Define

Define Target
Target && Vision
Vision on
on
Volume
Volume && Productivity
Productivity

Focused Improvement Pillar - Step 1

Efeso © 2004 rel. 4 2006/09/20
-2- 1.0 Define Target & Vision

The goal of FI step 1 is to define a starting point, a vision,

and a master plan for improving Volume and Productivity

¾ Define a set of KPIs to align the activities with business

needs
¾ Clearly define a baseline & vision for the future (targets)
¾ Set up a defined system to measure the KPI losses in a
systematic way
¾ Develop a system of tools to guide productivity
improvement
¾ Analyse the improvement opportunities in order to
define the improvement strategy and plan

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-3- 1.0 Define Target & Vision

What do we want the company to be in the medium term?

Business Needs
Loss Analysis & “Potential”
Company Macro-Targets

Company Targets and Guidelines

Action Plan

Follow up

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-4- 1.0 Define Target & Vision

Activities of step 1
¾ Identify the improvement framework: volume requirements & productivity targets
¾ Define the list of critical KPI’s to link to business
¾ Define loss model, definitions and classification codes
¾ Implement an (on-going) loss measurement system (OEE, Material Waste, Labour)
in all areas
¾ Carry out a "Capacity" & "Labour" analysis, identify bottlenecks
¾ Define the losses to attack in detail
z Deploy Volume & OEE losses

z Deploy Labour losses, (Level 1&2) identify productivity improvement priorities

¾ Define “present vs. required” levels of performance for critical KPI’s

¾ Define & check specific loss reduction plans to close gaps (of "current" vs.
"targeted" performances. Develop a (yearly) performance improvement
implementation plan
¾ Establish a system to track & follow up on the results of specific (previous) loss
reduction projects

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-5- 1.0 Define Target & Vision

Identify the improvement framework:

volume requirements & productivity targets

¾ Define clear targets regarding volume per product line:

the present & future demand
¾ Define the necessary targets for productivity, consistent
with future volume levels and cost targets

Definitions:
¾ Demand analysis
¾ Volume requirements
¾ Productivity

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-6- 1.0 Define Target & Vision

Define the list of critical KPI’s to link to business

Categories Performance Indicators Measure

¾ Define a set of Conve rsi on Cost €/ton

%
Scrap
KPIs aligned with €/ton
management priorities Ove rusage
%
€/ton
and business needs Labour €/ton
C Labour producti vi ty T on/hour
Ove rti me %
Mai nte nance Cost €/ton
Ene rgy Cost €/ton
De pre ci ati on €/ton
OEE %
V V ol ume T on/day

¾ KPIs examples
¾ KPIs principles
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-7- 1.0 Define Target & Vision

Define loss model, definitions and classification codes

¾ Make sure the OEE definition, Material Waste and labour

productivity definitions are defined and applied
consistently within the factory
¾ Review losses definition and measurement system
¾ Define Material waste loss codes
¾ Deploy labour productivity losses into loss code

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-8- 1.0 Define Target & Vision

Make sure the OEE definition, Material Waste and labour

productivity definitions are defined and applied consistently
within the factory
¾ State clearly the meaning and the calculation for OEE and
losses
¾ State clearly the meaning and the calculation for Material
Waste
¾ State clearly the meaning and the calculation for labour
productivity measurement and losses
¾ Publish the definitions as Company standards

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-9- 1.0 Define Target & Vision

Review losses definition and measurement system

¾ For each loss:

Relationship

Description
What to Physical Responsible
Loss Description From Frequency Examples with Cost Calculation
z measure value to collect
factors
Set-up A normal Downtime Hours Process owner Set-up data Daily - Weekly • Job change Direct labour Direct labour hourly
(planned) collection sheet report for OEE • Drum change rate x downtime x #

What to measure
/ Production • Load new of operators
action
z
report - binders
carried out Operating • Change APL
by the standards
operator Maintainers Hours Maintenance Maintenance log Daily • Gear change Maintainers Maintainers hourly
which

Unit of measure
time on Manager sheet labour rate x maintainers
requires machine time on machine x #
z stopping the of maintainers
machine, in Scrap material Kg Process owner Production Daily • Tandem line Direct material Kg of waste x
order to report - out of waste standard cost
Operating capacitance

Responsible
change from
standards
one product
z to another, Downtime Hours Process owner Set-up data Daily Depreciation Depreciation x
or to collection sheet downtime
facilitate the Downtime Hours Process owner Set-up data Daily Fixed burden Fixed burden x

Data source
machine with collection sheet downtime

z materials,
etc. in order
to continue
running

z Frequency
z Cost effect calculation

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- 10 - 1.0 Define Target & Vision

Review losses definition and measurement system - cont’d

¾ Develop specific tools to guide loss identification

VOLUME PRODUCTIVITY LABOUR

Demand Productivity Measurement Shop floor labour losse

Volume strategy Productivity Deployment Office Labour losses

Utilisation Synthetic Value Analysis

OEE Analytic

Bottleneck concept Productivity Model

Volume Deployment Manning Index

Volume Model

OEE Model

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- 11 - 1.0 Define Target & Vision

Implement an (on-going) loss measurement system

(OEE, Material Waste, Labour) in all areas

¾ Expand OEE, Material Waste and labour productivity

measurement and analysis in all key areas
¾ Train personnel on the correct way to record loss data
z Lack of training and follow up will surely result in incorrect
data, or missing data
¾ Follow up the data to clearly understand the scope of the
losses and what the data includes/excludes
¾ Finally expand loss measurement in all areas

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- 12 - 1.0 Define Target & Vision

Expand OEE, Material Waste and labour productivity

measurement and analysis in all key areas

¾ Identify the process steps in which collect data referring

to material waste loss codes
¾ Adapt labour productivity loss codes to different process
areas
¾ Train the involved people
¾ If needed implement supporting tools
¾ Coach the start-up of data collection

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- 13 - 1.0 Define Target & Vision

Carry out a "Capacity" & "Labour" analysis. Identify

bottlenecks
There are many sources of information to identify the losses:
¾ Factory Model
¾ KPIs
¾ OEEs
¾ Existing and closed teams attacking losses
z Every team identifies other improvement opportunities
which are set aside for a "later day"
¾ Employee concerns, customer complaints, etc.

If machines are integrated in lines, identify the critical ones by

calculating line bottleneck index (BNI)
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- 14 - 1.0 Define Target & Vision

Define the losses to attack in detail

¾ Deploy Volume & OEE losses

¾ Deploy Labour losses, (Level 1&2) identify productivity
improvement priorities

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- 15 - 1.0 Define Target & Vision

Deploy Volume & OEE losses

Define a priority of attack losses in order to satisfy the

demand at the minimum cost, which means improving the
throughput by de-bottlenecking
¾ Carry out demand analysis, taking into account trend,
seasonality, stock policies in order to define peak and
average load for each station
¾ Carry out Volume and Capacity to define losses to attack
Follow the volume deployment procedure

Efeso © 2004
- 16 - 1.0 Define Target & Vision

Deploy Labour losses, (Level 1&2) identify productivity

improvement priorities

The activity aims at

¾ identifying the productivity priorities and the areas with
more potential
¾ by defining what are the labour losses and classifying them
z 1. Labour Balance
Î Loss due to the missed adjustment of the manpower to the
workload (Over-manning)
z 2. OEE effect
Î Loss due to machine performance (OEE effect) lower than
ideal
¾ Using a simple measure … the manning index

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- 17 - 1.0 Define Target & Vision

Define “present vs. required” levels of performance for

critical KPI’s
Ref. Year 1 Year 1
Categories Performance Indicators Measure Year 2 Year 3
Year YTD Target
Conversi on Cost €/ton
%
Scrap
€/ton
%
Ove rusage
€/ton
Labour €/ton
C Labour producti vi ty T on/hour
Overti me %
Mai ntenance Cost €/ton
Energy Cost €/ton
Depre ci ation €/ton
OEE %
V V ol ume T on/day

KPI’s- What are the best practices?

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- 18 - 1.0 Define Target & Vision

Define “present vs. required” levels of performance for

critical KPI’s - cont'd

What are the Gaps?

¾ Analyse
z Volume / Capacity / Mix
z Manning
z OEE

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- 19 - 1.0 Define Target & Vision

Define & check specific loss reduction plans to close gaps

(of "current" vs. "targeted" performances)
¾ Analyse the improvement opportunities in order to define the
improvement strategy and plan
T u rn ov er 140
30 29
M a t eria l ( N et ) 120
M a t eria l Wa st e
100 25 22
La b ou r c ost -50% reduction

Million $/year
Dep rec .
80 20
O/h +p rof it
60 15
15
40
20 10
0 5
T u rn ov er C ost
0
Conv. Cost Losses Achiev.Savings
Direc t la b ou r
Dep rec ia t ion
Gen era l ex p en se
Dir. M a t . ( w a st e)
E n erg y
Cost items

Sa la ries
E x t ern a l serv ic e
M a in t en a n c e la b ou r
M a in t en c e ma t eria l
I n d irec t la b ou r
Ot h er ma t eria ls
I n d irec t ma t eria l
Ot h ers

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

Efeso © 2004
- 20 - 1.0 Define Target & Vision

Develop a (yearly) performance improvement

implementation plan

The activity aims at developing a long term action plan

¾ Consolidate the findings from the previous actions
¾ Define and express the Vision on Volume and
Productivity targets
¾ Prioritize the losses that impact Volume and Productivity
¾ Define a set of responsibilities for every loss, establishing
links with other pillars
¾ Elaborate the Master Plan

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- 21 - 1.0 Define Target & Vision

Consolidate the findings from the previous actions

“Tracking” OPIs were (or should have been) established at the

conclusion of each “closed” team. Based on the success of the
team, new “trigger points” for performance were established:
¾ What is the current performance?
¾ Are the gains being sustained?
¾ Are the tools in place to assure continued good
performance?

Don’t start your loss reduction plans from the beginning!! If

needed, back up and regain loss reduction momentum leveraging
your previous work.

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- 22 - 1.0 Define Target & Vision

Establish a system to track & follow up on the results of

specific (previous) loss reduction projects

The activity aims at setting a system to control results,

correct deviations and consolidate the savings
¾ Set the organisation: 5W+1H for control
¾ Set the Pillar board and the meeting system
¾ Start the Saving Book and the reporting system

Efeso © 2004
- 23 - 1.0 Define Target & Vision

Establish a system to track & follow up on the results of specific

(previous) loss reduction projects - cont'd
Overall performance Most recent
TREND vs target (GAP)
#REF!
PARETO performance,
Does not show an
contributions
improvement trend 120 140
120 to improvement

Process Cycle Time- Days

101 120
(Rationale for improvement focus) 100 120
100
100
80 80
Total Plant Ave. 67
80 59
60 54 62
GOAL 60 54
60
40 41
40 40
¾ Clearly define 20
TARGET!! 20 20
0

a baseline &
Oct-99
Nov-99
Dec-99
Jan-00
Feb-00
Mar-00
Apr-00
May-00
Jun-00
Jul-00
Aug-00
0
0
Product #1 Product
Premarin Effexor #2 Product
OTC #3 Product
Misc. #4
Premarin Effexor OTC Misc.

vision level Frequency of

measurement appropriate
PAYNTER to subject of metrics
Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00
Premarin
Product Line 1 101 93 99 93 115 120
Effexor
Product Line 2
59 44 50 61 49 54
OTC 54 44 39 52 49 41
Product Line 3
Misc. 67 74 75 60 65 62
Product Line 4
Total Plant Ave. 72 80 76 64 96 90
GOAL 70 70 70 70 70 70 60 60 55 55 50 50

Historical data provides insight into

problem areas, relative Quantifies the target
contributions to improvements performance level
or lack of, etc.

Product cycle time: example - Level 1

Efeso © 2004