PQCDSM KPI Definitions. Part 3


PQCDSM KPI Definitions. Part 3

 December 1, 2020 0  23 min read
Cost
Production (Make) Cost per unit volume (tonne or ‘000 units)
This measure allows monitoring of production cost development in order to generate

improvement plans, set targets, and deliver manufacturing savings. Allows to trend and
benchmark performance across plants and global sites.
Production Cost / Unit of Volume= Production Cost / Volume produced

(tonnes or Units)
Which Considers:
1. The appropriate volume unit should be based on the category definitions (tonnes or thousand
units).
2. For practical purposes, Production costs will follow SCOA Definitions.
3. Production costs include all costs required to make an agreed category unit, e.g. one tonne
of packed powders only.
port
4. Volume should consider only the agreed category unit e.g. Packed powder and not powder
opy of the Gartner® Magic Quadrant™ Report today! Veeam
transferred as an intermediate or packed soap and not noodles sold to 3rd party.

5. This should be measured and collected in local currency.
Example:
Q1 Performance ($) Site 1 Site 2 Site 3 Global
Production Cost (‘000$) 3,904 4,320 3,389 11,613
Labour costs (exc. R&M Labour) 2032 2876 1524 6432
Utility costs 452 362 403 1217
R&M costs 501 305 451 1257
Depreciation costs 639 750 789 2178
‘Other’ production costs 280 27 222 529

Volume Output (Tonne) 11,232 13,677 8,600 33,509

Production Cost / tonne ($) 348 316 394 347

Exchange
Rate 11.05 1.5 100

Production Cost per tonne Global = (11,613,000/33,509) = 347 $/tonne
Labour (Make) Cost per unit volume (tonne or ‘000 units)
Is a measure of the impact that Labour costs have on the overall

production cost
Labour Cost per unit volume = Total Labour (Make) Cost / Total volume
port
(tonnes or ‘000 units)
Which considers: 
1. All the following costs that are allocated to Make should be included. It should not include
those costs associated with Plan, Source, and Deliver:
The salary cost of direct production labor.
Factory management salaries excluding Technical Director.
Costs of salaries for Quality Control/personnel.
Engineering management salaries, allocated to this manufacturing plant in particular,
including chief engineer and their staff, drawing office (other than that charged to projects
and development), engineering planning.
Cost of fixed direct labor and supervision, excluding labor involved in Repair &
Maintenance activities and Material Warehousing.
Line operators who undertake R & M activities as part of TPM should be included within
the labor cost.
Cost of the fixed and direct labor involved in the transfer of raw and pack materials to
point of use and the transfer of finished goods from the packing hall to the next
intermediate location.
3. Should also include the cost of temporary and contract FTE in the total Labour cost.
Utilities (Make) Cost per unit volume (tonne or ‘000 units)
Is a measure of the impact that Utility costs have on the overall production cost.
Utilities Cost per unit volume = Total Utilities (Make) Cost / Total volume
Which considers:
2. Variable and fixed cost elements of utilities for the processing and packing sections such as
fuel, steam, compressed air. Depreciation of the utilities assets (e.g. boiler) should be included.
3. If coal is converted to steam on-site the total utilities cost should include the cost of the coal
and the element of steam generation cost allocated to the particular category unit.
port
Repairs & Maintenance (Make) cost per unit volume (tonne or ‘000
units) 
Is a measure of the impact that Repairs and Maintenance (R & M)
costs have on the overall
production cost
R & M Cost per unit volume = Total R & M (Make) Costs / Total volume
R & M Costs = Costs associated with Labour, materials and purchased

services
Which considers:
1. Engineering services providing repairs and maintenance for the processing and packing plant
and equipment. This should include engineering salaries, wages of direct maintenance staff,
materials, and purchased services
2. Operator / Staff labor associated with autonomous maintenance-related R & M activities
should be excluded from this cost.
3. The cost to repair and maintain equipment used directly within the Make process excludes
the costs to repair buildings and structures
Financial Depreciation cost per unit volume (tonne or ‘000 units)
Is a measure of the impact that the level of assets and there age has on the overall production
cost
Financial Depreciation = {Sum (Make Equipment depreciation + Building

Depreciation)} / {Total Volume (tonnes or ‘000 units)}
Equipment Depreciation = 7% Total Process and Pack Equipment Gross Book Value
Building Depreciation = 2.5% Gross Book Value associated with the buildings for Make
Which considers:
port
1. Financial depreciation is being considered which is based
on the Gross Book Value (GBV)

2. Only equipment and buildings directly associated
with Make are to be considered e.g.
Depreciation associated with the cost of
the boiler house would be included in the cost of
Utilities.
3. Volume should consider only the agreed category unit
e.g. Packed powder and not powder
transferred as an intermediate or packed soap
and not noodles sold to 3rd party
Other Production costs per unit volume (tonne or ‘000 units)
This measure enables additional factors important in Production cost to be captured and
should generally represent a low percentage of the total cost
Which considers:
1. Property taxes, insurance, repairs to buildings,

cost of unused facilities, royalties and service
fees payable to 3rd parties for
the use of a production process, any materials or services
purchased for
production.
2. Variable and Fixed cost of sundry items used in the
processing and packing sections e.g.
solvents, bleaching, etc.
3. Volume should consider only the agreed category unit
e.g. Packed powder and not powder
transferred as an intermediate or packed soap
and not noodles sold to 3rd party
Savings Performance
Measure savings against the Manufacturing Excellence initiative. Excludes Product Logic and
Buying savings
Savings Performance (%) =Actual Mfg. Excellence Savings in the period /

Target Mfg. Excellence Savings in the period * 100
Note: At this point, this measure is a qualitative assessment.
Which considers:
1. As part of the Manufacturing Excellence initiative, all plants will have a savings target that is
port
in line with the Manufacturing Savings committed to delivering Path to Growth. These targets
opyshould
of the be cascaded
Gartner® to a Quadrant™
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
2. These Savings should not include any activities or projects that are funded by the
restructuring.
3. Volume related savings or on-costs should also be excluded
Savings
Measure the actual amount of

Manufacturing Excellence savings during the period.
Savings = Actual
Manufacturing Excellence Savings
Note: At this point, this measure is a qualitative assessment.
Which Considers:
1. As part of the Manufacturing Excellence initiative, all plants will have a savings target that is
in line with the Manufacturing Savings committed to delivering Path to Growth. These targets
should be cascaded to a plant level.
2. These Savings should not include any activities or projects that are funded by the
restructuring.
3. Volume related savings or on-costs should also be excluded
Raw Material Inventory
Measures the component of working capital

that exists as raw material inventory, thus affecting
the gross capital
employed for the concern.
Raw Material Inventory = Raw materials

on hand expressed in dollars.
Which Considers:
All raw materials on hand, whether obsolete or current.
Packaging Material Inventory
Measures the component of working capital that exists as packaging

material inventory, thus
port
affecting the gross capital employed for the concern.

Packaging Material Inventory = Packaging
materials on hand expressed in
dollars.
Which Considers:
All packaging materials on hand, whether obsolete or current.
Delivery
SKU Complexity
Measure the level of

portfolio complexity in a factory.
SKU Complexity = Volume produced

/ # of unique SKUs produced
Which Considers
1. A unique SKU includes all standard and promotional items that are manufactured in the
period of evaluation.
2. For manufacturing operations that act as regional sourcing units, even the differentiation of
two products by labels with different languages should be considered as separate SKUs.
3. The product portfolio to use for this ratio should be the number of SKUs actually
manufactured on the site for the given period.
4. Volume should be reported in tonnes or ‘000 units according to the category’s normal
reporting criteria.
Example
Volume Produced # of different SKUs manufactured SKU Complexity
Line A 20,000 12 1666
Line B 25,000 7 3571
Total 45,000 15 3000
port
Note: The number of SKUs in the example assumes that there is an overlap in the SKUs ran in
each line. For the total, this duplication should not be considered.

Portfolio Produced Weekly
To measure the degree of flexibility and linkage of the Make Process

within the overall supply
chain. The purpose of the measure is to track how
closely Operating Units’ production
scheduling is to market needs. The more
frequently that products are produced, the greater is
the flexibility to
provide a rapid response with minimum stocks.
Portfolio Produced Weekly (PPW)% =(# Of unique SKU produced per week X 100) / (# Of
unique SKU in Portfolio)
Which Considers:
1. A unique SKU includes all standard and promotional items that are traded in the following
quarter to the period of evaluation.
2. SKU’s produced must be counted from the actual production every week.
3. SKU’s Portfolio to be used considers the future three-month horizon.
4. Consolidation by month, quarter, year, and sites should be done as a weighted average by
SKU volume.
Example:
April Week 1 Week 2 Week 3 Next Quarter Portfolio
#
SKU produced 23 37 34 62
PPW
% 37 60 55

Volume
(‘000 Units) 2500 3300 2870

Portfolio Produced Weekly (April) = {(37%*2500) + (60%*3300) +

(55%*2870) * 100} / 8670 = 52%
port
opyOutput Reliability
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Quadrant™

Allows measurement of a site service level to the supply chain
Output Reliability by SKU (%) = {Σ (Plan – ABS (Actual – Plan)) * 100} / (Σ

Plan)
Which Considers:
1. The Plan should be frozen in the week previous to the actual production week. No changes
requested by planning or by the factory should be accepted as changes to the original frozen
plan.
2. The plan comprises a period of 7 days of production (full week).
3. Consolidation by month, quarter, year, and Global should be done as a weighted average by
SKU volume.
4. Any product rejected for quality or hygiene incidents should not be recorded as production
output in this measure
5. Measurement at the plant should be on an SKU basis.
6. Factories should track the number of plan changes per week to ensure that causes for a poor
performance in this measure can be correctly attributed.
7. Output Reliability will only be calculated on the basis of packing lines, not in processing
operations.
Example:
Site 1 Week 1
SKU Actual Plan ABS Difference Plan – ABS
Liquid 400ml 30000 32000 2000 30000
Liquid 200ml 45000 40000 5000 35000
Liquid Milk 200ml 42000 43000 1000 42000

Total 117000 115000 107000

port
the Gartner® Magic Quadrant™
opy of
Report
today! Veeam


OR(%) 93%
Site 1 Week 2
SKU Actual Plan ABS Difference Plan – ABS
Liquid 400ml 65000 65000 0 65000
Liquid 200ml 33000 39000 6000 33000
Liquid Milk 200ml 40000 32000 8000 24000

Total 138000 136000 122000

OR(%) 90%
SKU Site 1 Site 2
Week 1 93 94
Week 2 90 97

Total Volume
255000 266000

OR(%) 91 96
Output Reliability Site 1, Week 1(OR)% = {(32000-2000)+(40000-5000)+

(43000-1000) * 100} / 115000= 93%
Output Reliability Site 1, Period (OR)% = {(93*117000)+(90*138000) * 100}

port
/ 255000 = 91%

Output Reliability Global, Period (OR)% ={(91*255000) + (96*266000) *
100} / 521000 = 93.5%
Number of SC Planning Schedule Changes
To measure the activity occurring as

changes to the “frozen” plant schedule, after the schedule
has been “frozen”
for the current short-term planning cycle.
A number of SC Planning Schedule Changes = The difference between the

individual SKU count planned for in the frozen schedule and the SKUs that
ran on the lines.
Which Considers:
1. The Plan (as set by SC Planning, not plant scheduling) should be frozen in the week previous
to the actual production week. Any changes requested by planning and jointly agreed should be
accepted as changes to the original frozen plan.
2. Any product rejected for quality or hygiene incidents should not be recorded as production
output in this measure.
3. Measurement at the plant should be on an SKU basis.
4. The number of plan changes per week.
Number of SC Planning Schedule Changes will only be calculated on the

basis of packing lines,
not in processing operations.
Example:
“Frozen” Plan Actual SKU Run Change?
Liquid 400 ml 3500 3500 No
Liquid 200 ml 2700 1000 Yes
Liquid Milk 50 ml 1500 1500 No
Liquid 100 ml 6500 6500 No

port
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2000 0 Yes

Organics 500 ml 0 2000 Yes
Organics 350 ml 0 1000 Yes
Organics 250 ml 4500 4500 No
Total SC Plan Changes 4
TAGS #KPI #Lean #Manufacturing Excellence #Quality #Safety
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

Production (Make) Cost per unit volume (tonne or ‘000 units)

This measure allows monitoring of production cost development in order to generate

Production Cost / Unit of Volume= Production Cost / Volume produced

Q1 Performance ($) Site 1 Site 2 Site 3 Global

Production Cost (‘000$) 3,904 4,320 3,389 11,613

Labour costs (exc. R&M Labour) 2032 2876 1524 6432

Utility costs 452 362 403 1217

R&M costs 501 305 451 1257

Depreciation costs 639 750 789 2178

‘Other’ production costs 280 27 222 529

Volume Output (Tonne) 11,232 13,677 8,600 33,509

Production Cost per tonne Global = (11,613,000/33,509) = 347 $/tonne

Labour (Make) Cost per unit volume (tonne or ‘000 units)

Is a measure of the impact that Labour costs have on the overall

Utilities (Make) Cost per unit volume (tonne or ‘000 units)

R & M Costs = Costs associated with Labour, materials and purchased

Financial Depreciation cost per unit volume (tonne or ‘000 units)

Financial Depreciation = {Sum (Make Equipment depreciation + Building

Other Production costs per unit volume (tonne or ‘000 units)

1. Property taxes, insurance, repairs to buildings,

Savings Performance (%) =Actual Mfg. Excellence Savings in the period /

Note: At this point, this measure is a qualitative assessment.

Measure the actual amount of

Note: At this point, this measure is a qualitative assessment.

Raw Material Inventory

Measures the component of working capital

Raw Material Inventory = Raw materials

All raw materials on hand, whether obsolete or current.

Packaging Material Inventory

Measures the component of working capital that exists as packaging

All packaging materials on hand, whether obsolete or current.

Measure the level of

SKU Complexity = Volume produced

Volume Produced # of different SKUs manufactured SKU Complexity

Line A 20,000 12 1666

Line B 25,000 7 3571

Total 45,000 15 3000

To measure the degree of flexibility and linkage of the Make Process

April Week 1 Week 2 Week 3 Next Quarter Portfolio

Portfolio Produced Weekly (April) = {(37%*2500) + (60%*3300) +

Output Reliability by SKU (%) = {Σ (Plan – ABS (Actual – Plan)) * 100} / (Σ

SKU Actual Plan ABS Difference Plan – ABS

Liquid 400ml 30000 32000 2000 30000

Liquid 200ml 45000 40000 5000 35000

Liquid Milk 200ml 42000 43000 1000 42000

Total 117000 115000 107000

SKU Actual Plan ABS Difference Plan – ABS

Liquid 400ml 65000 65000 0 65000

Liquid 200ml 33000 39000 6000 33000

Liquid Milk 200ml 40000 32000 8000 24000

Total 138000 136000 122000

SKU Site 1 Site 2

Output Reliability Site 1, Week 1(OR)% = {(32000-2000)+(40000-5000)+

Output Reliability Site 1, Period (OR)% = {(93*117000)+(90*138000) * 100}

Number of SC Planning Schedule Changes

To measure the activity occurring as

A number of SC Planning Schedule Changes = The difference between the

Number of SC Planning Schedule Changes will only be calculated on the

“Frozen” Plan Actual SKU Run Change?

Liquid 400 ml 3500 3500 No

Liquid 200 ml 2700 1000 Yes

Portfolio Produced Weekly (April) = {(37%2500) + (60%3300) +

Output Reliability Site 1, Period (OR)% = {(93117000)+(90138000) * 100}