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anufacturing ilxcellence code (MEC)

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 NON-PERFORMANCE..
s.2.UNPLANNED ........................ 51

6.ROUTTNE TO MANAGE STANDARDS .'...............51

T.GOVERNANCE/RECOMMENDED rMPLrCATrON....... .......... s3
E.FACTORY OPERATTNG SYSTEM (FOS) ..............s4
9.MEASURES AND THErR HTERARCHY ............. ...................58
IO.KEY PERFORMANCE INDICATORS (KPI's) .....59
11.SrTE CORE KPr SCORECARDS ........59
11.1.ENVIRONMENT. HEALTH AND SAFEry........ ..........61
11.L.1SAFETY: ToTAL RECORDABLE FREQUENCY RATE (TRFR) .................61

11.1.12ENV|RONMENT:CO2 FROM ENERGY....,.. .......'...........61

11.1.14.ENV|RONMENT HAZARDOUS WASTE ........................62

L1.1.15ENV|RONMENT NON-HAZARDOUS WASTE .................. ..................62

11.1.16ENV|RONMENT TOTAL WATER ............... 53

11.1.17ENV|RONMENT TOTAL CHEMICAL OXYGEN DEMAND (COD).......... ..................63

I2.2.PRODUCT|V|TY: .....'...-.. 63
(OEE)...........
L2.2.1OVERALL EQUTPTMENT EFFECTIVENESS .....................63

L
12.2.4PRODUCTIV|TY: PRODUCTION VOLUME..... ..........'.......54
L

t 12.2.6PACKAGING MATERIAL WASTE... ...,..........64

! 12.2.L0STOCK (RM/PM) DAYS |NVENTORY.......,,,...

12.2.11MANUFACTURING EXCELLENCE SAVINGS
................68
,.................69

I 12.2.12QUAL|TY: MANUFACTURING D INCIDENTS (% NON-CONFORMANCE)

L2.2.13MANUFACTURING D INCIDENTS (ABSOLUTE)

......*......70
...........7't'

I L2.2.14.MANUFACTURlNG D INCIDENTS CONSUMER UNITS (ABSOLUTE)...........

12,2.14.MANUFACTUR|NG D INCIDENTS CONSUMER UNITS (ABSOLUTE)...........

..........71
..........7L

I 12.3.DEL|VERY:.................. ........."..."--...---- 72
12.3,1DEL|VERY: oUTPUT RELIABILITY (oR)....,...,.... ......'.'.'."-72

12.4.MORALE ......................... 73

I
I l2.4.3EMPLOYEE RELATIONS INDEX (ER).............. .................74

I
PREPARATION DETAILS

Group Manufacturing Excellence Manager

Group Manufacturing Director
Chief Supply Chain Officer

B'or 54 FMCG Internal Use Only

TIMELlNE
The MEC Code upgrades the existing Manufacturing Scorecard KPIs and becomes mandatory for all 54
FMCG factories as of Jan2022.

- All factories are expected to read and apply the definitions.

TARGET AUDIENCE
The MEC Code is valid for all Businesses and different Product Categories across all sites. The ManEx Code

may be circulated to all 54 FMCG Employees, however the document will be most beneficial for the following
rolc

Manufacturing Excellence (ManEx) Manager / Coordinators

Plant Managers

Production Managers

Supply Chain Planning Managers

Engineering Managers

Quality Managers

EHS Directors / Manasers

R&D Directors / Manaser

l.INTRODUCTION
54 FMCG has placed an ambitious growth strategy that will be achieved through compass. We operate in an

cnvironment of volatile, uncertainty, complexity and ambiguity. In driving sustainable, profrtable growth,
Supply chain is playing a fundamental role by reducing our environmental footprint and generating saving
that will fuel our growth.

Our aim is to become a role model, setting standards to our manufacturing operations. To do so we need
consistent rules, integrated tools and right behaviors. We need a transparent, current and easily available
fbctory performance picture that help us to focus on where to improve and deliver value to the business. This
moans all of us have to improve the way we capture and use information to realize our shared potential, unlock

trapped value and drive improvements that will enable factories to exceed performance targets.

To excel in End-to-End cost competitiveness, we need to build a strong foundation. Factories control most of
thc Supply Chain costs (materials, conversion stocks, stocks etc.) and play key role in driving Return on
lnvcstment.
The purpose of Manufacturing Excellence Code

'l'o bc truly global, we need a global set of standards and methodology by which to operate. This will help us

Ir t:

- Reduce the waste and remove inefficiency that our consumers will not pay for;

- Provide better information to our customers regarding sustainability and quality;

- Make smarter decisions based on better information.

llrc Manufacturing Excellence Code (MEC) Code standardizes the way we operate our factories and evaluate
r11nuf'acturing performance. The purpose is to have one terminology and one methodology for measuring and

1'1: po rt in g manufacturing operations across the company.

'l'lrr: ManEx Code provides clear definitions regarding manufacturing performance and processes. It includes

irll rclevant Key Performance Indicators (KPIs), and requires factories to define Process Performance
Iptlicators (ppls) and Key Activity Indicators (KAIs) needed to enable their efficient and consistent
rplpagcment. The ManEx Code also introduces new concepts such as Push and Pull resources and
Mlrrufacturing Standards which require a paradigm shift. Manufacturing Standards will establish an accurate
lirrk bctween operational and financial performance.

'l hc Managing Manex Code is organized as follows:

- Definitions

Manufacturing Standards

Routine to Manase Standards

- Governance

lly embracing the ManEx Code as the new way we operate opr factories, we will deliver greater value and

lcinfbrce our performance culture. This will allow us to deliver unmatched business value.
2,GENERAL DEFINITIONS
2.1SITE
Deflnltion A Site is a physical location with facilities, that is operated by 54 FMCG. It is physically
dcfined by its tangible boundaries.

A single physical location is never considered as having more than one Manufacturing Site. Sites have the

following characteristics :

. Adjacent facilities are considered as one Site even if they have distinct mailing
addresses

A 54 FMCG Manufacturing Site may produce for several categones:

o be defined independently from management structures: a management team

can run one or more sites and a site can have one or more management teams

o be part ofajoint venture operation

o include a processing plant (e.g., Oil or Soap)

 2.2FACTORY
Dcfinition A Factory is a building with manufacturing facilities within a Site. All non-manufacturing
lircilities, such as offices and utilities (areas), will be allocated to the Factories on a site.

A F'actory is the unit for which production planning is executed'

A Factory always has one or more of the following three manufacturing facilities:

. Processing facility: - converting raw materials into semi-finished products;

. Production facility: - converting raw and packaging materials into hnished

products;

. Packaging facility: - converting semi-finished products into finished products.

A processing facility is usually a part of a production or packaging facility. However, it is a Factory in itself
it:

1. the processing facility produces for more than one production or

packaging facility (internal or external of the manufacturing site); and

distinct planning and processes exist for the processing facility.

2.3AREAS
l)ctinition Areas are the physical zones in a factory where resources are consumed or stored, activities are

rrnclertaken and inputs are transformed into outputs.

Notcs 12. A Factory Map can be created to show any entire factory as a set of Areas, without leaving any of
llrc factory's activities unmapped.

2.4LINE
l)cfinition In physical terms, a Line consists of one or more machines, processes or tasks which together
onlount to a step within the work of that Area. A Line always falls between two 'relevant and significant
bul'l'ers. Relevant and significant buffers can take many different forms, but are always:

big enough to measure and control; and

make it possible for a Line to run independently of any other Line; and

booked into the relevant Enterprise Resource Planning (ERP)

A Line is a production operation that may exist in any of the following Areas:

L Processing

2. Filling & Packing

3. Repacking

A Line can include manual packing operations. It can be dedicated to the needs of a single product or a group

ol' products. It is defined as a Line for the purposes of production planning, costing, manufacturing

pc r lbrman ce measurement and capacity man agement.

Notes:

1. Buffers are not part of any Line, but of the Area that they and the Line fall within.
2. A bottleneck machine on a Line can produce only one product at a time. Therefore,
only one production order can run on the Line containing the bottleneck machine
at any given time.

3. All involved transfer lines/pipes, including conveyors, are part of the Line.

4. The activities of quality inspection, and the buffer before quality inspection, are not

part of any Line. They are simply part of the Area in which the operation falls. So,
if, for example, a product is palletized and then stocked for quality checks before

sending it to the Finished Product Warehouse Area, then the palletizing, stocking
and quality checking are not part of the Line, but are part of the Filling and Packing

Area.

2.5RESOURCES
Introduction Resources are materials and assets consumed within Areas to produce a certain amount of
orrtput or to suppofi that Area's manufacturing activities. Resources are classified as Pull or Push, because the

tlrivcrs to manage the consumption of these differ.

F

lr)xnmples People, machines, raw and packaging materials, bought-in and in-house generated utilities,

corrlract services, fuel, spare parts, supervision & management, etc.

 2.5.1,PU11REsOURCES
l)clinition Resources which are required on a Line for transformation purposes are called Pull resources.

Thcsc are the resources that are actually needed in order to deliver the manufacturing process for which a Line

cxists. We can identify and measure the consumption of these resources in relation to a unit of the output at
production Order level. Pull resources required (for production) are defined using the following matrix Since

thcse resources are related to the output, they have to be compared against a reference called a 'Standard'.

Standards provide the essential link between input and output. The following 'Manufacturing Standards',
which should be controlled in the Factory, are defined for every Line:

{. Material Standards

2. Line Standards

I Labor Standards

4. Utilities Standards

Notcs l. Every utility (e.g. electricity, water, air) will be calculated at a finished goods /semi-finished goods

lcvcl. This will help us to define a Master Recipe for both finished goods and semi-finished goods. Using
rnore educated allocation logic, deeper visibility and understanding of utilities will be possible. As
lllcasurement capability is currently limited, we recommend beginning with the measurement of electricity
rund steam. Please refer to Utility Standalds {section 9.4) tbr furthel dctails.

2.The appropriate Pull resources should be mapped to each Area and Line on the Factory Map.

2.5.2.PUSH RESOURCES
l)cfinition These are the remaining resources, which are not Pull resources but which are still required

within the physical boundaries of a Factory to produce according to Unilever standards of safety, quality,
sustainability and cost.

'fhese resources need to be:

5. Controlled and rePdrted;

6. Allocated to SKUs for product costing;

T. Analyzed and benchmarked through relevant and common measures.

Dctailed rules on how to allocate Push resources are defined in the 'Global Standard for Product Costing'
document.

Examples Site security, repairs & maintenance, people and general utilities in warehouses and labs, etc.
 2.6.STOCK KEEPTNG UNrT (SKU)
Dctinition A SKU is identified by the barcode Global Trade Item Number (GTIN) of the Trading Unit
(TU), inespective of whether that trading unit is a case or a pallet.

'fhe TU is the unit in which a particular customer places its orders. It includes repacking, but does not include

picking. This is because repacking results in a new TU for which the customer places an order. However,
picking is simply a part of preparing the order for the customer, a general task within a distribution supply
r:hain.

2.7.BILL OF MATERIAL (BoM)

Dcfinition A Bill of Material is a summary of the materials consumed in making a product. A BoM is

tlrawn up for every SKU at its final level, as well as at various intermediate levels. For example, separate
ItoMs may be drawn up for finished goods and for related semi-finished goods/ backward integration products,
s6 that distinctions may be made between final and intermediate levels. A BoM is always product specific-

Itlcally, a BoM should also exist for Repacking, also termed 'Rectification' when it refers to finished goods.
'l'his is when a finished good is repacked with supplementary or replacement packing material to create another

lirrished good.

Multi-packing processes - assortment packing or gift packing - will also result in a new finished good which
will hence also have its own BoM.

Notes Any change in the master data of a BoM must be agreed with the Group Team. The scale and type of
changes required to reach the right BoM will be different for each category and location, due to a lack of

sttndardization in current master data'

2.8.MASTER RECIPE
l)cfinition The Master Recipe of a product describes the different steps required during the production
process. This is different from the 'recipe' term commonly used while preparing a batch or defining a BoM.
'fhe Master Recipe can be described in terms of manufacturing standards such as:

. Machine hours

' Laborhours
 2.g.PRODUCTION VERSION
Definition A production version consists of a Bill of Material and a Master Recipe. when a given SKU

has several Bills of Material or Master Recipes, it is necessary to develop

multiple manufacturing Production

Versions for that SKU.

also result in different

Ideally, different Labor and Utility Standards defined in Master Recipe should
production versions. However, for the purpose of simplification, a Production version needs to be created in

only the following three cases:

l. Change in BoM;

change in Line standards e.g.,Lchange in Line, nominal speed or oEE;

3. Change in season, resulting in different labor requirements

Versions should
Examples In each of the following situations, for the same product, different Production
so that there is a version which accurately details the way that
the product is produced in each case:
be created,

. A given product can be manufactured with liquid or solid' The composition

is the

same but the form of the material is different'

. A given product can be manufactured on different Lines or on a given Line with

various operating set-ups. (e.g., when a Line is composed of machines occupying

a position in parallel with other machines, the Line might have several operating
set-ups corresponding to different machine combinations')

. A change in any of the three parameters above can result in either a new
Production Version replacing an existing Production Version or a new Production

Version co-existing with an earlier Production Version'

. Every material on a BoM has a specification sheet. In the case that a material with

a different specification sheet is used during production for any reason

at all' a

a new specification sheet is

Quality Deviation has to be recorded. If and when
adopted for regUlar use, then a change to the BoM must be initiated.

. As part of the Governance, R&D defines whether a change in Bill of Material

or in
results in an alternative BoM (and therefore a different Production Version)

the creation of a different SKU code itself'

1ffi
 2.lO.PRODUCTION ORDER
A production order is a request from planner for given quantity of semi-finished or finished
Definition a a

Production Orders should be

product to be produced in a certain time, using a given Production Version.
a finished product, and define the number
created for every Line producing either a semi-finished product or

of Resources which should be consumed'

A production Order specifies the use of a particular Production Version, and so a Line cannot fulfrl two
production orders at the same time. If a Line is found to have more than one Production order running on it,
Order runs on a given Line at any
then the Line should be redefined so as to ensure that only one Production
than at machine level. Closing and
time. A production order is always planned and launched on a Line, rather
the receipt of goods, time
confirming production orders within 24 hours is best practice to facilitate
confirmations, daily performance review etc'

2.LL.CATEGORIES AND UNITS OF MEASUREMENT

54 FMCG level, the 'ton' is the
Definition For all reporting, aggregation and consolidation purpose at
this is critical, as 54 FMCG has to
obligatory unit of measurement, irrespective of the category. Adherence to
report its results to a number of external stakeholders'

'Packs' as their conventional unit

In oil sub-category, 'liters' is reported as 'tons', bottled water which use
.packs, to .Liters', using the Declared Weight of the SKU. For floor, Pasta & macaroni quintal is
convert
reported as ton. Hence, the resultant unit is still reported in 'tons.

Formula:

(production Volume [ton] =lfr-duction Volume [piecesJ SKU)(Declared Weight SKU)

AII SKU

of reporting and aggregating all

This formula enables the calculation of 'tons' from 'pieces' for the purposes
to Material Standards for the link
results. Declared weight refers to the euantity declared on the pack. Refer
between this and Zero Base in the Bill of Material'
part of the master data and
Notes All the conversion factors for pallets to tur", to Pieces to Tons/Liters form
are included in Excel templates supporting this document'

1"3
 2.L2.NOMINAL SPEED
l)clinition The Nominal Speed is a reference standard value which is used in several rneasures (OEE,
I Clupacity, etc.), standards (Line & Labor) and Costing & Planning.

'fhc Nominal Speed is the highest sustainably achievable speed at which

I a given product can be manufactured

on a given line at perfect efficiency and with no losses, safeguarding all Quality and Safety standards and
attainable for the corresponding Lot Size.

To define the Nominal Speed, the supplier has to be consulted as the first point of reference. The Nominal
Speed must then be agreed with category experts.When commissioning a new Line, the Nominal Speed should

be the speed defined in the Capital Expenditure (Capex) proposal.

NOTE: The Nominal Speed must be revised if changes or modifications occur to the equipment or the product
being produced.

2.L2.1..BO1TLENECK & NOMINAL LINE SPEED

Definition A Bottleneck is the slowest machine/machines or process/processes that limits the production
of a Line, reducing its Nominal Speed.

The Nominal Speed of the Line is limited to the Nominal Speed of the Bottleneck machine/process.

Comments Maximizing the Bottleneck speed enables an increase in maximum capacity and a reduction in
or avoidance of additional investment. Operators should be aware which machine is the Bottleneck and that
the performance of this machine is critical to line productivity. A Bottleneck must be identified for each Line,
each product (or group of similar products) and each Production Version. For any given Line there can be
only one Bottleneck.

Notes If improvement activities increase the nominal speed of the bottleneck, the bottleneck may switch to a

different machine or process.

2.L3. PRODUCTION VOLU ME

Definition The Productio4Volume is the quantity of a product produced in a given,amount of time in a

specific Area i2n the factory.

. The quantity is the magnitude of the measurement unit

The time is the frame of reference, e.g., shift, day, week, month, quarter or year,
depending on the reporting requirements.

The nature of an Area is defined above 'Areas'. The Areas under consideration
when determining Production Volume are: Processing, Filling & Packing and
Repacking.

L,{.
 . The product is anything resulting from partial or full transformation of materials
(raw materials/packing materials). The products under consideration when
determining Production Volume are the outputs of the Areas defined above e o
finished products or semi-finished products.

Once we have established a Production Volume for each Area defined above, these can be aggregated to obtain

a Production Volume for the Factory.

The Production Volume of the Factory is thus the quantity of product leaving the Factory in the given amount

of time. Volumes of different forms ofproduct, such as semi-finished goods and finished goods, cannot usually
bc added together, but in the example that follows, we will simply add them, assuming they are all leaving the

Factory boundary.

Notes It's important to ensure you do not double count quantities when calculating Production Volume.

z.T .LINE TIM E CLASSIFICATION

Definition In order to consider accurately the amount of time consumed by a Line, a suitable way to
classifu time is needed. This classification has to allow sufficient visibility, consistency and accountability to
be usable for manufacturing performance management, planning, costing and standard capacity calculation

methods.

There are four types of time losses a Line can undergo:

1, Legal losses:

These occur when a machine or Line is unable to produce for legal/statutory/regulatory reasons. Such losses

are outside of compony control as they result from, and can usually only be resolved under, the legal
jurisdiction of the country in which the Site housing the machine or Line is located.

2. Unutilized Capacity losses:

These are losses incurred when a Line is underutilized or idle; e.g., when it is available for production. An
tt
exception to this defrnition is while an Equipment/Process Trial is being carried out, as an Unutilized Capacity
loss is then experienced though an activity is being performed on the machine. The Plant Manager and his
external or intemal business partners are responsible for the management of this loss.

Any decision not to produce will be based on logical factors such as high costs, poor return on investment,
business planning or other pre-determined considerations.

Unutilized Capacity losses should be considered thoroughly in a Capacity Expenditure Proposal before any
new capacity investment is approved.

3, Process Driven losses:

1.3
 'l'hcsc occur when a Line is intentionally stopped to complete certain activities on a machine or Line. While

tlrcsc activities are being carried out, the Line is not able to produce. These losses have a shared responsibility
(c.g, rnanufacturing, planning and engineering are all functions which may share the responsibility).

It is necessary to create standards for each ofthese losses, because the duration ofthe losses will be dependent
on the portfolio or the mix of products produced on the Line in question.

This means that even if a machine is running for long periods of time, the extent of these losses should be

largely consistent. For this reason, it's best to estimate Process Driven losses on machines / Lines on the basis
of the mix of products, rather than on the basis of a percentage derived from the machine or Line's history

4, Manufacturing Performance losses:

This is when a Line unexpectedly stops while it is intended to be in production under a launched Production
Order. These losses are mostly the responsibility of manufacturing, but there can be exceptions.

The magnitude of these losses will mostly depend on the size of the Production Order and the uptime of the

machine e.g. the length of time for which the machine has to run. Hence, if the machine has to run for long

periods of time, then there will be more hours of these losses.

It is thus best to estimate these losses as a percentage, taking historical data from existing machines or Lines

as a basis.

Illustration:

Time losses z
o
=
a
o
F

I
I Notes This Time Classification is valid for calculations at annual, quarterly, monthly, weekly, daily and shift

level. Only the duration of total time and the losses will change as the time frame varies.

I Total Time (TT): The absolute number of hours available in a year of 365 days except for leap years (366
days per year).
I
14
Avuilable Time (AT): The maximum time for which the Company could utilize the Line for production
cluring the Total Time. This excludes only the time for which the company has no control (Legal losses). This

timc is highly relevant for Capital Expenditure decisions. Since Unuttlized Capacity losses can be reduced
ovcr a few months, the Available Time represents time considered as available over the long term. Refer to
the Capacity definition

Formula Available Time (AT) : TT - Legal losses

Available Loading Time (ALT): The maximum time for which the company could utilize the Line for
production over the short term. This time is used by the production planner for preparing weekly production
plans. Since Manufacturing Performance and Process Driven losses can be reduced in a few weeks, Available

Loading Time represents time considered as utilizable for production in the short term.

Available Loading Time (ALT)

Formula : AT - Unutilized Capacity losses (except ldle Time)

Value Operating Time (VOT): The minimum amount of time that will be consumed by the Line for a given
production Plan under ideal conditions (operating at Nominal Speed and without any loss of any kind). It is

calculated as:

Value Operating Time (VOD : Good Volume

Nominal Speed

Operating Time (OT): The time for which the machine is operating including both uptime (VOT) and failure
time (Manufacturing Performance losses).

Operating Time (OT) : VOT + Manufacturing Performance losses

Loading Time: The time for which the machine is loaded, including uptime (VOT), failure time
(Manufacturing Performance losses) and activity time (Process Driven losses).

Loading Time (LT) : OT + Probess Driven losses

Idle Time: The time for which the machine is not loaded because of lack of demand or capacity being more
than demand.

Idle Time: ALT - LT

Notes Good Volume refers to the quality-cleared volume produced at the end of a Line (refer to definition of
Line above). This volume might be different from the Factory Volume (defined above) since certain quality
analyses, like microbiological analysis, take a few days after the Production Order has been closed on the

Line. The output of such quality analyses will not be included in the Good Volume or, hence, OEE.

1q
 2.L'.OVERALL EQUTPMENT EFFECTTVEN ESS (OEE)
2,15.1. DEFtNtT|ON
Dcfinition Overall Equipment Effectiveness (OEE) measures the operational performance of the
production line taking into account Manufacturing Performance losses and Process Driven losses. It reflects

how effectively the Loading Time is being used to produce Good Volume. (Please refer to the Time
Classification section, for more details on the Loading Time.)

As a minimum, the OEE measure should be calculated for every Production Order. It is also recommended
not to ignore the value of this measure in the management routine of the factory (per shifVday/week etc.).

Formula The standard method of calculating OEE considers the actual Good Volume at the end of Line,
as it was confirmed at the end of the Production Order, along with the required Loading Time:

Overall Equipment Effectiveness (OEE) : Value Operating Time

Loading Time

Note:

1. In order to improve OEE, we need to measure Manufacturing Performance

losses and Process Driven losses during the Production Order. This is done
using either a manual or automatic loss measuring system, depending on the
capability of a given Factory.
2. Ideally, the OEE obtained using the formula, and that calculated when the
procedure in Note 1 is applied, should be the same. If not, then this is because

of unaccounted (or inaccurate assessment of) losses in the loss-measuring

system. Unaccounted losses should amount to less than 2%o of Loading Time
(based on experience).

3. The recording of Manufacturing Performance losses and Process Driven losses

by the loss-measuring system should be made at the Bottleneck machine (e.g.,

if the Labeler stopped for 7 min, while the Bottleneck stopped for only 5 min, a

loss of 5 min would be booked for the Line).

4 Material losses, manpower losses and energy losses resulting in OEE losses are
captured for the entire Line at the Bottleneck machine. They are recorded,
respectively, in units of kilograms, man hours and kilowatt hours, and then
converted to time losses such as Quality Defect time loss, Shortage of Operators

and Process Failure time, respectively.

l-c
 The Production Order generated 50kg of waste and l300kg of Good Volume at Nominal speed 100kg/h

Quality defect time loss : 50kg/100kg/h : 3Omins

Process Driven losses :20 + 20 : 4}mins manufacturing Performance losses : 80 + 30 : I l0mins Total OEE

losses: 15Omins

Below are two methods to calculate OEE given the data provided; only one method is correct

Value
Operating = 16hrs^ 150 mins = 13 Shrs
Time

:" --.. 1300ko 11 (hrc

opcrating = i#ffi, = 13 hrs oEE= l:-"
IONTS
^84.3c1.'
ilrne
4')4"^
OEE= 1 bnrs
=81 3oi,

*30% unaccountable loss - improve loss capturing system

Notes Note 1: The second of the two ways of calculating OEE is wrong, because it subtracts OEE losses from
Loading Time to arrive at Value Operating Time. However, Value Operating Time should be calculated
directly from Good Volume and Nominal Speed. Doing the calculation this way ensures that unaccountable
loss does not affect OEE.

Note 2: The difference in OEE calculation between the two methods described above is due to the
Unaccountable Losses. These losses result as incomplete and inaccurate loss capturing methodology"
Improvements in the loss capturing system will reduce the Unaccountable Losses.

2,15.2.MANUFACTU RING AND SHARED PERFORMANCE

Introduction In order to keep track of the different losses and to manage them properly, two additional
measures have been introduced in addition to OEE. These will help to segregate responsibility and add more

granularity for OEE improvement.

Definition Manufacturing Performance (MP): This is a measure of Manufacturing Performance losses,

and is the sole responsibility of the Manufacturing department, since most of the losses are under their control.

Formula Manufacturing Performance (MP) : Value Ooerating Time

Operating Time

f'
l
Definition Shared Performance (SP): This is ameasure of Process Driven losses, and is shared among
Manufacturing, Planning, Maintenance, Technology Innovation, etc.

Shared Performance (SP) Operating Time

Loading Time

Notes
l. In theory, a calculation of OEE can be made by multiplying MP and SP together.
Overall Equipment Effectiveness (OEE) : MP x SP

2. The MP of the previous year can be used to estimate the MP of following year, by 'risk and time
weighing' focused improvement estimates into the historical MP. This MP can then be used to estimate
OT for the following year.
3. The SP of the following year can be estimated by first estimating Process Driven losses for the business

plan volumes of the following year. Then add these losses to the estimated OT from note 2 to estimate
LT.
4. Aggregation method of OEE and all Line Performance Measures should be based on Machine hours,
not Volume.
OEE Factory :2 VOT lines

DLT lines

2.15.3.MANAGING MANUFACTURING PERFORMANCE & TIME LOSSES

Introduction Each of the WCM (World Class Manufacturing) defined losses is part of one (and only one) of
the Time Classification Cases below. Both WCM and Managing Manufacturing Performance losses are shown

here. The two illustrations describe precisely the same set of losses.

A. Legal Losses - External/legal (Holiday & Maintenance)

B. Unutilized Capacity Losses (Shutdown Losses)
o Bank Holiday
o Shift Pattern
o Idle Time
. Planned Stoppage time
o Shortage of Utility (Force Majeure)
. Equipment/Process Trial & Schedule Modification Time

!&
 C. Process Driven Losses

o Maintenance time
o Meal/Tea Break
. Cleaning & Sanitation Time
o Changeover Time
o Start up and Ramp down
D. Manufacturing Performance Losses

o Breakdown and Equipment failure time

o Process failure time

o Shortage ofoperators
o Materialavailability
o Cutting blade change
. Minor stoppage
. Speed loss

o Quality defect time loss

o Measurement and adiustment

2.I6.LINE CAPACITY AND CAPACITY UTILISATION

Definition:

Asset utilization: A measure used to understand the sweating of the asset. It summarizes all time
losses captured on a Line.

Unconstrained Capacity: A long term measure which is relevant for strategic purposes and capital
expenditure process. It is a measure of unutili zed capacity losses.
lo
Constrained Capacity Utilization: A short term measure which is relevant for schedulinq Lines on a
week to month basis. It is a measure of Idle Time loss.

Please note: The formula for calculating unconstrained and constrained capacity are product mix and volume

dependent.

tr'ormula, Asset utilization: I sruValue Operating Time/ Total Time

Unconstrained capacity utilization: I sruLoading Time/ Available Time

Constrained capacity utilization: I sruLoading Time/ Available Loading Time

1$
 Corresponding to the Unconstrained Capacity utilization measure, there is a measure of Unconstrained

Capacity:

Unconstrained Capacity: Available Time x Average Throughputx

Corresponding to the Constrained Capacity utilization measure, there is a measure of Constrained Capacity:

Constrained Capacity: Available Loading Time x Average Throughput*

*Average Throughput :I sru Volume/l sxu Loading Time

2.I7.SALARIES AND WAGES

Introduction In many of our operations, Salaries & Wages make up a significant proportion of the product

cost. It is important that the Salaries & Wages are correctly budgeted in the factory, so that accurate costs are

assigned to products.

This section defines the various resources within Salaries & Wages with a focus on the 'Pull Labor' required
for labor Standards.

2.18.LABOUR CAPACITY
Definition The total hours of permanent Pull Labor on a Line or Area is defined as the Labor Capacity of
that Line or Area. It is the maximum total hours Pull Labor in that Line or Area can work in the short to
medium term, e.g., the current year.

When calculating Labor Capacity, only the quantity of permanent personnel and the contract of employment
of those personnel are considered in the calculation. The permanent personnel taken into consideration are the
Crew and Shared Crew on each line of the Pull Area who are fixed people on the payroll of the company.

Labor Capacity is useful for costing and planning, since it gives visibility of manhours available.

Formula

Labor Capacity: Contracted number of man-hours of permanent people

)
'
*o,"a "Contracted" refers to Contract of Employment

Temporary personnel hired to support production as a result of seasonality is not part of the labor capacity
calculation.

I
Lg
3. MAN U FACTU RI NG STAN DARDS
Introduction Manufacturing Standards are reference values defined for all pull resources consumed in a line.

These are necessary for:

Production Planning and Scheduling. Establishing the precise quantity that can
be delivered within a timeline, using the appropriate quantity of resources, to satisfy
the requirements of the business.

Costing (budgeting, controlling and reporting). Providing an accurate baseline of

our cost, and ensuring financial decisions are based on accurate information.

Understanding Plan (quantities and value) vs. Actual (quantities and value) and
then driv ing operational performanc e improv ement.

WCM & Manufacturing Standards

Material losses

Energy losses
 Definition In order to understand Manufacturing Standards, the following
definitions are needed:

' Design: A base line measurement that does not include any
type of losses. The
Design assumes resource consumption at r00%o efficiency
(,.perfect world,,)

' Standard: This is the expected level that will be achieved or

delivered. This value
(generally in quantity) is used for costing, pranning
and scheduling purposes. It
should be set as a realistic, achievable value that can be
maintained for a sustained
period' The Standard is a combination of the key operating
data for a specific Line,
product and Production version. It combines the
Design with planned non_
performance. This value will contribute to budgeting
and transfer price calculations,
but will not establish the total cost as Unused Capacity
cost and push cost will also
need to be considered.

' Planned Non-Performance: This refers to expected losses, wastages or

inefficiencies, and takes into consideration planned improvements
or targets which
are risk and time weighted. This output is used for setting
manufacturing targets,
planning and finance, etc

Formula Design r planned Non-performance : Standard

Definition capacity: capacify is defined only for those pull resources which
are capacity constrained

e'g'' those whose management and expansion is 54 FMCG

responsibility. For example, Line and labour are
generally capacity constrained resources, unless
they are outsourced to a co- packer. Materials are not
generally capacity constrained resources, however,
since we buy these from our vendors. Bought-in utilities,
such as electricity purchased from the grid, are not
constrained, but in-house generated utilities like steam
are
capacity constrained' However (and as discussed previously),
since utilities are treated financially as push
resources, we do notdefrne any Capacity for them.

Understanding the capacity of factory resources ensures that these resources can be utilised effectively.
capacity Utilization is applied at strategic, tactical and
operational levels in order to make decisions regardins:

' capital investments in new and upgraded manufacturing assets

and processes;

' Rationalization, consolidation and realignment of manufacturing

operations;

' Production sourcing and allocation across all factories

and out-sourcing alternatives;

. Loading of resources to meet demand;

 . Optimization of Capacity Utilization through improvements to systems and
operating performance,

Planned Unused Capacity: Understanding Factory capabilities is a pre-requisite for being able to make
strategic and operational decisions regarding investment in, and utilization of Capacity. As these decisions

can impact business results and performance across the supply chain, it is essential that we establish clear

definitions and common approaches. Planned Unused Capacity is calculated only for capacity constrained
resources.

Formula Planned Unused Capacity : Capacity - Standard

Notes Capacity should be calculated only for the restricted Pull resources for example, Capacity for the Lrne
is 365 days (8,760 hours).

3.1.LINE STANDARDS
Introduction Each Line requires information that describes its typical reliable operation. Line Standards are

a collection of key operating data (defined below) for a specific master recipe of a SKU. They provide the
basic inputs for production planning & scheduling, costing and performance measurement. Key operating data

for line standards are:

Definition Design. This is the minimum machine hours needed to complete a Production Order (or Lot
Size), assuming no manufacturing and process driven losses.

Formula Design Line Hours : Value Operating Time (VOT)

Definition Standard: This is the standard number of machine hours needed to complete a Production
Order. In other words, this refers to Loading Time

Formula
Design Ltne Hou't's * Process Driyen Losses
Manuf acturing Perf ormance o/o

If details of Manufacturine o/o and Process Driven losses are not available in the first vear. vou
Performanc e

should instead use:

Line Houl"s _
Standard Line Hours _Design
OEE

Loading Time

"$?
Definition Planned Non-Performance: This represents the OEE losses, including expected focus
improvement activities for the given year.

Formula Planned Non-Performance Machine hours : Standard - Design : LT - VOT

Definition Planned Unused Capacity: This is the Resource availability that has not been consumed either
by the Design or by Planned Non-Performance. Planned Unused Capacity is calculated at

a monthly and yearly level, and is the total available Resource Quantity of a Site minus the resource used by
the Standard.

Formula Planned Unused Capacity : Capacity - Standard : Total Time - Loading Time

t,
A*
 3.2.LABOUR STANDARDS
Introduction

Labor Standards are defined as the labor hours required to produce a Lot Size of a product using a given
Production Version. They are established for Pull Labor and provide basic data for production planning &
scheduline and costing.

Key operating data for Labor Standards are:

Definition Design: This is the minimum labor hours required to complete a Production Order (or Lot
Size), assuming no losses. 'Minimum labor hours' does not refer to an ideal or hypothetical manpower
configuration, but to the current manpower, working for the minimum time, as calculated using the Value
Operating Time.

Formula Design Labor Hours : Design Line Hours X (pull labor per shift)

Definition Standard: This is the number of labor hours required to complete a Production Order,
including the OEE losses.

Formula Standard Labor Hours

Destgn Labour Hours
-l Process
Manuf acturtng Perf ormonce o/o

Driven Losses (Labor Hours)

Where

Process Driven Losses (Labor hours) : Process driven Losses (Line hours) X Pull labor required for these

losses

If o/o and Process Driven losses (labor hours) are not available in the
details of Manufacturing Performanc e
first year, you should use:

Formula

Standard Labor Hours :

Design Labor Hours/OEE
Definition Planned Non-Performance: This is the number of extra man hours required to run a Line for
a siven Production Order due to the OEE losses on the line.

Formula Planned Nonperformance labor hours : Standard labor hours - Design labor hours

?5
Definition Planned Unused Capacity: These are the available labor hours that were not consumed either
by the Design or by Planned Non-Performance.

Formula Planned Unused Capacity Labor Hours: Labor Capacity -Standard Labor Hours

Notes A Line may utilize either permanent or temporary personnel, and may also have different Standards
for the on-season and off-season. Hence, Planned Unused Capacity may be negative, especially in on-season,
mandating the need for hiring temporary personnel to bridge the demand-supply gap.

3.3. MATERIALS STAN DARDS

The Materials Standards are equal to the combined Bill of Materials (BoM) for all products (SKUs and semi-
finished materials) and their versions. The BoM provides basic data for sourcing, production planning &
scheduling and costing, and so can be used as the Materials Standards.

Definition Design: The theoretical quantity of material required for a process to produce a given
Production Quantity. This theoretical quantity excludes any production related losses or allowances. It is used
as a base line measurement to provide a stable basis for comparison. In NAV, this is more popularly known
as the Zero-Base Quantity.

Formula Design: Zero base Quantity

For SKUs, Zero Base Quantity is the declared weight on the pack. For semi-finished goods, Zero Base
Quantity is the quantity needed to form the declared weight on the pack.

Definition Planned Non-Performance: The expected total quantity of raw, pack and semi-finished
material losses. The value is expressed as a percentage of Design.

Formula Planned nonpedormance : Desigtt X Scrapok

The non-performance expressed as Scrap%o covers material losses.

WCM Material Losses

Batch Rejection e.g., Wrong recipe for use Giveaway

Effluent e.g., Floor waste, cleaning loss etc. Handling, transfer & storage loss Breakdowns, failures etc.

Stock adjustments Unused Rework material Handling transfer & storage loss Breakdown, failures etc.

Stock adiustments

Notes To accurately define the Scrap%, some categories may require exhaustive analysis of factors such as

volume, air, density, etc.

2F'
 Definition Standard: This is the sum of the Design plus the Planned Non-Performance material
consumption. The Expected Standard material usage loss is used for sourcing, planning and costing purposes.
In NAV, this is more popularly known as the BoM.

Formula Standard: Design * Planned Non-Performance

Notes l. Material Yield Factor - Yield is the amount of acceptable material available after the completion of
a process that generates by-product(s). In manufacturing planning and control systems, Yield is usually
associated with a specific master recipe to determine how many units should be scheduled in order to produce

a specific number of finished goods.

Example: If protein extract is a result of processing of soya bean, then the Material Yield Factor will be the

amount of protein extract generated from a unit quantity of soya bean. The BoM using the protein extract will
reflect the quantity of soya bean along with its yield factor, and not the quantity of protein extract.

2. For Finished Goods, Design, is equivalent to the declared ot zero-based material consumption.

Notes 3. There are material losses that are not included in the Expected Standard material usage, but they
should be considered separately as business / financial losses. These losses are:

Re-use of trial material, pilot plant material or returns;

Obsolescence and Stock write-offs:

l Chemicals and other processing materials not forming part of the finished product
(e.g. chemicals used in bleaching) which are treated as production costs;

I
ta Loss due to bad handling whilst packing materials are in the warehouse (as long as

it is not under manufacturing responsibility);

I
ta
Loss during packing material transfer to production and finished goods transfer to
warehouse (as long as it is not under manufacturing responsibility);

Other non-manufaciurins related reasons.

t
27
 3. .UTILITY STANDARDS
Introduction Sites require different types of utilities, depending on their production processes and their
geographic location. Prudent selection and efficient use ofall energy resources required for factory operations
are necessary to ensure:

Reliable supply;

Favorable cost performance; and

. Minimum adverse environmental impact.

I Utility usage should be measured and tracked by operation or task wherever this is feasible and economically
justified. For energy intensive processes (e.g. evaporating, drying and freezing),
the consumption of energy is
a pivotal factor in taking decisions on investment and operating plans. Even in
operations that are less energy
,I
intensive, consumption may still be one of the key factors in determining shift plans and
operating cycles.

I Definition Two broad types of utilities are used in any Factory:

' Bought-in utility - Utilities which are purchased from vendors operating outside of
l the Factory premises, e.g. electricity, water, fuel etc.

' In-house generated utility (known as a Source Utility) - These are utilities that are
produced by 'source equipment' in the Factory consuming one or more bought-in
utilities. For example, steam is an in-house utility, produced by a boiler (source
equipment), using electricity, fuel and water (bought in utilities).

Both types of utilities will be found in different areas of a Factory. Some Areas may use only bought-in
or in-
house generated utilities, while other Areas will use both.

3.4.1.ryPES OF UTILITY STANDARDS

lntroduction There are two types of Utility Standards:

' Source Standards - These are Utility Standards defined. at the in-house utility
generator's end (e.g. boiler, air compressor).

' User Standards - These are Utility standards defined at the user end (e.g. Filling and
Packing Line, Processing Line etc.).

[,
7.&
 l
ll Definition Source Standards: These refer to the level of consumption of each bought-in utility resource

I by an in-house utility generator (source equipment) to produce one unit of a Source Utility.

t' l Source Standards are useful in monitoring the performance of source equipment, and the cost of in-house
generated utilities, on an ongoing basis.

I It is currently difficult, for two reasons, to treat in-house utilities as a Line and to calculate the Source

l Standards (Design and Planned Non-Performance) for each utility. This is because:

' In-house generated utilities get consumed simultaneously in multiple production

/ l Lines and processing Areas, and the performance of the generators is mainly
governed by the demand from these users/Lines.

d l ' There are frequently no appropriate metering devices at the in-house utility
generator's end, making it difficult to monitor its performance.

{
l As a consequence, Source Standards will not be defined, and both bought in and in-house generated utilities
will
'l be treated as Push Resources. To enable this Push allocation, User Standards will instead be developed.
ri ) Definition User Standards: These refer to the level of each utility resource consumed, per production
r!
line, per pack. User Standards are helpful in allocating utility costs to individual product SKUs.
r
User Standards are defined using historical data, and capture Line configuration and varying utility demand
for different Line and pack sizel) combinations. If the same SKU, with similar pack sizes, is being produced
.-
I rl
on two different Lines, then two different user Standards need to be defined.

3.4.2.UNtTS OF MEASUREMENT FOR UTIL|T|ES (UOM)

I Illustration: UOM for Utilities

.: Bought in utility
I Electricity
Unit
kwh

I Fuel m3

I : Source

Steam
Utility
Tons

I Compressed air

Refriseration
m3/hr.
kw
a

Notes The table above is provided for indicative purpose only. Please ensure Units of Measurement are
I
appropriate.

3S
 5.ACTUAL VALUES OF RESCURCE CONSUMPTION
5.lACTUAL
Definition 'Actual' refers to the 'actual' amount of each resource that has been consumed after a
Production Order has been completed. When a Production Order takes longer to complete
than a shift, the
Actual values are captured at shift level, as well as at production order level.

Actual values are important in order to:

' Make comparisons against the Standard defined in the Manufacturing Standard;

' Take actions to eliminate unexpected events (Unplanned Non-Performance) not

allowed by the Standard;

' Give the Factory Leadership team accurate information with which to manase the
Factory;

. Take actions to improve and adjust the Standard.

Formula Actual:Standard+(JnplannedNon-performance

Illustration

Actuals

Actuals
Standard
0)

3S
 5.2.U N PLAN N ED NON.PERFORMANCE
Definition This is the wastage,losses and inefficiencies which have occurred by the end of a production
Order. These losses were not expected at the beginning, and so were not planned for in
the production and
cost planning.

Formula Unplanned Non-Performance: Actual - Standard

Notes In some cases the Production Order may perform better than the Standard (the expected performance).
This may occur where there has been an OEE improvement, for example. If this is the case,
the Unplanned
Non-Performance value will be a negative number.

6.RCUTINt TO MANAGE STANDARDS

Introduction It is important for there to be an agreed process to manage Standards, to ensure they are kept
up-to-date. A typical cycle to manage a Standard is:

1. Identify and establish a Standard: First, it's necessary to identifu what it is that
needs to be 'standardized'and then to define the values that the Standard needs
to
establish. For example, a Standard may be needed which will define the speed of a
Line and the crew required to run a specific product on that Line. Once the Standard
has been created, it needs to be documented and controlled.

2. Train and apply the Standard: Once a Standard has been established, users need
to be trained to apply and follow it. It's vital that all those whose work affects to the
Standard are properly trained in its importance and application, as its use is
mandatory and it needs to be applied with consistency.

3. Check and verify the Standard: The effectiveness of the Standard is checked bv
moriitoring that it delivers the expected output.

4. Act in case of deviation: The Standard is an evolving document that needs to be

revised to reflect changes. The following are examples of changes that may result in
a need to modif,i the Standard.

The equipment is modified in some way;

New equipment is added;

The product is modified causing a change to its production data;

X:1
Tracking & Approving the Standard
Changes to Standards need to be tracked and approved. Each Standard
will contain the
following data, enabling it to be tracked:

' A Unique document/version number;

. The date on which the Standard was created;

. The dates to and from which the document is valid;

. The date at which the Standard was altered:

' The reason for changes (which will be mentioned in comments;.

Additionally, each Standard will have an Authorization section, in which authorized

personnel will be required to approve its contents.

Roles and
responsibilities This section
of the ManEx code defines 'who does what'. It is important for
responsibilities to be defined clearly and concisely to create definite ownership
of
activities. Creating 'owners' ensures that input information is correct and activities
are not
duplicated, and results in less debate and more action.

Notes Routine to Manage in the Roles and Responsibilities table refers to the Cvcle
to
manage Standards.

>A
 T GOVtRNANCT/RrCON4 M tN DFD I M pLtCAT|CN
Introduction The implementation of the Managing ManEx Code is one of the key
initiatives 54 FMCG to
achieve to meet its medium- and long-term objectives. As such, this
implementation must be given plme
importance and all the resource it requires. Training sessions will be planned
by the manufacturing Excellence
Team in order to transfer the necessary knowledge to enable proper
implementation, followed by the
construction of a careful action plan for implementation.

Lead responsibility for this task rests with the ManEx coordinators in
each Factory, supported functionally
by the Group Manufacturing Director and Manufacturing Excellence Manager.
However, individuals in all
affected and user functions share responsibility for the thoroughness
and quality of its implementation, and
the whole Factory Management Team should support and be fully
involved in the initiative.

Implementation l. Read the ManEx Code thoroughly.

Steps
2' Any questions should be addressed to the Group Manufacturing
Excellence Manager.
In the absence, the ManEx coordinator is the next point of contact.

3. All factories are expected to read and apply the definitions

4. ManEx initiated sites must apply the ManEx Code in full

Notes Full commitment to the implementation of the ManEx Code is mandatory
for all Sites.

}J
s.FACTORY OPERATTNG SYSTEM (FOS)
Introduction In any organization, 'governance' is the act of governing.
Governance concems those decisions
that define expectations, grant power' or veriSr performance.
It is also concerned with ensuring consistent
management, cohesive policies, guidance, processes and
decision- rights for a given area of responsibility.

All Sites should have an effective governance process in place. (The

tendency is to overcomplicate matters by
having far too many ineffective forums which add very rittre
value.)

ourbasic governance design mustprovideclarity,as well as creating an effective means of communicatins

top-down and bottom-up.

Our key principles for good governance are:

' The Site has a long-term Master plan (of 3-5 years horizon),
fully aligned with the
category and company business strategy. This plan must be
updated regularly, as a
matter of course.

' The Site should have a structured model, with the right forums
in place to discuss
its day- to-day issues.

' These forums should be led by appropriate individuals,

with participants who are
empowered to make decisions.

It(good governance) is based on a few, highly relevant

measures (typically 5
maximum) and driven by a loss-reduction approach on a timely
basis.

It (good governance) has a clear link with the business/Site strategy, and
a robust
deployment from the top to the shop floor level (Line).

All Factory departments/Areas have aligned objectives and shared measures.

There are clear escalation rules and problem-solving procedures

in place.

There is a clear model to show how every team member

contributes to the delivery
of results.

. All data utilized is accurate and relevant.

%&
 ts9 t:triLtirlilrr}l*rT
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:})
 9 MEASURES AND THEIR I-lIERARCHY
rntroduction Key Performance Indicators (KPIs) are measures of performance that are extremely important
in determining whether the high-level objectives of the
Business are being (or will be) met.

However' KPIs are normally achieved by aggregating

several factors, and so tracking them directly, and
making improvements to them, is difficult. In addition,
because of the time required for the process of
consolidation' KPIs effectively becomes lag indicators.
Thus, the speed at which it is possible to react to KpIs
is too slow to be of use in driving performance.

Because of this, it is necessary to cascade the

KPIs into several other measures at different levels in the
Factory.
This results in proactive behavior which, in itself, increases
the drive to improve performance.

There is a hierarchy of measures, made up of a range

of Performance Indicators, and depicted in this pyramid
structure:

Definition

Key Performance Indicator (Kpl)

This is the consolidation into one indicator of several PPIs.
Examples of KpIs include: oEE; confonnance:
and Conversion Cost.

Process Performance Indicator (ppl)

Several Activities together can be combined into
an intermediate result between a KAI and a KpI. Examples
of PPIs include: Quality defects; Unplanned Stoppages
etc.

Key Activity Indicators (KAt)

At this level of Indicator, the aim is to measure how well an
activity in a Factory is being performed. The more
standardized a process is, the more stable it is and the
easier to improve.

Examples of KAIs include: Attainment of changeover standard procedure; compliance with cleanins
effectiveness; Lubrication etc.

s8
10" KEY PERFORMANCE tN DTCATORS (Kpt,s)
rntroduction The Group Manufacturing Excellence Team
has developed Manufacturing KpI Definitions
which will be used to report performance for all 54
FMCG Manufacturing Factories.

A key performance indicator (KPI) is a measure of performance.

Such measures are commonly used to herp
an organization define and evaluate how successful
it is, typically in terms of making progress towards its
long-term organizational goals.

The ManEx code contains an overview of the

KPIs that will be collected and reported, each of which
has
been defined, agreed and endorsed by a large
number ofstakeholders.

11.SITI CORE KPI SCORECARDS

rntroduction core Scorecards have been mandated, and will be used by Sites to focus on measurinq the
agreed KPI's and target improvements in the
short, medium and long term.

site Influenced KPr scorecards: These tend to be measured

outside of the Site, but include important
information as they are impacted by the Sites .
Example,

Illustration:
Site Core KPI

Scorecard

FACT0RY KPI's

ffi
ry
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6fr
 1 1.1.ENVIRONMENT, HEALTH AND SAFETY
1 1. 1. ISAFETY: TOTAL RECO RDABLE FREQU EN Cy RATE (TRF R)
Definition Total Recordable Frequency Rate (TRFR) monitors employee safety improvement for all
54FMCG. This will assist in determining whether safety targets are being met. TRFR is expressed as a rate of
Loss Time Accident (LTA), Restricted Work Case (RWC) and Medical Treatment Case (MTC) per 200,000
hours worked, e.g. all workplace accidents, excluding those that require simple first aid treatment.

Formula

# of recordable inctdents *269,996

TRFR =
total hours worked

Measure Rate

Source & TRFR data is provided monthly by each manufacturing factory in the EHS system
frequency

11.1.12ENVlRONM ENT:CO2 FROM ENERGY

Definition 54 FMCG reports externally its CO2 emissions from energy. The data is calculated based on
the amount and types of fuel and electricity used and on standard conversion factors.

Formula co2 from Energy : 2 (energy Consumption x co2 emissionfactor)

2 Production Volume

Measure Kg/ton production

Source& CO2 from Energy data is provided monthly by each manufacturing Factory in the EpR
frequency system (Environmental Performance Reporting System).

Comments The reference for the emission factors is the Greenhouse Gas Protocol. For electricity, country-

specific electricity CO2 emissions data is used. It is sourced from the IEA (Intemational Energy Agency;
based on how the electricity is generated in the national grid.

In all cases, CO2 emissions are automatically calculated using the Environmental Performance Reporting
(EPR) Systenr

&1
 11.1.13.ENVIRONMENT ENERGY
Definition 54 FMCG manufactdring factories use different sources of energy depending on their
production processes and their geographic location. The term .Energy,
takes into account all consumed
energy.

Formula Energt (G4 :z (energlt consumption (GJ)from eachfuer source)

2 Production Volume

Measure GJ/ton production

&
Source Energy data is provided by each manufacturing factory in the EpR system (Environmental
Frequency Performance Reporting System). Frequency: Monthly.

Comments Default values for the energy content of all fuels are provided in the
Environmental Performance Reporting (EpR) System

Total energy consumption is automatically calculated using the EpR system.

6t
 11. 1. 14. ENVI RON M ENT HAZARDOUS WASTE
Definition This is the quantity of waste (in tons) that is sent off-factory for disposal, e.g., to landfill
incineration, and which is classified as hazardous based on the local legislation.

Formula Hazardous Waste:Z Ouality o"f-aste (kpW each Hazardous Waste stream

2 Production Volume

Measure Kg/ton production

Source & Hazardous Waste data is provided by each manufacturing factory in the EPR system.

Frequency Frequency: Monthly

11.1. 15ENVI RON MENT NON-HAZARDOUS WASTE

Definition This is the quantity of waste (in tons) that is sent off-site for disposal e.g. to landfill or
incineration, and is classified as non-hazardous based on the local legislation.

2, Quality ofwaste (kd for each Non-Hazardous Waste stream

Formula Non-Hazardous Waste:

2 Production Volume

Measure Kglton production

Source & Non-Hazardous Waste data is providedby each manufacturing factory in the EPR system.
Frequency Frequency: Monthly.

Comments Since there is no common international waste classification, the 54 FMCG data is based on the

national legal dEfinitions applicable for each factory.

I 11.1.16ENVI RON M ENT TOTAL WATER
Definition Water consumptiori is measured in all 54 FMCG factories. The data represents .all water

I consumed

include:
- both the potable (drinking quality) and non-potable (lower quality) water that we use. It may thus

I water used as an ingredient in products,

uncontaminated non-contact cooling water

I . waste water

I Formula Total Water :(2 Municipal Water (m3) + Borehole Water (m3)) /> Production Volume

I Measure m3/ton production

& Frequency Total Water data is provided by each manufacturing factory in the EPR system.
I Source
Frequency: Monthly.

I
11. 1. 17ENV| RON M ENT TOTAL CH EM ICAL OXYG EN DEMAN D (COD)

J1 Definition COD (Chemical Oxygen Demand) represents the ingredients and product lost from the
manufacturing processes. It arises mainly during cleaning operations. COD is widely used by regulatory

l bodies to control industrial wastewaters, and to calculate the correct level of

charges for downstream municipal wastewater treatment, which is designed to remove most of the COD before
l the wastewater is discharged to the environment.

Formula COD :2 COD load (kg) (watercourse and water treatmentl

:
E Production Volume
!
t'i Measure Kg/ton production

&
Source COD data is provided by each manufacturing factory in the EPR system. Frequency:
:
Frequency Monthly.

!
I

T
a

63
 L2.2.PRODUCTIVITY:
12.2. 1OVERALL EQU I PTM ENT EF FECTIVEN ESS (O EE)

Definition Overall Equipment Effectiveness (OEE) measures the operational performance of the
production line, taking into account Manufacturing Performance losses and Process Driven losses. It reflects
how effectively the Loading Time is being used to produce Good Volume.

The OEE measure should be calculated at least for every Production Order. It is also advisable to consider this

important measure in the management routine of the factory fuer shift/dayl week).

L2.2.2CAP ACIrY UTI LISATI ON (CU )

Definition Understanding the unused capacity in our Factories enables us to increase capacity Utilization

and so minimize Capex investment. Unused capacity is viewed as a hidden loss that has cost associated with

it. Highlighting this loss will increase visibility for the Business and increase our Return on Assets (ROA)

L2,2.3IABOU R P ROD U CTIVITY

Definition Labor Productivity (LP) measures the average volume produced per FTE employed in any
specific sub-family (technology).

Formulal Labor Productivitv : Production Volume

Total Number of FTE

Where:

Total Number of FTE : Total Number of FTE Direct* Total number of FTE Indirect Aggregation from Month

to YTD:

Labor Productivity: 2 Production Volunte monthly

AVG (Total Number of FTE monthly )

Measure Tons/FTE

'000 units/FTE

Source & Labor Productivity is reported as raw data (number of FTE) in the Alignment of Metrics

Frequency
on a monthly basis.
Comments 1. production Volume must be measured in both Tons or Liters for oil.Labor Productivity is
expressed in both FTE/Tons and FTE/Lit

2. Direct and Indirect Labor associated with manufacturing includes the managers,
supervisors and part- or full-time administrative personnel involved.

3. FTE is Full Time Equivalent. An employee working 80% of the standard working

hours is a 0.8 FTE.

4. FTEs Direct should include temporary/casual workers and third party contract
workers directly supervised by 54 FMCG in any given sub-family.

5. The 'Hours Production Direct' is divided by the 'standard Working Hours' to

generate the 'Total Number of FTEs Direct'-

The calculation of Hours Production Directs for this KPI excludes training, public
holidays, paid absences, vacation, other non-productive time (paid breaks,
meetings, lunch, wash-up, etc.).

7. lmportant clarifi cations :

. Absence includes any cause of non-attendance at work for any reason such as

sickness, weddings, funerals etc'

. Unpaid leave includes extra time taken by employees (e.g. extra unpaid
vacation/ holidavs).

. If a 'total committed hours' labor agreement is in operation at the Factory, the

negotiated number should be used in the Standard Working Hours/FTE Direct

calculation. Please adjust the other elements accordingly. Otherwise, use the
Standard Working Hours applicable in the site.

Aggregation across months to produce YTD is calculated based on summing up the

raw data for production, averaging the FTE data individually, and re-calculating the
KPI.

L2.Z.4PRODU CIIVITY: P RODU CIION VOLU M E

Delinition Ret'er to scction 2.13

 12.2.5RAW MATERIAL WASTE
Definition Raw Material Waste (RMW) is waste related to raw materials and ingredients incorporated in
the product sold during a given period. It must relate to the product in the form it leaves production. Zero-

based RM cost is taken directly from the Bill of Material (BoM); no material wastage allowance is included.

Actual RM cost includes:

Raw material lost durins Rework

Batches lost due to wrong recipe use, over/under dosages, contamination etc.

Washouts

Residues

Raw material lost during transfer to production (only when the transfer is a

manufacturing responsibility)

Raw material lost during handling in production and machine adjustments RMW
excludes:

Re-use of trial material, pilot plant material or returns

Obsolescence and Stock write-offs

Chemicals and other processing materials not forming part of the finished product
(e.g. chemicals used in bleaching) which are treated as production costs

Loss due to bad handling whilst raw materials are in the warehouse

Loss during raw material transfer to production and finished goods transfer to
warehouse (as long as it is not under manufacturing responsibility)

Other non-manufacturins related reasons

Actual RM cost is always bigger thanZero-based RM cdst.

Measuring RMW gives a betterunderstanding of the amount and source of raw material losses, so that a proper
plan can be made to eradicate these.

Actual RM cost - Zero Based RM Cost y lll oL

Zero based Raw Material Cost

Measure Percentage (%o

frequency: Monthly

*4
 12.2.6PACKAGI NG MATERIAL WASTE
Definition packing material waste (PMW) is the waste related to packaging incorporated in the product

sold during a given period. It must relate to the product in the form it leaves production'

Zero-based RM cost is taken directly from the Bill of Material (BoM); no material wastage allowance is

included.

Actual PM cost includes:

Packing material lost during Rework

Batches lost due to wrong recipe use, over/under dosages, contamination etc.

Washouts

Residues

Packing material lost during transfer to production (only when the transfer is a

manufacturing responsibility)

Packing material lost during handling in production and machine adjustments PMW
excludes:

Re-use of trial material, pilot plant material or tetums

Obsolescence and Stock write-offs

Chemicals and other processing materials not forming part of the finished product
(e.g. chemicals used in bleaching) which are treated as production costs

Loss due to bad handling whilst packing materials are in the warehouse

Loss during packing material transfer to production and finished goods transfer to
warehouse (aS long as it is not under manufacturing responsibility)

Other non-manufacturing related reason

Actual PM cost is always bigger than Zero-based PM cost.

Measuring PMW gives a better understanding of the amount and source of packing material losses, so that a

proper plan can be made to eradicate these.

PMW: (Actual PM cost - Zero Based PM Cost)/(Zero based Packing Material Cost) X 100 %

Measure Percentage (%) andFrequency monthly.

&&r
 l I2.2.7 COSTr P RO DU CTI O N COST

Definition Production Cost (PC) allows the monitoring of production cost development. It is used to
generate improvement plans, set targets and deliver manufacturing savings. It is measured per unit of volume
,D
(either Tons, Lit).

a
tr'ormula Production CosF
Labour * Uti"li.ties * Depreciation * Other I Repatr&Maintenance
I
ProductionVolume
Production Cost is uploaded as raw data. Frequency: Monthly.
I
Production Cost Breakdown covers the following elements:

I
. Labor

. utilities
I
Repairs and Maintenance

t Depreciation

. Other Production Costs

Measure Currency/Tons

Source & Frequency

Comments l. Production Cost will follow SCOA definitions.

2. Production Costs include all costs involved in the making of an agreed

category unit, e.g. one ton of "packed powder".

3. Production Costs should be measured and collected in local currencv.

4. Production Cost is not the same as Conversion Cost. Conversion Cost includes
other elements which are not solelv related to Manufacturins Cost.

5. The principles for the allocation of fixed costs across categories should come
a either from CFO or from site FC. In general terms, the use of volume weight
is suggested for this purpose

w3
 12.2.8CONVERStON COST
Definition Conversion Cost measures the cost of transforming Raw and Packaging Materials into finished
products.
t
Production Costs include factory operations from receipt of materials up to and including palletization or

t bagging of finished products, and including the costs of factory services management and other production-
related costs.

a Buying & Planning Costs incllude raw and packaging material buying, bought-in products and other services
buying, technical buying, production and supply planning, sales demand forecasting.
t
Supply Support Costs include:

a
. The cost of supply chain management;

. The cost of quality assurance and control for raw materials, packaging materials
a
Formula Conversion Cost:

I Productton Cost * Buying & Planntng * Supply Support

ProductionVolume

I Measure Currency/Ton or CurrencylLit

frequency
- : Monthly

12.2.9.PRODUCT COST
Definition Product cost (PC) includes cost of raw and packing material, cost of factory operations from
receipt of materials up to and including palletization or bagging of finished products, including the costs of
factory services management and other production-related costs. Namely Production costs include:

. Processing and Packing Labor

. Depreciation (Machinery Processing, Machinery Packing, Utilities, Buildings)

. Utilities (Electricity, Steam, Air, Water, Refrigeration)

. Repairs & Maintenance (R&M - Processing, R&M - Packing, Buildings, Other)

. Warehousing/ Palletization (Material storage RM/PM, Material handling RM/PM,

-l Palletization)

tlt
 Other production costs (Factory and Security costs, Cleaning & Consumables,

Canteen, Laundry, Supervision / Management, Engineering Stores, Waste removal

including Effluent)

Formula
Pro
Raw materi.als * Packaging Materials * Production costs
duction ProducttonVolume
Cost:
Measure:Currency/ ton or Currency/L

Source and frequency: Product Cost will be collected from the Alignment of Metrics
Information System (AMIS) as raw data (value in Local Currency) on Monthly basis at
sub-family level. Production Volume will be collected in AMIS on a Monthly basis at
sub-family level.

Comment :Full definitions of the components of the measure are held in the Approved
Information Standard Chart of Accounts by Type, Cost Reporting Group & Allocation
Rules (SCOA) in the Cost Reporting Group section.

12.2. 10STOCK (RM/PM) DAYS I NVENTORY

Stock (RM/pM) Days Inventory is used to understand the Inbound Stock stored on factory
in
Definition
factory and
terms of days. This covers Raw Material (RM) stored on factory, Packing Material (PM) stored on
Work In Progress (WIP).

Measure Days Inventory

&
Source Total RM, pM and WIp will be collected in the Alignment of Metrics lnformation System

Frequency (AMIS) as Category raw data at sub-family level. Frequency: Monthly.

comments Stocks held at third party locations should be included.

qt5
 12.2.11MAN U FACTU RI NG EXCELLENCE SAVI N GS

Definition Manufacturing Excellence Savings (MES or ManEx Savings) are savings originating from
projects developed and executed by the Factory within the factory boundary. All savings must reflect
a

a prior l2-
structural cost reduction; therefore, the benefit must be incremental versus a baseline spend of
month period (rather than against a budget).

MES must be representative of manufacturing performance (e.g. asset reduction due to performance
improvement, wastage reduction, labor productivity increase, etc.). No benefits/ penalties should
result from

factors not controlled by the factory. In this way MES do not include savings which come
from cost-avoidance

projects (e.g. change from original equipment supplier to a lower cost supplier) or commercial innovations
(e.g. a new tax rate).

Formula ManEx Savings : Total Savings from ManEx Proiect

Measure ETB

Frequency:

Annually.

I
6#
 12.2.12QUAL|TY: MANUFACTURING D INCIDENTS (% NON-CONFORMANCE)
cification or CRQS
Definition This KpI measures the %o of consumer units that do not meet lnter Spec spe

specification resulting in product being put on hold. All non-conforming consumer units must be within
whether in the factory
Compony control (e.g. blocked in Nav and not available for delivery to customer),
party-operated)'
warehouse or a Compony distribution Centre (Compony -operated or third
u
KPI is expressed as the o/o of consumer units produced that are non-conforming' Included are:

a . Any products that do not meet the specifications on routine or extraordinary

testing

lin factory
) . Any products that have damage and therefore cannot be released

, . Non-conforming product that will be reworked, disposed, or sold to personnel

(e'g'

independent of disposition decision/action taken)

. Products that are made and packed in-specification, but found to be out of
specifi cation during rePacking.
D
. Products that are held as a precaution but found to be conforming
after further

testmg
a
. Products that are held but which, after consultation with category teams,
are

confirmed for release for shipment without any adjustment

Excluded are:

. Normally applied product quarantine processes

. Manufacturing trials (e.g. new equipment installation, innovation activities)

. Holds caused by secondary operations e.g. repacking primary product for

promotional purposes, damage durinjwarehousing or transportation' These
will be

tracked as part of Go to Market KPIs.

Formula: Manufacturing D - incidents %: Total non - conforming consumer units

Total consumer units produced x 100

Frequency: MonthlY

-
v#
J
12.2.13MANUFACTU RING D INCIDENTS (ABSOLUTE)
that for 'Manufacturing D Incidents (% Non-Conformance)',
but
Definition This is the same definition as

J
expressed as an absolute number of incidents'

-
Formula Manufacturing D Incidents (Absolute #)
: Total number of incidents due to non-conformance

, Measure Absolute (#)

Source & frequencY

a
Frequency: MonthlY

ENTS CONSU M ER U N ITS (ABSOLUTE)

j
t2.2.t4.MAN U FACrU Rl NG D I N Cl D
(% Non-Conformance)', but
Definition This is the same definition as 'Manufacturing D Incidents
) expressed as a total number of consumer units involved
in D incidents.

Formula Manufacturing D Incidents (Consumer Units)

: Total number of Consumer Units rejected

Measure Consumer Units

) Source & frequencY

(ABSOLUTE)
a t2.2.t4.MAN U FACTU Rl NG D I NCI DENTS CONSU M ER U N ITS
(% Non-Conformance)" but
Definition This is the same definition as 'Manufacturing D Incidents
expressed as a total number of consumer units involved
in D incidents.

Formula Manufacturing D Incidents (consumer units)

: Total number of consumer (Jnits reiected

Measure Consumer Units

Source & Frequency: MonthlY

frequency

e
i1
 L2.3.DELIVERY:
12.3. IDEL|VERY: OUTPUT RELIABILITY (OR)
output Reliability (OR) measures the reliability of the Supply Chain to deliver the
agreed
Definition
production plan. production plan for the production week n*l needs to be frozen by the end of the week n

(at least 2 shifts before the start of the new week).

the production plan has been

The production plan quantities cannot be a-djusted in the KPI calculation once
frozen and released in week n. Nevertheless, the factory is expected to make every
effort to meet changes to

the plan driven by customer demand. Such changes will impact the OR percentage'

actual weekly weighted

The measurement is calculated on a weekly basis and consolidated each month using
volumes.

Formula % OR = X SrKt/ (plan - ABS (Plan - Actual )) x 100

2 SKU Plan

MeasurePercentage(%)

Frequency: MonthlY.

,'Over" and "under"production both penalize OR equally, and the data must be calculated in
Comments :
absolute figures.Actual production volume refers only to Finished Goods that meet
all quality and hygiene
incidents will penalize the
specifications for consumer sale. Any product rejected for qualityor hygiene
oR.Completed production orders must be counted in the week the production order
is completed.Factories
Logistics and
must assign clear responsibilities' for addressing OR losses e.g. Planning, Production,
implement all the required
Materials.Each Supply chain stakeholder involved in the process must identify and
countermeasures to attack the OR losses under its own responsibility'

v7
 L2.4.MORALE
12.4.1MORALE ABSENTE EISM

Definition This indicator is used to monitor employee absenteeism in a Manufacturing Factory. It

+
measures the absenteeism as a ratio of absent hours over the total hours worked in the factory (actual absent).

Absent includes:

' Illness

Lost time accidents

Absence without reason

Long-term illness

Illness whilst nt"-**,

Absent excludes:

Vacations

Absence with company interest or permission (e.g.: blood donation, vaccination)

Maternity leave

Training

73
 )
Number of Absent Hours x 100 %

J
Formula Absenteeism:

Measure Percentage (%) Total hours worked Factory

Frequency - Monthly.

12.4.2MORALE TRAINING
Definition This measures the level of training invested in personnel in a Manufacturing Factory. Training

Hours (Total Factory) is the total number of hours spent by all employees of the factory (including temporary
workers), on seminars, quality training, TPM training, workshops, etc. Training is planned, and has objectives
and documented results.

Number of training hours (Total Factory)

, Formula Training: Total FTE (Total Factory)

Measure Hours per FTE

l)

\,
Frequency: Monthly
)'.

l
12.4.3EMPLOYEE RELATIONS INDEX (ER)
r' Definition The Employee Relations (ER) Index measures the frequency with which employee relations

issues occur in a Factory. Formal disciplinary, grievance and capability actions are all included in the

calculation of the ER index, including both individual and collective cases. (Industrial action, OECD

complaints and external arbitration cases are all'excluded from this measure and should not be included in the
calculation of this index.)

(# formal Disciplinary cases -r # formal Grievance Cases + # formal

(:
Capability cases)
Formula ER index:
ttof Employees on Factory at the start of every year
(
included in the calculation.]
fNote: both individual and collective grievance issues should be
(: Disciplinary cases : all formal disciplinary actions, as recorded (excludes informal warnings but includes
formal verbal warnings if recorded, and any written wamings and dismissals).

l. t1
1
i

t Individual grievance cases : any formal written grievance received and investigated, including Code of
Business Principal complaints.
L
Collective grievance cases : any failures to agree or procedural issues raised by employee representatives or

t groups of employees under the applicable procedural agreement.

Measure Rate

t Source & Available to be calculated through the ER reporting tool, and data is collected Quarterly
Frequenc on a cumulative annual basis e.g. Q4 figure : annual total, Q3 figure : 3rd quarter total
t etc

I
t
t
t

75
t

t 13.sACRONYMS

A.LT Available Loading Time

)
q.T A,vailable Time

,
BoM Bill of Material

f
apex Japital Expenditure

]C lonversion Cost

SCFOT Customer CaseFill On Time

IP leanins In Process

!' loD fotal Chemical OxYgen Demand

RQS lonsumer Relevant Quality Standards

\ U apacity utilisation

\ PR lnvironmental Performance Reporting

ER Employee Relations

RP 3nterprise Resource Planning

JERT Finished Product

FG linished Good

ros 3actory Operating SYstem

IB rull-Time Equivalent

EA ntemational EnergY AgencY

P lndustrial Performance

LA#
t SIS ntegrated Supply management Information System

t 'TBD
Iobs To Be Done

KAI (ey Activity Indicator

t
b
KPI Key Performance Indicator

t -P -abour Productivity

T Loading Time
t
-TA -oss Time Accident

t
t
t
I
 ManEx Vlanufacturing Excellence

VIES Manufacturing Excellence Savings

\4M&T Vletering, Monitoring & Targeting

t)
\4P vlanufacturing Performance

\4TC Medical Treatment Case

tt

\C Non Conformance

, {VAA \on Value Added Activities

f,EE )verall Equipment Effi ciencY

,
Y ]R )utput ReliabilitY
)a
)S System )ccupational SafetY SYstem
v
)b
)T )perating Time

t PC lroduction Cost

PLT Production Line technologY

)M Sacking Material

PMW )ackins Material Waste

]NP Planned Non Performance

PPI Process Performance Indicator

lPw Portfolio Produced WeeklY

QTR luarterly

r&M Repairs and Maintenance

estricted Work Case

Vtt.^r, epplications, Products in data processmg

Chart Of Accounts

i-Finished Good

, Health and Environment

k Keeping Unit

Performance

otal Productive Maintenance

otal Recordable FrequencY Rate

rading Unit

nit Of Measurement

alue Operating Time

orld Class Manufacturing