WWBU Dairy Products

Operations Indicators Reporting Guidelines

Bdg 2011

Updated by WWBU Dairy Products

August 2011

Operations Reporting Guideline B11

Table of Contents
INTRODUCTION............................................................................................................................................................................................................................................ 3
INDUSTRIAL REPORT.................................................................................................................................................................................................................................. 4
PRODUCTION................................................................................................................................................................................................................................................ 4
INDICATORS.................................................................................................................................................................................................................................................. 4
CONTROLLABLE COSTS................................................................................................................................................................................................................................. 6
CONTROLLABLE COST VARIANCE ANALYSIS.................................................................................................................................................................................................... 8
INDUSTRIAL INDICATORS MAGNITUDE INPUT FORMAT.................................................................................................................................................................................... 10
LOGISTIC REPORT..................................................................................................................................................................................................................................... 12
LOGISTIC COST........................................................................................................................................................................................................................................... 12
LOGISTIC COST VARIANCE ANALYSIS........................................................................................................................................................................................................... 12
LOGISTICS INDICATORS MAGNITUDE INPUT FORMAT...................................................................................................................................................................................... 16
STAFF ALLOCATION TABLE...................................................................................................................................................................................................................... 18

Operations Reporting Guideline B11

Introduction
The purpose of this document is to standardise definitions of performance indicators, submitted by each CBU to Magnitude System on a monthly basis.
In the Dairy a monthly Operations Reporting is mandatory for all fully consolidated CBUs submitting the standard Group Financial Report in Magnitude.
CBUs reporting a light version of the Group Financial Report (new fully consolidated companies with annual CANN w/o Interco < 15 m) do not
report Operations KPIs in Magnitude; anyway its strongly recommended that CBU starts to follow the same KPIs internally.
Once the CBU starts to report the full version of Financial Report, the CBU controlling should contact the WWBU Operation Controller in order to agree
on when to start the Supply Chain & Manufacturing Reporting in Magnitude: its possible to delay this date if CBUs is not able to fulfill all the reporting
requirements.
The Supply Chain & Manufacturing Monthly Reporting should be submitted in Magnitude on D+6 in the evening, local time.
A detailed calendar is communicated by the WWBU Controlling in the beginning of the year.
Please note that for Industrial and Logistics Reports in Magnitude, as a general rule for every indicator, you must report on every month the YTD
cumulative figures from January 1st of the year, except CBUs consolidated after this date.
Operational Indicators on top of those included in Magnitude are reported in the Operational Website called .
Please contact your local Manufacturing and Supply Chain team, as well as WWBU Operations Team for any information concerning it.

Operations Reporting Guideline B11

Industrial Report
The Industrial Indicators report consists of three categories: production, indicators, and controllable costs.

Production
The manufacturing process begins at the materials picking and ends when products are ready for sale, when they are palletised (note that palletisation is
included in production process). For the Fresh Dairy Products Division, manufacturing process ends when products exit the cooling tunnel. The cold
storage rooms are considered as part of logistics cost (see Factory Expeditions line as part of warehousing logistics costs).
Production is measured in tons. Factories are asked to record their production according to product classification whether it is yoghurt, drink, cheese,
dessert or other products.

Indicators
Plant Labour
Hour

Factories are asked to record the total number of paid hours (except holidays, bank holydays and overtime compensation see
exceptions listed below) regardless of the contract type: open-ended, fixed-term, temporary contacts.
FTE to be included are Manufacturing Labour, Direct Production and Overheads.
Plant workers include:

Those who has direct or indirect contact with products

Those who is necessary to produce goods
Those who performs maintenance on production machines
Those who handles waste materials inside a plant
Those who performs waste treatment related to production (burning, crunching, packaging, recycling etc)

Personnel not related to manufacturing or direct production include those in:

Administration, procurement, purchasing and management departments
General service staff (janitor, safety and security personnel)
Warehouse staff and quality control team

Absence time (regardless of the reason: short or long term illness maternity/paternity, working accident, training,
meetings, union representation time ), paid by Danone are included; all overtime is also included.
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Operations Reporting Guideline B11

The hours not included are:

Holidays
Bank holiday
Overtime compensations.

Please find some more details in the file attached:

FTE definition.ppt

For further information, please contact WWBU Manufacturing Management Team.

Base 100 Material Also known as Theoretical Minimum Consumption (TMC) its the reference against which to measure manufacturing losses.
consumption
Important to note, TMC includes physical and chemical losses, no manufacturing losses.
Losses included are only Stars & Stripes from PS and Aluminium Sheets
Base 100 has to be splitted into 3 categories:
Milk
Other raw materials (ingredients etc)
Packaging

Operations Reporting Guideline B11

Controllable Costs
These are monetary figures of expenses related to production. The amounts are expressed in thousands local currency, and the negative sign denotes
expenses and positive sign denotes profits in specific cases (e.g. supplier refund).
Material Losses

Monetary difference between actual consumption of materials and the Theoretical Minimum Consumption (at standard cost)
It has to be split into 3 categories:
Milk Losses
Other raw materials Losses (ingredients etc)
Packaging Losses

BOM 0 - Base
100.ppt

Manufacturing
Labour
Cost

Labour Manufacturing:
Any expenses related to manufacturing labour such as wages, overtime, bonus, holiday, social benefit, uniform, on-the-job training
etc for the following staff:
Who has direct or indirect contact with products
Who is necessary to produce goods

Direct
Production
Cost

Direct Labour Production:

Any labour expenses (wages, overtime, bonus, holiday, social benefit, uniform, on-the-job training etc) for the following staff:
Machine maintenance staff
Staff who handles waste materials inside a plant
Staff who performs waste treatment related to production (burning, crunching, packaging, recycling etc.)
Utility staff
Maintenance w/o Labour:
Maintenance costs of machinery and equipment linked to production (spare parts, internal and external services including
labour) as well as maintenance and repair of the building and any other equipment on the plant
Consumables, e.g. small tools or transportation costs of spare parts
Chemical products used for cleaning as part of production cycles (CIP)
Utilities
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Operations Reporting Guideline B11

Cost of electricity, fuel, water, compressed air, treatment of wastewater and garbage fees and taxes related to utilities.
Depreciation
Depreciation of machineries and equipments used in production
Depreciation of machineries and equipments linked to treatment of utilities
Depreciation of the building and any other equipment located on the plant
Long-term rental costs of machinery and equipment linked to production
Finished Goods Losses (industrial)
Finished Product Losses due to manufacturing quality.
Manufacturing
Overheads

Overhead Labour Cost

Any expenses related to overhead staff labour costs such as wages, overtime, bonus, holiday, social benefit, uniform, on-the-job
training etc.
Other Costs:
Other costs are all costs recorded in factory mainly considered as overhead costs:
Factory management costs
General and administrative department
Procurement department costs (if the department locates in the plant)
Quality department costs
Security costs, including hiring of security guards
Taxes, insurances
Travelling costs
Laboratory consumables
Vehicles (company car, lease, fuel etc.)
Telecommunication fees, supplies and machines for the office
Subcontracted services (e.g. gardening, cleaning, staff transport)
Rental cost of equipments not linked to production (e.g. photocopiers, lifting machines, fax machine)
Please find some more details in the file attached:

Operations Reporting Guideline B11

Other Costs.xls

For further information, please contact WWBU Manufacturing Management Team.

Operations Reporting Guideline B11

Controllable Cost Variance Analysis

The purpose of this analysis is to explain and identify the causes of variation from budget and previous year.
Please note that a value in negative sign denotes expense and positive sign denotes saving.
Exceptional
Events

To make the content of each line of controllable cost comparable to previous year and budget.
Hereby a clarification over the concept of "Exceptional Events" on Controllable Costs and Supply Chain Variance, any significant
impact has to be validated by the WWBU :

Exceptional Events
Definition.ppt

Volume

The percentage indicates the level of variability to volume of each controllable cost component
100% indicates if there were 6% increase in production, the cost would increases by 6% (100% of 6%)
50% indicates if there were 6% increase in production, the cost would increase only by 3% (50% of 6%)
0% means that the cost is not impacted by any production volume increase or reduction (fixed cost)
The global percentage shows the level of variability of total controllable cost. The given percentage for each controllable cost line
are those defined as general Budget Flex rules and can be exceptionally modified for specific cases only if agreed with the Dairy
WWBU Manufacturing Management Team.

Inflation

Percentage in cost increase from 2010 to 2011 linked to the economic situation of the country.
Examples vs. N-1:
3% increase in labour costs due to overall 2% increase agreed with unions plus other increases
1% increase in utilities costs due to contracts negotiated with supplier companies (negative if reduced)
Examples vs. Budget:
It should reflect only the difference between inflation included in budget and the actual situation.
If assumed in B 2011 3% increase in labour costs is going to be 3,5%, only 0,5% should be taken into account

Depreciation
variance

To isolate the variation in depreciation mainly due to end of depreciation life and new investments impact from the productivity
calculation. It's automatically calculated by difference between the given periods.

Productivity

Calculated by difference in both cases (vs. N-1 and vs. Budget), it should reflect the result of different action plans and projects that
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Operations Reporting Guideline B11

contribute to improve the factory performance.

Please note that a value in negative sign denotes expense and positive sign denotes saving.
The following is an Excel template provided by WWBU; please fill the yellow cells in order to compute the variance.
The values obtained in pink cells are then entered in Magnitude reporting.

Formats Variances
B'11.xls

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Operations Reporting Guideline B11

Industrial Indicators Magnitude Input Format

The reporting is submitted in Magnitude in monthly package managed by Dairy WWBU: DP-AC-YEAR.MONTH, schedule DP-IND-AC-YEAR.MONTH.

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Operations Reporting Guideline B11

Reconciliation with AR1:

Giving that Controllable Costs is calculated based on Production Volumes and Manufacturing Costs (AR1 line) calculated on
Sold Volumes, a cost difference might exist between the two.
This difference is to be reported into line Reconciliation with AR1
This line has to be filled only for Budget and Estimates

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Operations Reporting Guideline B11

Logistic Report
For Fresh Dairy Products Division, the logistic process begins at the exit of cooling tunnel, even if the finished goods are waiting to be shipped to
warehouses or distribution centres, is located inside the factory and managed by the factory. The amounts are expressed in thousands local currency,
and the negative sign denotes expenses and positive sign denotes profits in specific cases (e.g. supplier refund).

Logistic Cost
Finished
products losses

Related products: finished products, immediately available for sale, that meet the definition of goods included in gross sales.
Related events: unsaleable products can be identified through :

physical inventories
customer returns of the goods
breakdown of cooling systems, etc
expired or too short shelf life

If the decision to discontinue the sale of a product is taken by the marketing department, the unsaleable costs are recorded in
other marketing costs. Otherwise they are recorded as logistics costs inside three different categories:
Modern Trade Returns (Buy-backs)
Proximity Returns (Buy-backs)
Expired and damaged FP Losses

Quality controls: any quality issue on product, even after storage in warehouse, must be accounted as Industrial Losses.
For lost unsaleable products:
full standard cost of finished products
destruction costs

For unsaleable products that can be sold at a marked down price :

stock depreciation charges
recycling costs (unpacking, resorting, repackaging)
these costs are reduced by any compensation received for the losses (from insurance, suppliers).

Internal
freight
out

Internal freight out:

Transportation costs between the production plant and primary warehouse out of the factory for all products being produced by the
CBU. When finished products are imported from other CBUs (e.g. inter-company) or purchased from any external outsourced
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Operations Reporting Guideline B11

supplier, transportation cost should be considered as part of purchasing cost and classified in P&L material cost line.
Warehousing

Factory Warehousing:
If a factory is used for warehousing for finished products, it is considered as an expedition centre.
If a warehouse is used for production and logistic purposes, the warehousing costs are allocated to production and logistic
departments (using relevant allocation methods such as stored volumes, surface area used, number of dedicated racks). If the
costs cannot be relevantly allocated, they are recorded either in logistic or in production costs according to the warehouse main
utilisation. In Fresh Dairy Division, the cost allocation starts after the cooling tunnel.
DCs Warehousing:
Any cost related to warehousing activities (receiving, handling, picking and shipping) occurred in the Deposit Centers.
In case of outsourced warehousing, the warehousing costs are the costs invoiced by the logistic subcontractor.
In case of internal warehousing, the costs include:

Staff costs including Temporary (same costs as those described in manufacturing labour)
Depreciation charges and renting or leasing costs of warehouses and equipment used in warehouses
Maintenance costs of warehouses and equipment used in the warehouses
Utilities and Overheads costs consumed within warehouses
Other directly related costs

Distributors Warehousing:
Warehousing costs invoiced by the distributor

Freight to
customers

Permanent and temporary staff costs

Depreciation charges and renting or leasing costs of warehouses and equipment used in warehouses
Maintenance costs of warehouses and equipment used in the warehouses
Utilities and Overheads costs consumed within warehouses
Other directly related costs

Freight to Customers:

Freight between plant and customers

Warehouse and customers (retailers, distributors, wholesalers)
Freight to transit terminals or cross dock points used to reload smaller trucks
Permanent and temporary staff costs for CLV
Spare parts and maintenance costs
Depreciation expenses, renting or leasing costs of the assets related to customers deliveries
Other direct related costs

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Operations Reporting Guideline B11

Distributors freight cost:

Transportation costs to clients invoiced by the distributor

Other
Logistic
Costs

Pallets:
Purchase or renting costs of pallets.
Distributors other costs:
Other costs invoiced by distributors. Include order taking, merchandising that are invoiced by distributors in their total fees.

The sum of all above items above = Total Supply Chain Cost should be in line with SC Cost in the CBUs P&L (non blocking control in Magnitude).
Additional items being part of Supply Chain Report, not included in Total Supply Chain Cost:
Co-Logistic

Danone provides logistic services only (Storage, picking and delivery) mainly to absorb Fixed Costs and to generate a margin.
For Co-Logistic the amount to be reported is the sum of Fixed Cost Absorption and the margin.

Co-Distribution

Danone buys stock from supplier (Buy & Sell model), keeping control of sales orders, delivery and in-store execution to generate
high margin.
For Co-Distribution the amount to be reported is the result of the activity already net of reclassifications between lines to offset
operating costs (logistic or commercial) => Net P&L impact.reported in Other Income and Expenses P&L line.

Intercompany
transports

Volume and Costs related to the Transportation of Finished Products from an Intercompany CBU.
These costs are not included in logistics, but on material costs as part of finished goods purchasing price (Transfer Price).
This line has to be filled only quarterly and during Budget and Estimates

Co-Packaging

Co-packaging:
Manual transformation between end of cooling tunnel & SKU
(i.e. Stickers on products, Topper on our cups, Magnets on Danonino )
Services to be considered as co-packing:
sticking, wrapping, gifts and any commercial, promotional benefits fo the consumer adds on the product,
cartons sticking (barcodes or others),
legal labels for recipe and language reasons,
club packs / or mixed cartons,
packing from regular cartons to specific handling equipments for customers ( Iron/ carton rolltainers).
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Operations Reporting Guideline B11

Logistic Cost Variance Analysis

The purpose of this analysis is to explain and identify the causes of variation from budget and previous year.
Each CBU must complete logistic cost variance analysis monthly on YTD basis.
Please note that a value in negative sign denotes expense and positive sign denotes saving.
Exceptional
Events (Others)

To make the content of each line of logistic cost comparable to previous year and budget.
Please refer to the document Exceptional Events Definition attached at page 7

Volume

The percentage indicates the level of variability to volume of each logistic cost component.

(Volume)

100% indicates that if there were 6% increase in sales, the cost also would increase by 6% (100% of 6%)
50% indicates that if there were 6% increase in sales, the cost would increase by 3% (50% of 6%)
0% means that the cost is not impacted by any sales volume increase or reduction (fixed cost )

The global percentage shows the level of variability of total logistic cost (usually between 70-100%). The percentage for each
logistic cost line is defined by the CBU according with its distribution structure and the content being fixed or variable of each
logistic costs component. Please take Sales Volume w/o Interco as a basis (Domestic + Export).
Inflation

Percentage in cost increase from 2010 to 2011 linked to the economic situation of the country

(Price)

Examples versus N-1:

3% increase in warehousing costs due to overall 2% labour increase agreed with unions plus other increases
1% increase in transportation costs due to contracts negotiated with supplier companies (negative if reduced)

Examples versus Budget:

It should reflect only the difference between inflation included in budget and the one expected for Actual 2011. If assumed in B11
3% increase in warehousing is going to be 3,5%, only 0,5% should be taken into account.
Mix variance
(Mix)

Productivity
(Productivity)

To reflect the impact of changes in channel mix for each line of logistic cost if any. Changes of mix in sourcing plants assumptions
or significant changes in distribution zones weight should also be considered.
Examples:
Direct delivery to platforms is typically cheaper that retailer or proximity distribution. When the channel mix changes it usually
impact negatively or positively on total logistic cost depending on the type of change.
Calculated by difference in both cases (vs. N-1 and vs. Budget), it should reflect the result of different action plans and projects that
contributes to improve the CBU performance. The analysis versus budget allows identifying extra productivity on top of that already
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Operations Reporting Guideline B11

included in the budget.

Please note that a value in negative sign denotes expense and positive sign denotes saving.
The following is an Excel template provided by WWBU; fill yellow cells to compute the variance. The file is attached at page 9.

Starting from May 2009 Logistic Variance is reported only inside ROP Variance; refer to below table to fill it correctly.
Logistic Variance

ROP Variance

- Exceptional Events
- Volume
- Inflation
- Mix Channel
- Productivity

- Others
- Volume
- Price
- Mix
- Productivity
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Operations Reporting Guideline B11

Supply Chain Monthly Reporting Magnitude input format.

The reporting is submitted in Magnitude in monthly package managed by Dairy WWBU: DP-AC-YEAR.MONTH, schedule DP-LOG-AC-YEAR.MONTH.

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Operations Reporting Guideline B11

Staff Allocation Table

The following table summarises the allocation of operational staff.
Operation

Description

Reception of raw and pack materials

Physical control of deliveries

Warehouse staff and drivers for transfer deliveries

Supply of material to production line

Warehousemen, clerks, truck driver

Reception of energy, fluids and consumables

Control of deliveries

Manuf
Labour

Direct
Production

Manuf
Overheads
X
X

Supply
Chain

X
X

Warehousing supply of energy, fluids and consumables

Preparation of production

Weighing and mixing preparation

Manufacturing

Production line staff

Foremen, workshop supervisors
Manufacturing managers & engineers (not dedicated to any line)

X
X

Packaging

Manual and automated packaging, palletisation

Removal of palletised products

Truck drivers

Fished products storage

Warehousemen, clerks, truck driver

Fished products distribution

Warehousemen, clerks, truck driver

Machine adjustments

Cleaning and adjusting made by production staff

Cleaning and adjusting made by maintenance staff

On process quality controls

Quality team/ lab control

Quality control
Waste treatment

Plant cleaning
Factory management

X
X

Handling of waste materials inside plant

Waste treatment (burning, crunching, packaging, recycling etc)
Handling and treatment of by products

X
X
X

Maintenance of cleaning of buildings, general installations and

areas not allocated to production

General and administrative department

Procurement and purchasing
Plant management

X
X
X

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