Pulau Sambu Guntung

Operational Cost ReductionOpportunity Analysis

June 5th 2012June 5th 2012

Operational Cost ReductionOpportunity Analysis

1. Introduction 10 minutes

2. Review of the OCR methodology 20 minutes

Presentation Cost mapping and 3. Presentation Cost mapping and Opportunity Analysis 90 minutes

4. Next steps 20 minutes

5. Discussion 40 minutes

Objectives and Introduction

Operational Cost ReductionOpportunity AnalysisOpportunity Analysis

Purpose of this meeting

To present the results of cost mapping exercise and opportunity analysis

To agree the next steps in the Operating Cost Reduction project

Operational Cost ReductionProject phases Focused Improvement

Map full operational cost structure in filling

line operations

Phase 1Cost Mapping

Identify savings potential, prioritise

based on operational cost impact

Phase 2Opportunity Analysis

Customer implements improvements (using

WCM methodology) in chosen areas to gain

savings

Phase 3Implementation

Systematic approach to:

1) Establish operational cost baseline

2) Identify the improvement activities returning the highest cost savings for your business

3) Proven methodology to drive and secure improvements

cost impact savings

Summary What we have done so farUsed the information provided by you into our system performance and economics model to generate a view of current operational cost structure

Focus is to understand the economic impact of system performance improvements by line

The cost structure has been assessed for direct production costs only current analysis do not include product and packaging (apart from waste), quality control department, logistics and inventory, sales and marketing expenses, etc.

All analysis has been made on the operations in Pulau Samu Guntung plant

Snap-shot assessment - based on actual performance data for Line D A3CFlex, for Snap-shot assessment - based on actual performance data for Line D A3CFlex, for period of Feb to Apr 2012 Information provided by you and PLMS that we have used: Actual line operations for the investigated month e.g. production time, CIP time, machine downtime

and generated waste

Current costs for: raw material, packaging material and staff

We have also used general Tetra Pak assumptions for certain costs

We have analysed opportunities for improvement

The opportunities are based on the operational cost model and data gathered from PLMS and site based records

They give indications of the type and size of savings available and will need to be confirmed within the first phase of the WCM initiative

Review of the Methodology

Project scope

Cost AnalysisCost Analysis

OCR Focused ImprovementScope Covered

Total Conversion Cost

Consumer

Reception Processing Packaging Logistics$ $Customer

Operational Cost Analysis

Scope with adequate data

Producer/Supplier

Retailer

Review of the Methodology

Project scope

Cost AnalysisCost Analysis

OutputCost base

Customer Operational Cost

Fixed costs Variable costs Speed / CapacityOverall Equipment

Cost/Unit

Seeing everything in terms of costUnderstanding and allocating the data

Cost Items Cost Drivers

Fixed costs Variable costs Speed / CapacityEffectiveness

Size/area

Capital

Operators

Spare part cost

Service cost

Utilities

Cost for waste

Cleaning time

Machine Mechanical Efficiency

Set-up time

Service time

Waste

Spare part cost

TP service work

Customer service work

Product waste cost

Area cost

Costs are analysed by Item and Driver

60

80

100%

Cost/'000

Other time

Service and maintenance (customer)

Service and maintenance (TP)

Area costProduct waste

Utilities

Capital cost

Capital cost

Labor cost

Capital cost

Capitalcost

Laborcost

Capit

al cost

Pro

duct w

ast

e

Labor

cost

TPservice

cost

Labor

cost

Capitalcost

Packagewaste

Product

waste

16.0 4.7 0.9 2.30.61.1

2.5 2.6 3.3 1.5

Total =

35.4

Value adding Non-Value adding

Packmat waste cost

Area cost

Utilities

Overhead

Packer cost

Operator cost

Capital cost

By Item By Driver

0

20

40

60Service and maintenance (TP)

CIP stop

Equipment stops

Production time (normal functioning)

Labor cost

Product

waste

Packagewaste

Labor cost

Productwaste

Pro

duct w

ast

eLabor

cost

Spare

parts

Spare

partsLabor

cost

Labor

cost

Production time

(normal functioning)

Filling

machineD

istr

ibution

equip

ment

Product

change

Paper

change

CIP

Serv

ice a

nd

main

tenance (TP)

Serv

ice a

nd

main

tenance

(Em

ig)

Unschedule

dtim

e Other time(incl. Customer

stops)

OEE Loss Analysis (Overall Equipment Effectiveness)Measures quality production against line capacity

OEE = x 100A

B

WeekendShutdownHolidays

Plant not scheduledScheduled downtime

Breakdowns

Set-up & adjustment

Tools change

Availability loss

A

Tools changeStart-up

Others

loss

B

Defect / ReworkQuality loss

Minor stoppages

Speed lossesPerformance

loss

Performance and cost results

Cost by item and by drivers

OEE loss analysisOEE loss analysis

Key Data and Assumptions (1/5)Line D Feb-Apr 2012

Product cost Primary Packaging material

Secondary pack. mat.

Information given by the customer Weighted average for all different PM: 55.10 /000

Opening: 1.93 /000

Cardboard: 14.14 /000

Product cost

0.30 / Litre

57.03 / 000 packs 14.14 / 000 packs

Key Data and Assumptions (2/5)Line D Feb-Apr 2012

Labor Waste Maintenance contract

Filling Machine operators :1 xxxxx /month

Distribution Equipment/FL Operators: 10xxxxxx /month

Production leader:0.2per shiftxxxx /month

QC personnel:0.33

Product waste

CIP : 1000 l/event

Product change: 1000 l/event

Paper change :0.75 l/event

QC : 100% of QC waste

Overfilling: 0.514 ml/pack

Package waste

QC:28/h (destructive)

Service & maintenance

Service employee cost: 1.16 /hour with 1924 hours service work per year on the line

Total labor cost for the line per month: xxxx / month

Package waste:

2.083 / month

Product waste:

8.120 / month

Maintenance contract:

4.573 / month

Customer Service

186 / month

QC personnel:0.33per shiftxxxx /month

QC:28/h (destructive)

CIP : 183/event

Product change: 3/event

Paper + strip change 3packs/event

Line stops: 25.290 packs

Total Customer system CostLine D

Op. CostFeb-Apr 2012

Line D A3 CFlex Cost/000

Two ways of looking your cost Line D - Cost items, Cost drivers

Period of analysis Feb- Apr 2012

Detailed operational cost structureLine D

Period of analysis: Feb-Apr 12

Operational Cost Reduction Focussed Improvement Project Overview

= On target (Within 0.5% of target)

= Within 1.5% of target

= More than 1.5% below target

Objective:

Operational Cost Reduction of 31.01 %

Quantification

Cost/1000 saved on focus lines 5.70

Customer Project Manager: Tetra Pak Project Manager:

Focus Improvement areas OCR Target %OCR

Result %

CIP time reductionCIP time reduction 13.79 55.304

Filling Machine stop reduction 14.07 56.427

Other stop time reduction 3.15 12.627

Total 31.01 % 124.358

HPBR/2012-05-18

Highly Confidential

Performance and cost results

Cost by item and by drivers

OEE loss analysisOEE loss analysis

OEE Loss Analysis (Overall Equipment Effectiveness)Line D

OEE = x 100 = 42.3 %A

B

Feb-Apr 2012

Improvement Opportunities

Opportunities and sensitivity analysis

Total potentials and impact on costTotal potentials and impact on cost

Set Up Time analysis

How Tetra Pak Lines are working?Set Up (CIP) time definition

Production Stop,Set Up start

Production starts at maximum speed

ProductionProduction

Set up is the sum of activities that has to be done in the machine in order to prepare it to produce

Machine cooling down

CleaningWater

circulation

Machine preparation

Machine preparation

Machine sterilization

3.50

4.00

4.50

Set Up AIC timeLine D Actual Average 2:52 hrs

Specification: 2 hoursActual average: 2:9

Target: Average = 2.1 hrsTarget-30%

1.00

1.50

2.00

2.50

3.00

3.50

Actual Average

Target Average

Specification

200

300h

Hours per month and line

2027 209

Set Up time reduction: what happensLine D, AIC reduction

Time saved Additional productionTransfer at 50 % OEE

to additional production time

0

100

Production

time

Additional

production

time from CIP

time reduction

New total

production

time

Line D Target -30% for AICSet Up reduction: 0:51 hours (Monthly frequency 8)Total potential saving monthly: 6.36 hoursYearly Extra Capacity (@ 50% OEE) = 0,36 Mio Packs

6.00

7.00

8.00

9.00

Set Up Final CIP timeLine D Actual Average 6:10 hrs

Specification: 4 hoursActual average: 6:10

Target: Average = 4:15 hrs

Target-30%

Actual Average

1.00

2.00

3.00

4.00

5.00

6.00

Target Average

Specification

200

300h

Hours per month and line

202

26 228

Set Up time reduction: what happensLine D, Final CIP reduction

Time saved Additional productionTransfer at 50 % OEE

to additional production time

0

100

Production

time

Additional

production

time from CIP

time reduction

New total

production

time

Line D Target -30% for final CIPSet Up reduction: 1.2 hours (Monthly frequency 15)Total potential saving monthly: 26.06 hoursYearly Extra Capacity (@ 50% OEE) = 1.4 Mio Packs

Set Up time reduction: potential savingLine D Final CIP + AIC

Line Line D D Target - 30% for CIPTotal OCR = Total OCR = 13.23% (2.44 13.23% (2.44 /000)/000)Yearly potential saving* = Yearly potential saving* = 55.300 55.300

*Assuming 21.8 Mio packages produced yearly

Line Equipment Downtime analysis

Stop Reduction: what happens Line D excluding Set Up

Actual Lost Time Target Situation

300

330h

Hours per month

320.9

-40.1

-27.8

253.0

-30%

- 50%

Target = Stop Reduction by 50% Monthly savings : 51 hours Yearly Extra Capacity (@ 50% OEE) = 2.754.000 Packs

100

200

Actual FM OE

-27.8

New total

production

time

200

250h

Hours per month and line

202.0

39.0 241.0

Stop Reduction: what happens Filling machine line D

Time saved Additional productionTransfer at 50 % OEE

to additional production time

- 50%

100Production

time

Additional

production

time from CIP

time reduction

New total

production

time

Target = Stop Reduction by 50% Total potential saving monthly: 39 hours Yearly Extra Capacity (@ 50% OEE) = 2.100.000 Packs

Stop reduction: potential savingFilling machine line D

Line DActivity Target = Short Stop Reduction by 50%OCR =14.7% (2.59 )Yearly potential saving* = 56.427

*Assuming 21.8 mio packages produced yearly

Stop Reduction: what happens Other Equipment stops reduction

Time saved Additional productionTransfer at 50 % OEE

to additional production time

- 30%

Activity Target = Stop Reduction by 30% Total potential saving monthly: 12 hours Yearly Extra Capacity (@ 50% OEE) = 648.000 Packs

Stop reduction: potential savingOther equipment stop reduction

*Assuming 21.8 mio packages produced yearly

Line DActivity Target = Short Stop Reduction by 30%OCR = 3.15% (0.58 )Yearly potential saving* = 12.627

Overfilling Analysis

TPA3Flex 2000ml Line 7 packs > 200 packs

0.06

0.07

0.08

0.09

0.1

Cream Mean

Skim Mean

Overfilling ReductionLine X

Achieve 3 Gr mean with 0.7 STD

0

0.01

0.02

0.03

0.04

0.05

-1.0 0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

19.0

20.0

21.0

22.0

23.0

24.0

25.0

26.0

27.0

Skim Mean

Cust Min

Cust Max

Skim

Cream

Overfilling reductionLine X sensitivity analysis

Activity target: Activity target: Reduce from 13.8 Gr. (weighted average between cream and skim) to 3 Gr. Reduce from 13.8 Gr. (weighted average between cream and skim) to 3 Gr. (78 % reduction) reducing the standard deviation from 6 (average between (78 % reduction) reducing the standard deviation from 6 (average between cream and Skim) to 0.7.cream and Skim) to 0.7.

5.4% OCR representing 7.7 5.4% OCR representing 7.7 Yearly potential saving* = 77 000 Yearly potential saving* = 77 000

Over capacity = 51 500 packs

*Assuming 10 Mio packages produced yearly

Improvement Opportunities

Opportunities and sensitivity analysis

Total potentials and impact on costTotal potentials and impact on cost

Scenarios showing impact of implementingrealizable initiatives on Line DPotential 31.01% reduction in operational

Operational cost base Potential saving

31.01 %

124.358 /year

Product Loss Analysis

Operational Cost Reduction Focussed ImprovementAdditional Potential Benefits ( not included on calculated savings)

Overfilling (*) CIP ProductWaste

Target 4 ml / pack 300 lts

Total Monthly 7.271 lts 6.900 lts

Total Monthly 14171 lts

Total savings / month 4251

Total savings / Year 55.266

HPBR/2012-05-18

Highly Confidential

(*) Assuming an underfilling aprox 4 ml of the 261 ml of the nominal full pack isachievable without forming problems

Project Deliverables

OCR FI Hard Deliverables

Operational Cost reduction 31.01 %

Pilot line savings 124.358

OEE Improvement from 42.3 % 51.41 %OEE Improvement from 42.3 % 51.41 %

An additional capacity of packs/year 4.559.000

An additional potential saving of product loss 55. 266

OCR FI Soft Deliverables

A group of people trained in WCM methodologies

An additional capacity of packs/year 4.559.000

Potential to expand methodology to the rest of theTetra Pak lines

Potential to expand methodology to the rest of the plant

Questions ?Questions ?

Thank you Thank you

Next Steps

Focused improvement team training and kick off

Execute projectsPrioritisation & Master Plan

Operational Cost Reduction road mapDriving Focused Improvements

Close individualprojects

Regular follow-up

Opportunity Analysis

Operational Cost Analysis

OEE Loss Analysis

Propose and define Team table/matrix

OCR manager OCR Central Team

Steering CommitteeCustomer:

Technical Service:KAM:

Operational Team

Project coordinatorname OCR manager

(Tetra Pak Indonesia)

OCR Central Team(Technical service)name

(Customer)

Team 1 CIP time reduction 1 leader + 4 members

Team 2 FM short stop reduction 1 leader + 4 members

Team 3 Other equipment stop Reduction 1 leader + 4 members

Identify Team Leaders and members - 1 Team Leader/Team - 4 members/Team

Running the Teams: From Middle of October 2007 till End of February 2008

it visit week

Next Steps

Steering group meeting from week to review results from the teams

Monthly regular meeting to update Prod. manager.

Training and Kick off of the teams

The End

Training proposed

World Class Manufacturing Concept - WCM big picture, infinite loop - From Pillar to teams (definitions) - Team work

Method and tools applied at customer - analyse Data and decide the route to take - analyse Data and decide the route to take

Standards for visualisation to be used (team boards)