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GI-23.010-2
Managing Manufacturing Performance

Self-Training Module
Performance Indicators - Quality

Quality
Corporate Technical Industrial Performance / Nestec S.A. / 2006
 Content of this Module 2

Performance Indicators

Examples

This Module reviews the Performance Indicators relative to Quality.

 Content of this Module 3

Performance Indicators

Examples

Let us consider the first topic.

 Performance Indicators 4

First Time Quality

Final Release @ factory

Exceptional Release

Consumer Complaint Rate

Non-Quality Costs (Factory Related)

Above are the main Performance Indicators relative to Quality. They are explained into more details in
the following slides.
 First Time Quality 5

FTQ
Number of lots " Pass - Unrestricted"
(1 ) (2)

Number of lots produced (1)

It measures the effectiveness of the production process

to produce products conforming to specifications.

(1) Lots mean "inspection Lots" in SAP Template.

(2) Usage Decision (Release) for inspection Lots within specification limits.

First Time Quality is the number of (Inspection) lots released where all the selected release
characteristics are within specification limits, expressed as a percentage of the total (Inspection) lots
created.
It is expressed as a percentage of the total lots produced.
 First Time Quality 6

FTQ
Number of lots " Pass - Unrestricted"
(1 ) (2)

Number of lots produced (1)

It measures the effectiveness of the production process

to produce products conforming to specifications.

(1) Lots mean "inspection Lots" in SAP Template.

(2) Usage Decision (Release) for inspection Lots within specification limits.

First Time Quality can be applied to:

- the release of raw and packing material.
- the release of finished products.
- all decision steps in the process.
 Final Release @ Factory 7

Released (Inspection) Lots (1)

Final Release @ Factory x100
Total Number of (Inspection) Lots produced

It indicates how much of the production that was finally

released to the trade.

Final Release First Time Quality

(1) The Final Release includes the First Time Quality calculation and those lots with exceptional or partial release.

Final Release (FR@Factory) is the ratio in percentage (%) between the number of (Inspection) lots with
Usage Decision taken for releasing products in our plants (Factories) and the total of (Inspection) lots
produced. It includes all First Time Quality products and those products that were deemed non First Time
Quality, but ultimately released.
The Final Release number must always be equal or exceed the First Time Quality number.
 Exceptional Release Finished Products 8

Exceptional Release =

Total number of exceptionally released Inspection Lots per month

It measures the number of lots that were not meeting the

limits defined as release criteria

Exceptional Release is the number of lots released which do not meet the limits defined in the release
criteria. The exceptional release decision must be taken based on a pre- determined scheme established
by the market.

The right selection of the release criteria is as important as the setting of the correct limits.
 Consumer Complaint Rate 9

Number of Complaints
Consumer Complaint Rate 1 000 000
Number of Consumer Units Sold

It measures the consumer dissatisfaction with the delivered goods.

Consumer Complaint Rate is the number of complaints per million consumer units sold.
In addition to the direct manufacturing environment, the root causes of complaints could be located
anywhere in the entire supply chain.
 Consumer Complaint Rate 1
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Any negative contact,
expressed either in writing or verbally,
reflecting the dissatisfaction of a customer or
a consumer (e.g. distributor, supermarket,
hotel, shopkeeper, final consumer).

Number of Complaints
Consumer Complaint Rate 1 000 000
Number of Consumer Units Sold

Retail or consumer unit that is

sold to the end user.

It measures the consumer dissatisfaction with the delivered goods.

Consumer Complaint Rate is the number of complaints per million consumer units sold.
In addition to the direct manufacturing environment, the root causes of complaints could be located
anywhere in the entire supply chain.
 Consumer Complaint Rate 1
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Number of Complaints
Consumer Complaint Rate 1 000 000
Number of Consumer Units Sold

Complaint Type: Factory Origin Complaints:

- design related - product quality
- factory origin - alleged illness
- distribution related - packaging
- Company's image - foreign bodies

Consumer Complaint Rate is the number of complaints per million consumer units sold.
In addition to the direct manufacturing environment, the root causes of complaints could be located
anywhere in the entire supply chain.
Complaints of factory origin may warrant examination as sub indicators.
 Non-Quality Costs (Factory Related) 1
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Formerly called Process-related Losses = Material Variances being the
difference between the Actual Material Usage and the Target Material
Usage (see Raw and Packaging Material Training Package for definitions).

Non-Quality Costs = Material Variances (includes Cost of Overfilling)

(Factory Related) + Costs of Written off, Destroyed or Disposed Materials
+ Costs of Downgraded / Upgraded Materials
+ Costs of Special Operations (sorting, sieving, resampling, retesting...)
+ Other Non-Quality Costs (complaint handling and investigation...)

It measures all costs that incurred because a product

does not reach the required level of quality first time.

Non-Quality Costs (Factory Related) include the costs originated by different failures in the
manufacturing of our products. They are a combination of different figures coming from several
processes and the handling of raw and packaging materials.
Working with Non-Quality Costs is a powerful way to create quality awareness. It will help to uncover
weak points and to reveal areas for potential savings and waste reductions.
 Warning 1
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First Time Quality & Line Efficiency

TH
LE
NPH

Output
Pr oduction
Production TH
Waste & Rework Line No min al Speed
Released Production Blocked

Performance Indicators should be viewed as a set whenever possible

and not viewed separately.

The calculation of Line Efficiency is based on Production (at the end of the line) and not on Released
Production (after QA tests).
In other words, it is possible to have Line Efficiency equal to 100% and still have a poor First Time
Quality (and Final Release). Therefore Line Efficiency should be analysed in combination with First Time
Quality (and Final Release).
 Content of this Module 1
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Performance Indicators

Examples

Let us now consider the next topic.

 Examples 1
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First Time Quality & Final Release
Data:
A factory produces 10 lots of 500 cases each.
9 Lots pass the First examination.
The last 8 cases of the last lot have been found to be defective.
The last 8 cases are sorted and 3 are released and 5 destroyed.
"lots" is used as
Calculation: calculation unit.
First Time Quality = 9 / 10 = 90.0%

The following calculation: If one unit out of the lot is defective,

FTQ = 4992 /O NG = 99.8%
5000 the whole lot will not qualify for
R
isWWRONG First Time Quality.
Let us consider the following data.
Let us calculate First Time Quality.
 Examples 1
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First Time Quality, Final Release @ Factory and Exceptional Release
Data: A factory produces 500 lots.
490 lots pass first examination.
5 lots were released exceptionally.
2 lots were released partially.
3 lots were blocked.
Calculation:
First Time Quality = 490 / 500 = 98%
Final Release @ Factory = (490 + 5 + 2) / 500 = 99,4%
Exceptional Release = 5 lots

Let us consider the following data.

Let us calculate First Time Quality.
Then let us calculate Final Release.
Finally we calculate the Exceptional Release.
 Examples 1
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Complaint Rate
Data:
Number of Consumer Units Sold = 1 500 000 cans
Total Number of Complaints = 2379

Calculation:
2379
Consumer Complaint Rate 1 000 000
1 500 000

Consumer Complaint Rate 1586 complaints per million consumer units sold

Let us consider another example.

Let us consider the following data.
Let us calculate Consumer Complaint Rate.
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The End!

You have come to the end of this Module.

Please refer to the instruction GI-23.010-2 for more details.