Excerpt of financial manual 4.4.

1
LMPU
Related to the issue of direct labor costs is the calculation of Labor Minutes Per Unit ("LMPU"). LMPU
is based on total Worked Hours,both Productive Hours and Non-Productive Hours as shown in the
attached Definitions document. Total Direct Labor cost on the AL3 represents all Paid Hours, which
includes paid leave such as sick pay, maternity leave, vacations and all social charges.
Please note that the attached document in addition to the LMPU definition includes other production
efficiency ratios which are not reported directly to AHO.

DEFINITIONS

Labor Minutes Per Unit - LMPU:

Calculated for a product or a family of product, is average of minutes of work needed to produce
one part (including subassy), it is based on total direct labor worked hours (1) paid, including all
non productive hours.
This value is used in financial reports (Alx,) as well as OPI.

Non Productive Hours - NPH:

Hours paid, but during when, no production has been realized:

NPH1: Non productive hours type 1, when persons have NOT been engaged on production activities :
- training,
- APS workshop,
- meetings,
- etc…
NPH2: Non productive hours type 2, lost when persons have been engaged on production activities,
but have not been producing :
- extra inspection,
- rework / sorting,
- set up as part of pre-production approval process ("PPAP"), if charge to production
- down time,
- waiting for components,
- etc…

Time Per Unit - TPU:

Number of minutes of work needed to produce one part.

The work includes all activities that are directly required for keeping production running :
- line workers / machine workers (operators),
- team Leaders (dedicated to specific line(s))(2),
- line feeders,
- maintenance (dedicated to specific line(s))(2).
It includes following operations :
- assembly/production,
- packaging,
- inspection on the line (part of production routine),
- set up and batch changes.
=> Non Productive Hours, are not included in TPU calculation.

TPU (actual):

Actual TPU level

TPU (standard):

TPU that should be theorically reached, according actual line-output capacity

TPU (budget):
TPU set in the yearly budget / rolling forecast

(1) holidays, absenteeism, rest time, lunch time are NOT worked hours
(2) Example: a maintenance tech dedicated to 3 lines is allocated at 33% on each line

-1-

Labor Efficiency:

Production efficiency = TPU (standard) / TPU (actual)

Productivity Improvement Efficiency:

Productivity improvement efficiency = TPU (budget) / TPU (standard)

Total Production Efficiency:

Total production efficiency = Production Efficiency X Productivity improvement efficiency

= TPU (budget) / (TPU (actual)

Total Plant Efficiency:

Total Plant efficiency = TPU (budget) / LMPU (actual)

Yearly Plant Productivity:

Productivity improvement based on LMPU improvement by Product Family,

Consolidated to plant level weighted by number of minutes per product family,
comparing average Q4 LMPU actual year v/s previous year.

Productivity improvement includes improvements from:

- operator efficiency
- line improvement and development
- non-productive-hours improvement
- product design improvement
 -2-
EXAMPLES

TPU and Efficiency calculation:

On a production line which is theorically able to produce 60parts/h with 4 pers, the production team has one of the
four employees who is not yet trained => Production output is only 50 parts/h.

An investment on the line, which was budgeted to increase the line-output capacity to 80parts/h, has been
postponed.

Due to a quality issue with a component, the performance of the line during the month has been badly affected.
Please find some data:
Wait for component = 3%
Sorting (GP12) = 11%
Breakdown rate = 4%
Training = 1%
Meetings = 1%

Let’s calculate TPUs and efficiencies:

TPU (standard) = (4pers x 60min) / 60parts = 4min

TPU (actual) = (4pers x 60min) / 50parts = 4.8min

TPU (budgeted) = (4pers x 60min) / 80parts= 3min

Labor efficiency = TPU (standard) / TPU (actual) = 4 / 4.8 = 83.3%

Productivity improvement efficiency = TPU (budgeted) / TPU (standard)

= 3 / 4 = 75%

Total Production Efficiency = TPU (budgeted) / TPU (actual) = 3 / 4.8 = 62.5%

NPH1 = 1%+1% = 2%
NPH2 = 4%+3%+11% = 18%
NPH = NPH1 + NPH2 = 20%

LMPU = TPU(act) * (1/(1-NPH%))= 4.8 * 1.25 = 6min

Total Plant Efficiency = TPU (budget) / LMPU = 3 / 6 = 50%

 -3-
Yearly Plant Productivity

LMPU

Total Total
Plant
Q4 Q4 Improve- Produced Minutes Improved
Productivity
Y-1 Y ment Volume Y based on Minutes
%
Q4 (Y-1) Y

1 137
DAB 2,72 2,56 0,16 494 3 093 984 181 999 5,9 %

1 808
PAB 4,44 3,98 0,46 384 8 029 225 831 857 10,4 %

1 884
SAB 3,51 3,16 0,35 620 6 615 016 659 617 10,0 %

2 508
IC 7,11 6,42 0,69 576 17 835 975 1 730 917 9,7 %

xxx

yyy

Plant Total 35 574 200 3 404 390 9,6 %

Based on LMPU as reported by Product Family in OPI 10.

Additional Product Families can be added.

Make sure to cover at least 85% of production volume.

LMPU(Y-1) = Average for Q4 (Y-1) (to avoid monthly fluctuations). Volume weighted.

LMPU(Y) = Average for Q4 (Y) (same period as for previous year). Volume weighted.

Improvement = Delta LMPU (2006 - 2005)

Produced Volume (Y) = Total No of units produced during year Y

Tot Improved Min (Y) = Total minutes gained due to improvements year Y

Report only data in yellow field (other figures are automatically calculated)
Breaking time is included in NHP1, if it is pay. It is not included, if it is not pay.

LMPU Calculation

TPU =ΣProductive Hours of releted person include time to make COP

Produced output of OK parts include COP quantity

Time of support person should be added direct time as much as possible.

If it is difficult to take the direct time, it can be apportioned the time by way in below.
Σtime of support person / Total number of related line

LMPU= TPU + ΣNPH1 + NPH2 of related person

Produced output of OK parts include COP quantity

NPH1 can be apportioned by way in below if it is needed to allocate to line.

ΣNPH1 / Total number of line

<<Calculation Example>>

Example of LMPU
and TPU Calculation in ALA 131216.xlsx