cycle can be 1 week, but it may vary depending on product and
technology.

Line Operating Conditions provide reference data for production planning and costing. They
represent the way Resource, crew and input materials are expected to be used.
The following picture summarizes Line Operating Conditions.
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1. TIME CLASSIFICATION AND LINE OPERATING CONDITIONS

Some of Line Operating Conditions are related to the way we occupy the line and therefore to Time
Classification:

1.1. Not Occupied

Activities classified as “Not Occupied” may be related to a routine (example: Meals and Breaks) or to
specific needs (example: Training and Meetings, Industrialization projects or Trials and Tests).
When considering Meals and Breaks, it is recommended to identify a reference duration and
capture actual stoppage time for future references and analysis (example: budget review or
cost/benefit analysis in changing line organization).

1.2. Runtime

Time during which the line is intended to produce. It includes all Unplanned Stoppages and the time
lost due to Speed loss, Waste & Rework.
In terms of Line Operating Conditions, Runtime results from the combination of Quantity to
produce, Nominal Speed and Estimated Unplanned Stoppages impacting the
Bottleneck during operations. In terms of Line Operating Condition, Estimated
Unplanned Stoppages are represented in Globe by “Line Efficiency” (refer to
“Production Version” chapter for details).

1.3. Planned Stoppages

1.3.1 Line Related Stoppages

Line related activities are those planned activities during the Occupied Time that do not depend on
the individual products being produced or the length of the production run. Examples: set up at the
beginning of a cycle and the cleaning at the end of the cycle or changeovers related to format
changes.
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Line Related stoppages have a reference standardized duration and their cost are absorbed by all
the Process Orders produced on the line basing on Runtime machine hours. They may include
activities transferred from maintenance to production, as for example machinery inspections or
lubrication.

1.3.2 Product Related Planned Stoppages

Product related planned Stoppages are also known as “Product Related Changeover Stoppages” and
refer to those planned activities that occur directly as a result of producing a specific product.
They can be split into

 Fixed Product Related Stoppages: they are not quantity dependent. They include start-up
for a specific PO, changeover for a specific PO, cleaning for a specific PO. Example: specific
start-up net content check due to regulation of receiving market.
 Variable Product Related Changeover: they include events which are quantity dependent.
Example: change a roll every 1000 units.

Product Related Stoppage time may occur before, during or after production and is always captured
against the relevant Process Order, so that cost is allocated to the related SKU.
Product Related Planned Stoppages standards are maintained in Master Recipes (refer to
“Production Version” Chapter) and provide an opportunity to allocate time and cost to specific SKUs
and not to the whole line. This can support Planning routine and financial analysis. The utilization
and maintenance of these standards could require additional administrative work and therefore
they should be implemented after a cost/benefit evaluation.

If the stoppage is not associated to the product, but to the equipment (example: clean of a filter
every 4 hours), the stoppage time should be considered as Line Related and not Product Related.

Product Related Changeover must not include the Format changeovers that are performed for a
group of SKUs that follow. As already described, Format Changeovers are classified as Line Related
time.

For example, let us assume that a line produces dark chocolate SKUs, and then white chocolate
SKUs: this will require a long cleaning time to change over from dark to white chocolate. Cleaning
time is not associated to a single SKU, but to a group of white chocolate SKUs and therefore it must
be classified as Line Related Stoppage and not as a Product Related Changeover.
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In the same example, one of the SKUs requires additional start-up activities due to net content
requirements. This activity is SKU related and may be classified as Product Related Changeover.

Planned Stoppage Time is significantly affected by the combination of SKUs the line is being changed
from and to. Changeover Matrix is used to detail for each changeover combination the time it takes
to change from each SKU (or group of SKUs) on the line to another.
Changeover Matrix includes Line Related and Product Related changeover time. If appropriately set
up, it provides accurate time requirements when preparing detailed production scheduling and
therefore facilitates Pull Planning.

1.4. Examples of Time Classification

Occupied time

Not
Line Related Product
Occupied
Planned Related
Activity Runtime
Stoppage Stoppage
Time Time

Good Production Time X

Unplanned Stoppages (ex: breakdowns or

X
minor stoppages)

Speed Loss X

Waste & Rework X

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Changeover for a specific SKU X (fix)

Format Changeover for a group of SKUs

X
using the same format

Line Start up or Shutdown X

Set up at the start of week X

Planned Maintenance X

Cleaning - end of shift X

Cleaning - end of week X

Cleaning after a specific SKU X (fix)

Lubrication included into CIL standards X

Operational Stoppages - change of the

X (variable)
film reel every 1000 cases

Operational Stoppages - clear of a filter

X
every 4 hours

Meals and Breaks X

2. PRODUCTION VERSIONS

In Globe, Production Standards and related Line Operation Conditions are translated into Production
Versions.

Production Versions (PV) determine the different ways of manufacturing a product. They are the
result of the combination of a Master Recipe and a Bill of Material (BOM).
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When a Process Order is created, or anyway before Process Order release, the correct PV should be
selected, so ensuring the standard will reflect real operational conditions and variances will be
evaluated accurately.

In the following picture is explained how Line Operation Conditions are connected to Production
Versions:

On top of details reported into Production Versions, Costing Lot Size is used to estimate average
size of a Process Order (PO) for a given year. It is a budgeted figure maintained in Material Master
and can be estimated in two ways:
 Estimated annual production / estimated annual number of Process Orders.
 A typical quantity (e.g. always 5 batches).

Costing Lot Size is important for costing since it determines how the cost of the Product Related
Changeover is allocated in the budget. As the cost of this stoppage is always the same per Process
Order, the budgeted cost per Product Unit will be lower if 10,000 units are expected to be produced
per Process Order than if only 100 units are expected to be produced.
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2.1. Master Recipe

Master Recipe (MR) contains all product related standard information required to be able to plan,
cost, execute and control a production run except for the Input Material Standards which are
defined in BOM. Master Recipe is based on a runtime of 1 hour.

Master Recipe includes:

 Resource where production process will occur

 Line Nominal Speed (reported as “Base Quantity” in MR), basing on Bottleneck machine
 Line Efficiency (as %)
 Runtime Labour Hours
 Product Related Changeover Machine and Labour Hours (fixed or variable), reported as
“Downtime” in MR
 Energy consumption, under the section “Secondary Resources” in MR

Master Recipe does not include Machine or Labour Hours for Line Related activities or Not Occupied
Time activities (example: Meals & Breaks). As seen before, these operational conditions are key for
planning and cost purposes and should be defined, documented, validated and shared at the
relevant level.

Line Efficiency is needed as a Standard figure to allow proper costing and planning processes. In
principle, it represents machine losses occurring during production and is complementary to
Estimated Unplanned Stoppages:

Good Production Time Good Production

Line Efficiency %= %= %=1−%EUPS
Runtime Runtime × Nominal speed

It is extremely important however to note that Line Efficiency must not be used as a performance
indicator for performance evaluation of a production line. For that purpose, Asset Intensity, with the
relative loss components, must be used.
Line Efficiency actual figures are used as basis for the revision of Production Standards.

In case of multi-resource scenario, Master Recipes should be configured to reflect the combination
of machines used on the line. The nominal speed is set to one capacity and the number of capacities
– in a specific Master Recipe field – is used to show planning how many machines are being utilized
and as base for Machine hours calculations.
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The following illustration summarizes the link between Time Classification and Line Operation
Conditions maintained in Master Recipes:

2.2. Bill of Material (BOM)

Bill of Material is the list of components that make up a product or semi-finished product.

The list must contain the material number of each material together with the quantity, unit of
measure, designed waste conversion factor, and component scrap (expected loss).

Details on BOM are provided in the section about “Materials”.

2.3. Additional considerations on Production Version

When a given product has several manufacturing operation conditions (different Resources,
crewing, efficiency, nominal speed) or ingredients (with or without rework), several Master Recipes
and/or BOMs should be created and combined in the relevant Production Versions.

For proper production and capacity planning any foreseen change in operating conditions (e.g.
Nominal speed) or BOM must be timely reflected in GLOBE through updated Production Versions
and the DPS (Detailed Production Scheduling) planner must be notified.

Examples of scenarios requiring different Production Versions:

 A given product might be manufactured on different lines.

 A given product might be manufactured on a given line but with different operating set-ups
and with different manufacturing conditions. For example, it could happen that on the same
line the final packaging can be managed either by cobots or by operators, giving the need to
define alternative Master Recipes with appropriate crew and/or nominal speed.
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 In case of "seasonality", a given product might have different manufacturing conditions. This
could be due to different production cycles, different shift patterns, different process
conditions.

 A given product might be manufactured according to a slightly different Bill of Material (i.e.
variants / alternatives of a BOM).

 If the speed varies during the year, due to different reasons (e.g. learning curve for new
equipment), maintain Line Nominal Speed at the optimum and adjust the Expected Line
Efficiency to reflect the line speed reduction. The expected Line Efficiency can therefore vary
over time.
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LINE PRODUCTION STANDARDS – LABOUR

In many of our operations, labour can make up a significant proportion of the product cost. To
ensure that labour cost is managed accurately, it is important that Labour Standards are set
correctly.

As reported in Costing Standard for Manufacturing, the workers who spend the most of their time
operating lines and / or performing activities directly linked to the production cycle are called
Production labour.

For costing purposes, all Production labour is classified in one or more “Production labour pools”. A
“labour pool” is a pool of workers for whom an average cost per hour worked is calculated.

The time spent by the workers attached to Production labour pools is classified as a variable cost,
with just a few exceptions. These exceptions are listed in Costing Standards for
Manufacturing (e.g. time spent on a idleX project, time spent on trials, etc.).

The following illustration summarizes how Production Labour is classified and related terminology:

Labour hours may be spent on activities performed while the line is running (Runtime or
Proportional Labour hours), while the line is occupied with Planned Stoppages (Line Related or
Product Related Labour hours) and while the line is not occupied (Labour hours for Meals and
Breaks and other production activities).
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1. PROPORTIONAL LABOUR

Proportional Labour is considered to vary in relation to the length of the production run, hence its
name. In GLOBE terminology, it is called “Runtime Labour” as it corresponds to the time spent by
the workers manning the production line during Runtime. These Labour hours are recorded against
Process Order.

Calculation:
Expected Proportional labour per Product Unit=Expected Runtime per Product Unit (as per Line Standard) ×

The Expected Crew Size is the expected crew for the line when it is running at its nominal speed.
This value is maintained in the Master Recipe.

2. PRODUCT RELATED CHANGEOVER LABOUR

This refers to the labour hours required to perform those planned activities that occurs directly as a
result of producing a specific product.
These labour hours are recorded against Process Order.

Calculation:
Expected Product Related Changeover Labour=Expected Product Related Changeover time(as per Line Stand

The Expected Crew Size is the number of workers expected to perform this activity. This value is
maintained in the Master Recipe.

E xpected Product Related Changeover Labour

Expected Product Related Changeover per Product Unit =
Costing Lot ¿ ¿ ¿

3. LINE SERVICING LABOUR

This encompasses all labour hours worked by people attached to a "Production labour pool", except
for:

 Proportional labour
 Product Related Changeover Labour
 Time not classified as variable cost

Line Servicing can be classified into two categories:

 Time spent on Line Related activities

 Time spent on various other activities
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Time spent on Line Related activities includes all labour hours spent on Line related activities by
any worker attached to a Production labour pool. Examples include:

 A format change performed after several products

 A set-up performed at the start of the week for several products
 The start-up of a production run
 A cleaning performed after several products

Calculation, for each Line Related activity:

Expected Line Servicing Labour=Expected Crew ¿× Expected Duration× Expected Frequency( ¿ relation¿ Pro

Time spent on other activities includes various other activities performed by people attached to a
Production labour pool, such as having Meals or Breaks, taking samples from the lines, handling
materials, attending meetings and training sessions, performing pest control procedures, cleaning
production building areas, etc.

In addition, it includes any idle time incurred within a Production labour pool. This idle time is
defined as the surplus of hours worked over the hours required by the production programme.

For costing purposes, a distinction is made between:

 Line Servicing performed on a specific production line

 Line Servicing performed on an equipment that is common to several production lines

Depending on whether the equipment is specific or common, the costs are not allocated in the same
way. For more details, refer to Costing Standards for Manufacturing.
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4. EXAMPLES OF LABOUR CLASSIFICATION

Variable Labour Cost

Line Servicing
Product
Fixed
Proportional Cost
Related
Labour
Changeover Other
(Runtime) Line Related
Activity activities Production
activities
Activities

Good Production Time X

Unplanned Stoppages (ex:

X
breakdowns or minor stops)

Speed Loss X

Waste & Rework X

Changeover for a specific SKU X (fix)

Format Changeover for a group of

X
SKUs using the same format

Line Start up or Shutdown X

Planned Maintenance performed by

X
Technical Labour

Planned Maintenance performed by

X
Production labour

Cleaning - end of week X

Cleaning after a specific SKU X (fix)

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Lubrication included into CIL

X
standards

Operational Stoppages – change of X (variable)

the film reel every 1000 cases

Operational Stoppages – clear of a

X
filter every 4 hours

Meals and Breaks X

Training and Meetings X

Sampling X

Production Material Handling 1 (X) X

Production Supervision 2 X

1
Production Material Handling Labour (example: fork-lift drivers in production area) should be classified as proportional labour
(and hence part of the Master Recipe) only if their time is truly and fully proportional to the production volume of a specific SKU. In
other cases, for example if shared across multiple lines, they should be classified as Non-Proportional labour under “Other
production activities”.
2
A person may perform, either regularly or occasionally, some supervision activities, but still spend most of his / her time
operating production lines, performing changeovers, etc. In this case, this person should not be considered as a Production
supervisor. He or she should be attached to a Production labour pool and therefore be considered as Variable Labour Cost
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LINE PRODUCTION STANDARDS – ENERGY

Prudent selection and efficient use of all energy resources consumed in factory operations are
required to ensure reliable and economic supply, favourable cost performance and minimum
adverse environmental impact.

For energy intensive processes, such as evaporating, drying and freezing, the consumption of energy
is a pivotal factor in decisions regarding investment and operating plans. For less intensive
operations, it may still be one of the key factors in determining shift plans and operating cycles.

The cost of the energy consumed by production lines is generally a variable part of the Total Cost Of
Production with the exception of some fixed energy consumers that are independent from volume
such as general lighting. The optimisation of the energy consumption requires an energy
management approach that is based on the continuous improvement principles in order to achieve
sustainable energy supply and energy cost savings.

Measurement and tracking of usage by operation or task must be applied where feasible and
economically or environmentally justified.

Energy Standards are a collection of key operating data defining the energy required by each energy
consumer (process, production line, product or area) in the factory.

In the case of production processes, these operating data are maintained in Master Recipes as
“Secondary Resources” and provide reference for costing evaluations.

Expected Energy Usage represents the expected quantity of energy required to be input into a
process per Product Unit. It is calculated considering one Machine Hour, as follows:

Expected Quantity of Energy ( per Machine Hour)

Expected Energy Usage per Product Unit =
Expected Output Quantity ( per Machine Hour )

Expected Output Quantity (Product Unit) may be a consumer unit (“Each”), a trade unit (case), 1000
KG, etc., according to the Base Quantity in the Master Recipe.

Expected Usage of Energy per Machine Hour is the quantity of energy required to be input into a
process per Machine Hour, when the machine is running under optimal operating conditions during
the production cycle. This means that the Expected Energy Usage refers to 1 hour of Runtime at
100% Efficiency.
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The energy categories captured in GLOBE must include: Electricity (KWH) Refrigeration (KWH) Gas
(M3) Steam (KG) Water (M 3) as well as any other relevant source of energy (coal, fuel oil, diesel oil,
etc.). Note that each factory remains free to use lbs and cubic feet instead of KG and M 3.
Expected Energy Standards must be established involving Production and Engineering for each
process (production processes and energy conversion processes).
Often it is practical to define Energy Standards based on the actual usage measured through
metering devices. The need to proceed in this way should not add complexity in the Standard
review/updating and should result in a positive balance between efforts and benefits.

For more details on Energy Cost allocation, refer to Costing Standards for Manufacturing.
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LINE PRODUCTION STANDARDS - MATERIALS

1. OVERVIEW

For most of our products, input materials account for about 70% of the total cost of production.
Input materials include all types of materials that are transformed into a finished product. They
include Raw materials (ROH), Packaging materials (ZPCK), Semi-finished products (HALB), Rework
(RWK) and even Finished products (FERT) in case of product transformation process.

Effective planning and control of procurement, storage, handling and usage of key raw materials,
packaging materials and semi-finished products are top priorities to ensure a competitive
manufacturing operation and to meet freshness requirements.

Accurate Standards for material usages are critical to manage all these processes. Standards should
be built leveraging Mass Balance analysis, so that Line Operating Conditions are based on actual
observations.

Bill of Material (BOM) is the production standard listing all the input materials required for a specific
SKU. Key elements in a BOM are

 Material number to produce

 Base Quantity to produce and related Unit of Measure
 Component (= input material) to use and related Unit of Measure
 Component Quantity
 Component Scrap (%)
 Designed waste conversion factor (%)

Component Quantity represents the ideal quantity it would be consumed in producing the Base
Quantity, assuming no losses are generated during the process. It is also called “Zero Loss Quantity”.

Component Scrap is the additional quantity of component (in %) to be considered to include losses
occurring during the process and therefore ensure Base Quantity is delivered.

The definition of Component Scrap should include losses like

 Overfilling
 generation of rework
 generation of waste of packaging, raw materials, semi-finished product, including QA samples

Losses like Expired Materials or Warehouse damages are not included in Production Standards but
booked separately as financial losses.

The sum of the Component quantity and Component Scrap is called “Expected Quantity”. It has an
impact on Manufacturing (stock reservations), Planning (material requirements calculations) and
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Costing (product cost evaluation). For this reason, both contributors must be set as a realistic,
achievable value that can be maintained for a sustained period.
Designed waste conversion factor is the representation of the yield of the specific component during
the process. It could be related either to the process or to the ingredient and includes production
steps as evaporation, baking, roasting, peeling, shell or skill removal, coffee extraction.

Designed Waste Conversion Factor is a GLOBE specific field in the BOM and is smaller or equal to 1.
The Designed Waste Conversion Factor is equal to 1 when there is no mass loss in the process. This
means that this value represents the % of remaining mass after production step is completed.

In the following example, expected quantities are calculated for the production of 1000 bottles of
water containing a declared volume of 1 litre and with Designed Waste Factor equal to 1:

Process Order
BOM values values
for 1 bottle as base quantity to ensure 1000 bottles
are delivered

Component Component
Quantity (=Ideal Component
Component Unit of Expected Quantity
Quantity Scrap
Measure = Zero Loss Quantity)
1000 * (1 + 3%) =
Bottle each 1 3% 
1030 each
1000 * (1 + 2%) =
Cap each 1 2% 
1020 each
1000 * (1 + 1.2%) =
Label each 1 1.2% 
1012 each
1000 * (1 + 0.5%) =
Water litre 1 0.5% 
1005 litres

Component Scrap should be based on observations, considering all the losses contributing to the final
value. In the example above, Component Scrap for water could result from the overall consideration
of overfilling, waste during filling and waste during packaging steps.
To have reliable input for costing and material planning, BOM data should reflect realistic operative
conditions on the line. Changes in the process or in the input materials should trigger Standard
updates.

2. ANALYSIS OF DEVIATIONS

Considering Input materials contribution in Cost of production, analysis of deviations is key to

understand if production process is competitive and to identify opportunities for improvements.

Deviations versus production standard can be analysed considering two possible reference points:
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 Actual vs Ideal = Actual vs "Zero Loss", highlighting the full opportunities vs ideal condition.
This deviation is also called Zero Loss Material Variance and can be measured in quantity, in
value or in %. In Manufacturing, Zero Loss Material Variance is used to drive and track
improvement initiatives.
 Actual vs Expected, highlighting deviations vs expected cost. In Finance, “Material Usage
Variance” (vs Expected) is usually reported in value and represents the difference between what
was committed in Standard Cost and the current performance.

The following example illustrates the relation between the two evaluations.

Factory has a demand for 1000 CS of SKU ABC having in the BOM Component A as unique input and
Designed Waste Factor equal to 1:

Process Order values

BOM values
to ensure 1000 CS are
for 1 CS as base quantity
delivered

Component Component
Quantity (=Ideal Component
Component Unit of Expected Quantity
Quantity Scrap
Measure = Zero Loss Quantity)
1000 * 3* (1 + 2%) = 3060 each
A KG 3 2% 
(3000 kg as Zero loss + 60 kg
from Component Scrap)

During Process Order Execution, 3200 kg are recorded as actual consumption for component A and
analysis of deviations results as follows:

 
Another opportunity for comparisons can apply when Designed Waste Factor is lower than 1. In this
case, in order to deliver the expected output, an additional quantity of component is required, due to
the mass loss during the process.
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For example, in case of biscuit production it could be assumed that 10% of dough mass is lost during
baking. Imagining ideal conditions and no losses, the consumption of 100 kg of dough will generate 90
kg of biscuits, due to the baking step. Similar effect can be observed when loosing mass when
removing peels or shells from beans or nuts.
For the processes where Designed Waste Factor is relevant, the appropriate maintenance of a realistic
value in BOM increases visibility on expected quantity contributors and ease the identification of
opportunities.

In many cases, unrealistic values of Zero Loss Quantity – related or not to Designed Waste Factor
maintenance – could lead to unlikely conclusions when analysing deviations, highlighting a generation
of output that cannot be related to actual consumption of components (example: declaration of 1000
filled bottles of Water with an actual consumption of 990 empty bottles).

Some manufacturing processes generate not only the intended product, but also other materials, as
an unavoidable result of these processes. They are defined as “By-Product” or “Co-Product”
scenarios.
These additional materials - Rework or semi-finished products – are maintained in Bill of Materials.
Since they generate a quantity and a value on the Process Order – they can influence significantly how
deviations are analysed.

For more details on these scenarios, refer to Costing Standard for Manufacturing.