Planning at Douwe Egberts Coffee Treatment & Supply

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Planning at Douwe Egberts Coffee

Treatment & Supply

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Planning at Douwe Egberts Coffee

Treatment & Supply

A study about the planning of man and machine and the influence of multi-functionality

Sietske Wassenaar Studentnr.: 1761072

University of Groningen

Business Administration Operations & Supply Chain

Supervisors University Prof. Dr. Wijngaard Dr. Ir. van der Zee

Supervisor Douwe Egberts: R. Oud

Planning & Logistic Department

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Planning at Douwe Egberts Coffee Treatment & Supply

Preface

This master thesis is the result of research about the planning of man and machine at Douwe Egberts Coffee Treatment & Supply. Doing research for an A-label brand like Douwe Egberts was inspiring and a great opportunity to gain more knowledge about the food industry and international business.

I would like to thank all employees of Douwe Egberts, who provided me with a great deal of information and insight into the organisation. Special thanks to my supervisor Ric Oud who gave me useful feedback on my project and gave me the opportunity to execute this project at Douwe Egberts. To fully manage my own project I was given a lot of freedom. I enjoyed working at the PLD department tremendously. Colleagues allowed me to ask questions and were always at hand for discussions. I specifically enjoyed the discussion sessions held with employees from several departments. They were interested and confident that the results would be valuable to them. Above all they gave me the opportunity to develop my personal skills.

The above mentioned made it possible to write my thesis as presented here. While writing it I have learned a tremendous deal. Not only did I gain theoretical knowledge but also work experience and practical skills. I am grateful to J. Wijngaard and D.J. van der Zee, my supervisors at the University of Groningen. They provided me with support and feedback during the progress of my master thesis.

Sietske Wassenaar,

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Summary

From 1753 on Douwe Egberts started to sell coffee, tea and tobacco in Joure. Douwe Egberts expands it activities to become national supplier and later on international supplier of coffee, tea and tobacco. The year 1987 sees the end for Douwe Egberts as a family business when it becomes part of Sara Lee International. Although tea is still being produced on the location in Joure, this research is focussed on Coffee Treatment and Supply.

The analysis of the planning processes for production planning and personnel planning at the factory revealed that a medium-term personnel planning level for the different production departments does not exist. This results in the inability of levelling production and using reserves to equal required shifts. Furthermore, one department can be understaffed while another is overstaffed and exchanging employees from the overstaffed department to the understaffed department is not always possible.

Based on the companies request and the described problems the following research question has been formulated:

How can a more optimal planning of man and machine be achieved. How can the OEE be used in a “medium-term workforce planning” for the different production-lines at Douwe Egberts CT&S and how do exchange possibilities of personnel between departments influence the medium-term planning.

This research is split up in three analyses, supply-, demand- and gap & solution analysis. The supply analysis covers the competences of the employees. The demand analysis describes what is needed from the organisation to perform activities asked by customers. The gap & solution analysis is to compare the supply and demand analysis, identify differences and provide solutions to close planning gaps. Besides this planning analysis the surplus value of exchanging personnel between departments is examined.

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The demand side of Douwe Egberts shows considerable variation in required output and high dependency between the different production processes. This indicates that there is a general need to exchange employees between departments. To calculate the required competences following calculation has been used.

The gap & solution analysis explained the neutral to positive influence of the task characteristics on the relation between multi-functionality and performance. A medium-term personnel planning results in the following opportunities for the gap & solution analysis:

- level workload, to avoid over/understaffing - transfer personnel to workload

- hire/discharge temporary employees

The short-term personnel planning is complex because not all employees have the same competences, absenteeism, planned maintenance and cleaning and high variation in demand. Not all these factors can be mastered by the use of a medium-term personnel planning and long-chain multi-functionality. The medium-term personnel planning can help to reduce the variation in personnel requirement per week and long-chain multi-functionality can reduce the occurrence of gaps where demand for skills exceeds supply.

A medium-term planning is developed which gives insight in the required shifts per production-line for one week. This planning should be made for 10 weeks. This planning will make the personnel planning more optimal as gaps between supply and demand of skills can be discovered beforehand. This gives the opportunity to level workload and plan the transfer of employees beforehand to avoid over-/understaffing. The surplus value of multi-functionality finds expression here. This developed plan was the missing link between the medium-term production planning and personnel planning and provides more insight in the consequences of the production planning for the personnel planning.

To successfully implement the new medium-term personnel planning several steps still need to be taken. When all steps are followed this will result in a personnel planning that is

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1 Introduction

As the title and subtitle indicate, this report is about the planning processes and the influence of multi-functionality at the factory of Douwe Egberts Coffee Treatment & Supply (CT&S) in Joure. The company requested for a research on this subject and formulated the following objective:

A situation, based on EE and OEE, in which personnel occupation for the different production-lines at Douwe Egberts Coffee Treatment & Supply can be planned to create optimal performance for man and machine.

This objective has been written by the company itself and has served as a starting point for this research. An optimal performance for the personnel planning involves efficient planning where required personnel can be delivered and where supply of employees does not exceed the amount of required employees. As can be concluded from this objective, Douwe Egberts CT&S wants to create a more optimal personnel planning based on EE1 and OEE. Founded on this information and first interviews at Douwe Egberts CT&S, the actual research question and objective have been formulated as illustrated in chapter 2. Chapter 2 shows a summary of Douwe Egberts and more specifically the planning processes. After formulating the research question in chapter 2, chapter 3 continues with the theoretical framework to gain more knowledge about the described planning problem and to structure the research. Furthermore, this theoretical framework provides variables which influence the planning problem. These variables are depicted in the conceptual model. This model is used as a guide line, to determine which factors are to be investigated and used to structure research.

The precise planning process for both production- and personnel planning is described in chapter 4. It shows the precise problem and indicates room for improvement. Furthermore it presents the needs from the perspective of Douwe Egberts CT&S to make an optimal planning. Chapter 5 starts with the investigation of all variables as depicted in the conceptual model. It describes the input and restrictions that are formulated in higher planning levels. After that the different planning areas of the missing planning level are explained. Chapter 6 contains the conclusions and recommendations for this research.

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2 Douwe Egberts Coffee Treatment & Supply

This chapter gives an introduction of the company where the actual research took place. Paragraph 2.1 describes the background of Douwe Egberts and the position of Douwe Egberts CT&S within the company structure of Sara Lee. In addition the production process will be explained in paragraph 2.2. Paragraph 2.3 gives more insight in the current planning processes. This situation has been used as a starting point for this research and used as a base to formulate the research question. The research question and objective conclude this second chapter.

2.1 Douwe Egberts & Sara Lee International

From 1753 on Egbert Douwes started to sell coffee, tea and tobacco in Joure and for many years this was the place where coffee, tea and tobacco were sold. In 1919 Douwe Egberts expands its activities to become the national supplier of coffee, tea and tobacco. Douwe Egberts continues expanding its activities and in 1960 the company accounts for half of the national coffee and tobacco export in the county. The year 1978 sees the end for Douwe Egberts as a family business when it becomes part of Sara Lee International.

Sara Lee International

Sara Lee is a global manufacturer of leading brands including: Ambi Pur, Ball Park, Douwe

Egberts, Hillshire Farm, Jimmy Dean, Kiwi, Sanex, Senseo and Sara Lee. Sara Lee has the

following mission:

‘To simply delight you… every day’

and maintains the following vision:

‘To be the first choice of consumers and customers around the world by bringing together innovative ideas, continuous improvement and people who make things happen.’

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Sara Lee Corporation

Coffee & Tea Household & Body Care Sara Lee Food

Service USA

Sara Lee Retail USA

Douwe Egberts Coffee Treatment & Supply

Sara Lee USA Sara Lee International

Figure 2.1: Structure Sara Lee Corporation3

Twenty years after the merger with Sara Lee International the Tobacco factory was sold to Imperial Tobacco. Only tea and coffee were left to be produced at the factory in Joure. Although tea is still being produced on the location in Joure, this research and report is only focused on Coffee Treatment and Supply. The tea factory operates completely independent and is separated from the coffee factory.

Douwe Egberts Coffee Treatment & Supply

Douwe Egberts CT&S produces liquid coffee and instant coffee. The focus of the liquid coffee, Cafitesse, is on the ‘out-of-home’ market (offices, schools, hotels, and cafeterias). The liquid coffee is internationally distributed, with customers all around the world. The second product-group is the instant coffee for the retail market. This product is also being produced for deliveries worldwide. Each country delivered to has a different label attached to the product, combining this with various sizes of jars and flavours it results in many different possible end-products. Paragraph 2.2 will give more insight in the production process of both product groups produced at Douwe Egberts CT&S.

2.2 Production process

The primary process of Douwe Egberts CT&S is the production of coffee. This process is depicted in figure 2.2. The process starts with green coffee beans and at the end of the process the liquid or powder coffee is packed and ready to be distributed to the customers.

The process for liquid and instant coffee starts with the same process steps. At first the green beans are roasted according to recipes to roast the right mélange. The roasted beans

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Roasting

Packaging materials

Finished product (liquid) Green beans Meng/Zeef line Spray- drying Packaging liquid extract Agglomeration Freeze- drying Freezing Oblicone Finished product (instant) Instant packaging Extraction

are transported to the location where the extraction takes place. Here the beans become fluid coffee by using extraction-batteries.

Figure 2.2: Production process

Instant Coffee

For instant coffee the extract has to go through a drying process, freeze-drying or spray-drying. Freeze-drying is the latest method to dry the coffee extract, in which the process results in a more coarse-grained coffee powder. The spray-drying process results in a more fine-grained coffee powder. After the spray-drying some blends need an extra process step, called agglomeration. During this process the fine-grained coffee powder is made less fine grained. After that the coffee powder goes to the Packaging department where it is packed in jars. The type of jar and the label that is attached during packaging depends on customer specifications.

Liquid Coffee, Cafitesse

The liquid coffee does not need to go through a drying process as this extract proceeds straight to the Packaging division. Here the liquid coffee is packed in foil bags which are then packed in sheets. After packaging a subcontractor deep-freezes the liquid coffee to maintain the quality. The frozen coffee is now ready to be shipped to the customer.

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customer in Douwe Egbert’s point of view. Customer demand is therefore a total demand for the whole country.

Figure 2.3 shows a summary of all production-lines and the number of different products which are produced on a line. This table is based on production-output as recorded by the company’s ERP system. The output is the actual output for one year (July 2008-June 2009). Most outputs are available in kilograms; the output for the Packaging lines is given in pieces. One piece is one jar or bag. Comparing the number of products with the production process in figure 2.2 this gives an indication of the bill-of-material (BOM). Many different end-products are made from a small number of raw materials.

Figure 2.3: Output production-line

2.3 Planning process

The planning processes distinguishes between production and personnel planning. The structure of these processes and relations are depicted in figure 2.4. A description of the different planning processes is given next.

Production-line # Different

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Figure 2.4: Planning structure

Production planning

Long-term planning, medium-term planning and short-term planning can be distinguished here. The long-term planning is made for a year, medium-term covers several weeks and short-term planning is made for one week. Long-term planning concerns more strategic decision taking and contains the Annual Operating Plan. This plan contains estimated sales per customer. All customers of Douwe Egberts CT&S estimate their sales and calculate required products from Douwe Egberts. The Annual Operating Plan distinguishes only between product groups (instant & liquid).

The medium-term planning concerns the amount of products to be produced, depicted in week buckets. The planning horizon is 40 weeks. Production per week is spread equally over a couple of weeks to avoid major differences in machine load. Planned downtimes for each machine are taken into account but available personnel is not. The planners know how many shifts are scheduled, the number of shifts determines how long the machine can be filled with production orders.

The short-term planning is made for one week. In this planning two different product groups can be distinguished, instant and liquid. The liquid products are produced according to a fixed cycle. There are two different cycles, which are produced in turns. The demand for liquids is quite stable which makes it possible to use this fixed schedule. The production of instants is based on forecasts and customer orders. On a weekly basis detailed production schedules are made for production. These schedules precisely show which blend should be produced for each production-line. This planning takes different blends, cleaning, planned stops, modification in production-line and maintenance into account. Not all blends can be

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produced one after the other without a cleaning stop between the two blends. The calculation of the required production time is based on average production speed.

Progress in production is discussed during a daily meeting. When a production-line runs behind schedule or ahead of schedule it is mentioned here. Disturbance and unexpected events are also discussed. OEE4 is helpful in monitoring the machine performances. For each production-line OEE is calculated every week. When OEE is deviating from the norm, the first operator needs to explain the differences. The OEE norm shows the production efficiency which production should be able to accomplish. Total capacity minus OEE shows the average loss during production.

Personnel planning

A personnel planning for the production department is made on two levels, long-term and short-term. The long-term planning contains a view of total FTE’s per department. It is specified per department in which way this amount of FTE’s has been calculated. This specification shows what the net requirement and the gross requirement of FTE’s is. The short-term planning is decentralized and made by the first operators. Every week the personnel planning for the different production-lines are made, based on the amount of products to be produced. Based on the planned output required personnel is assigned to the different production-lines. The total workforce includes some overcapacity to cover the training of employees, illness, vacation and other unexpected situations that may arise. Competences of employees have to be taken into account when assigning employees, e.g. employees in Preparation can be assigned to various machines in the Preparation department. Employees from Powder-Preparation can only perform tasks at their own department. The same applies to employees of both Packaging departments.

There is an implicit system for the medium-term personnel planning. The production planner and the personnel planning have agreed upon some planning issues and an holiday planning is also made on this level. However, the agreements are made by each department independently and are not communicated. Because of the informal character of the medium-term personnel planning it has been depicted as a dotted line in figure 2.4.

Problems arise in short-term planning when more skilled personnel is required than currently available at the department or when there is much fluctuation in the production load. The consequences can be that one department is understaffed while another is overstaffed.

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Exchanging employees from the overstaffed department to the understaffed department is not always possible and then temporary employees are needed.

Fluctuation in production could result in the need of three shifts in one week, two in the next and for the third week three shifts again. The short-term planners have no insight in the required employees and skills for the coming weeks. It is therefore difficult to level production and use reserves to equal required shifts for the coming weeks. Furthermore, the planning department which makes the production planning, experiences a lack of insight in the consequences of their production planning on term personnel planning. Thus short-term planners and the production planning department experience problems in the planning process.

Figure 2.5 shows a simplified view of the planning levels. A complete and more detailed description of the planning process is presented in chapter 4.

Figure 2.5: Planning processes

2.4 Primary research question

The research question is formulated after gathering information and giving a first outline of the processes concerning current production planning and personnel planning. Together this resulted in the following research question:

How can a more optimal planning of man and machine be achieved. How can the OEE be used in a “medium-term workforce planning” for the different production-lines at Douwe Egberts CT&S. And how do exchange possibilities of personnel between departments influence the medium-term planning.

Production planning Planning

horizon/detail

Personnel planning Planning

horizon/detail Long-term planning Year(s) / per product

group (instant, liquid)

Long-term planning Year (s)/ number FTE’s per department Medium-term planning 40 weeks / output per

production-line (not per blend) Medium-term planning Informal, holiday planning, agreement on planning issues Short-term planning 1 week / per machine

per blend minute precisely

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Optimal planning in this research question refers to the gap between the short-term and the long-term personnel planning. Whereas the production planning is made for all three planning levels.

2.5 Research objective

Together with the research question, the research objective has been formulated. This objective has to be realized taking into account the conditions and limitations as described in section 2.6.

Realize a situation for which man and machine can be planned in such a way that more insight is given in overall workforce requirements and examine the opportunities and possible effects of exchanging employees between departments in this planning.

From the description of the planning above, the most significant fact is that the production planning is made for short-, medium- and long-term while the personnel planning for the production department is only available for the long- and short-term. Main focus in this research will be on the optimization possibilities for planning man and machine regarding a medium-term personnel planning. Opportunities and consequences of exchanging employees in this medium-term planning will be examined.

2.6 Research conditions and limitations

This research does not cover the complete process within Douwe Egberts CT&S. The research only focuses on the production process at Douwe Egberts CT&S. However several parts of the production process are excluded from the research. Reasons to exclude several production processes are the following:

- Part of the process is outsourced therefore labour planning for this process has not been taken into account, e.g. the packaging of coffee sticks and the deep-freezing process of the liquid coffee.

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A view of the production-lines which fall within the borders of the research is given in figure 2.6. These are the production-lines from extraction till packaging.

Figure 2.6: Production-lines included in research

Nr. Process type Name production-line Process

1. Preparation Branderij Roasting 2. Preparation Batterij 2 Extraction 3. Preparation Batterij 3 Extraction 4. Preparation Batterij 4 Extraction 5. Preparation Batterij 5 Extraction 6. Preparation Batterij 6 Extraction 7. Drying Droger 2 Spray Spray-drying 8. Drying FD 1800 (oude friso) Freeze-drying 9. Drying FD 4000 (nieuwe friso) Freeze-drying 10. Powder-Preparation Oblicone Powder-Preparation 11. Powder-Preparation Meng/Zeef lijn Powder-Preparation 12. Powder-Preparation Agglo Powder-Preparation 13. Packaging Liquid, VL08 Packaging Liquid Coffee 14. Packaging Bigbag, VLBB Packaging Big bags 15. Packaging Dozenlijn, VL10 Packaging Boxes

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3 Theoretical framework

The background of the problems at Douwe Egberts CT&S has been described in the previous chapter, including the research question and objective. Chapter 3 starts with the research methodology. After that a theoretical framework will be introduced to gain more theoretical knowledge about this problem and the direction of possible solutions. After developing the theoretical framework the conceptual model is drawn. The sub-questions formulated are based on this model. The conceptual model is used to structure research and to find an answer to the research question.

3.1 Research methodology

Douwe Egberts CT&S requested for a solution for their planning problems. The research question and objective show that the medium-term personnel planning is the main subject of this research. Examining and testing the theory alone is not sufficient to answer the research question. This research puts the accent on the problems and solutions for Douwe Egberts. The organisational situation is the starting point of this research and theories are used to develop a firm base to build on. The research steps to take are illustrated in figure 3.1.

Figure 3.1: Research process

This figure shows five elements. The first element covers the description of the problems at Douwe Egberts, the research question and objective. This element is starting point for this research. After that the theoretical background is developed. Based on the theoretical

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background a conceptual model is drawn. Interviews and data will be used to test this conceptual model. Desk research and discussions with persons concerned are used to interpret the collected data. Last stage is the development of the new medium-term planning model. Figure 3.1 illustrates the steps to take. How to take these steps is not illustrated.

The second step, develop theoretical background, involves desk research. The results from the first step are used to select the appropriate theories. Several articles are studied which results in the conceptual model. This conceptual model is elaborated in step three. All variables of the conceptual model are investigated here. Data is collected and interviews are held to gain information. The interpretation of the data is done by extensive data analysis and to present and discuss the results with persons concerned. The last step is the design of the new planning model. In this stage the model is discussed with persons concerned to find out if it corresponds with their expectations.

Figure 3.1 shows three feedback loops. When more information is needed during research it can be necessary to repeat a previous step and collect the missing information. All departments involved during this research are depicted in appendix I.

3.2 Basic planning model

The previous chapter described several problems that are related to the planning processes: the gap between long-term and short-term personnel planning and the inability of sharing resources, specifically human resources. Literature distinguishes planning decisions on strategic, tactical and operational level.

“At the strategic level, planning deals with decisions on human resources such as the management of knowledge mix, and assessment of workforce structure on matching business development of the organisation. Tactical planning typically considers decisions which are generally made monthly, quarterly, or yearly. Along the same timeframe, optimal planning for training/retraining has to be considered. Operational scheduling deals mainly with the assignment of workers to cover the labour requirement at the operational level” (Huang, 2008). Taking into account the objective and research question, this research focuses on a level between tactical and operational planning. This level will be called the medium-term level and corresponds with the medium-term production planning levels, the

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Planning at Douwe Egberts Coffee Treatment & Supply Supply analysis Solution analysis Gap analysis Demand analysis

level is missing in the personnel planning therefore this research focuses on a medium-term personnel planning.

Literature will be used to identify factors and elements that are needed in a personnel planning for the production department. Although focussing on medium-term level, long-term and short-term level can not be excluded as all three levels influence each other. Decisions taken on long-term level influence the possibilities for medium-term level and these determine the conditions for short-term level.

First a basic planning model will be explained. Each element will be explained including what this element implies for Douwe Egberts CT&S. The basic planning model of Anderson (2004) has been handled to identify the basic elements of a workforce planning as used in many organisations. Figure 3.2 illustrates the planning model as described by Anderson.

Figure 3.2: Basic personnel planning model (Anderson, 2004)

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3.3 Supply analysis

The supply analysis covers the capabilities of the organisation. For Douwe Egberts this includes analysing the available resources. The supply side of the different production-lines is characterized by two sides: the qualitative and the quantitative side. As stated by Anderson (2004) not only available workforce but also available competences need to be considered. This determines the qualitative side. Available quality is determined by the available competences and skills. Each machine at the factory is very specific and requires specific employee training to produce high standard products. Recently Douwe Egberts CT&S started a new training programme. In which all employees need to take exams. Employees who pass for an exam are registered as capable employees for a specific task. Skills and competences as mentioned in this research refer to the ability of an employee to perform a specific task related to the skills he or she possesses. An employee with the skill ‘extraction’ is able to perform the tasks at the extraction batteries and therefore can be assigned to one of the batteries. However, some departments have only started with the new exam/training programme. The reports for these departments have not been filled with the available competences yet. Per shift the group composition, regarding competences, influences the availability and usability of a group.

The quantitative side is determined by the time that competences and machines are available. The production department works in shifts. The amount of shifts determines the time that a production-line is able to produce. A limitation in this can be lunch stops during which a production-line can not produce.

The outcome of the supply analysis for Douwe Egberts CT&S gives a view of available capacities and capabilities within the organisation.

3.4 Demand analysis

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Figure 3.3: Relations in demand analysis

To satisfy future demand Douwe Egberts needs to determine the operations and related skills as well as competences which are needed to cope with future demand (Mihm, 2003). The bill-of-material can be used to specify the operations and skills and competences required to complete an order (Gresh, 2007). However, this is not applicable to Douwe Egberts. As explained, the product structure is divergent, as one blend can be used for different end-products. With 332 different end-products in one year this approach requires a lot of time. Another approach would be the use of production-outputs form ERP. This provides more insight in the production per production-line and the fluctuation in output. ERP makes it possible to download actual production per production-line specified per week and per blend. Processing times between blends vary and should be taken into account here as this influences the time required to produce an order and the number of required skills.

To calculate required production time OEE can be used. Theoretical machine capacity is not useful as theoretical output does not take modifications, cleaning stops and other irregularities into account. OEE can be used here as the OEE percentage shows how effective the machine has been used. OEE measures maintenance effectiveness, production effectiveness and quality effectiveness (Muchiri, 2007). Thus the height of the OEE shows how much of the theoretical capacity can be used effectively. Though the base on which OEE should be calculated is not unambiguous in literature, De Ron (2006) says the following about the base of OEE measurement:

In general, the time base should be the time period that the equipment is able to perform its intended function without being limited by external circumstances. This means that only failures caused by the equipment should be accounted for by the equipment.

Muchiri (2008) takes the loading time as a starting point to measure OEE. However Muchiri (2008) also suggests that it would be more appropriate to use available time as a starting point. In a five-shift production environment like Douwe Egberts this would mean that the base to calculate the OEE for one week is 168 hours (7x24). With the intention to make a ‘medium-term workforce planning’ for the production-lines, the starting point for OEE in this research should be the loading time. Loading time is the total time that a production-line is

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+

Availability Performance Quality Downtime losses Speed losses Quality losses

Equipment failure (technical) Setup adjustment time

Reduced speed

Reduced yield at startup 4 3 2 1 5 6

OEE

=

Quality defects Idling and minor stops

filled with orders. Taking loading time as starting point, the OEE percentage gives an indication what the required time is for the planned production.

The following description of OEE is based on internal information at Douwe Egberts CT&S. OEE consist of three parts: availability, performance and quality.

Availability: How long did the production-line actually run.

Performance: What was the performance of the production-line, compared to the norm, during the actual running time.

Quality: How many packs and jars were of good quality the first time.

Figure 3.4: Construction OEE

This definition of OEE is also consistent in literature. Muchiri (2007) and De Ron (2006) define the same six big losses.A view of the OEE calculation has been added in Appendix II. The six losses are identified precisely per department. Each department has a list of factors classified per type of loss to avoid imprecise measuring.

The bill-off-material specifies the operations needed to produce a specific product. Each product may have a different routing through production and each operation requires different skills and competences for the employees performing the task. If Douwe Egberts CT&S does not produce on a specific production-line this could influence the required skills downstream. Therefore the dependency in production needs to be taken into account.

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employees are needed to produce demand. In other words, what is the productivity of an employee. This employee productivity can be defined as “The efficiency with which labour is

used in production” (Flynn, 2008) and “productivity is output per man-hour of labour” (Buggie,

1997). Douwe Egberts CT&S has different production-lines. For each of these lines the employee productivity has to be calculated.

3.5 Gap and solution analysis

The gap analysis and solution analysis will be combined in a stage where factors that influence the capacity requirement planning can be examined. Identifying those factors beforehand makes it possible to look for future solutions to close those gaps. The inability of transferring employees between departments is of influence at this stage. Therefore the influence of multi-functionality will be examined here. According to theory the objective of the gap and solution analysis is the following: ‘Develop strategies that are tailored to address gaps in number, deployment, and alignment of human capital approaches for enabling and sustaining the contributions of all critical skills and competencies’ (Mihm, 2003). Gaps occur when available workforce can not meet demand or when the available workforce exceeds demand. In other words gaps occur when ‘demand exceeds supply’ or when ‘supply exceeds demand’ (Anderson, 2004). Multi-functionality can have influence in the development of those gaps. Multi-functionality is defined as a workforce where workers own multiple skills which makes it possible to assign them to different tasks (Gomar, 2002; Yue, 2008; Hottenstein, 1998; Park, 1989). Not all departments of Douwe Egberts CT&S have the opportunity to exchange employees and assign them to different tasks. As indicated in research more multi-functionality would increase productivity, quality of work and creates more flexibility for managers in assigning tasks (Gomar, 2002). Multi-functionality makes it possible to transfer multi-skilled employees from one work station to another in order to equate occupation at work stations and reduce the gap between supply and demand (Slomp, 2002; Yue, 2008; Molleman, 2007). This implies for personnel planning that planners can calculate with an aggregate number of personnel and short-term planning has more flexibility in assigning tasks. Thus more multi-functionality at the factory would reduce the complexity of a medium- and short-term planning at CT&S.

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to high training costs (Slomp, 2002). Factors which influence the optimal level of multi-functionality per employee are the ‘learning-forgetting rate’ and the ‘variety in demand’ (Yue, 2008). Molleman (2007) mentions that flexibility makes it possible to assign people to tasks where workload is highest and this can reduce idle time. Further mentioned in this article is the role of task characteristics and the relationship between flexibility and the performance measures: efficiency, quality and innovation. Task autonomy, skill utilization and task monotony influence the relation between personnel flexibility and performance. Examining these characteristics at Douwe Egberts CT&S reveals the surplus value of multi-functionality.

3.6 Conceptual model

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Planning at Douwe Egberts Coffee Treatment & Supply Theoretical machine capacity Demand characteristics OEE Employee productivity Actual capacity

Degree of skills & competences

required Degree of skills &

competences available Personnel availability Surplus value of multi-functionality Task Monotony Skill utilization Task autonomy Learning / forgetting rate Complexity planning supply and demand + _ + + + + + + _ +/_ + _ _ + Personnel occupation _{_} Demand characteristics Employee productivity

Degree of skills & competences

required Degree of skills &

competences available Level of multi-functionality Complexity short-term personnel planning + + _ _ + _ Medium-term planning Short-term planning

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3.6.1 Medium-term planning

This part examines the medium-term planning and what the different areas of the conceptual model imply for Douwe Egberts CT&S.

1. Supply analysis

The Supply Analysis considers the available personnel as well as the available competences of employees that Douwe Egberts CT&S can provide. Furthermore the minimal occupation which is needed to produce is examined in this part. The medium-term planning corresponds with the planning levels of the medium-medium-term production planning. The level of detail should correspond with this planning horizon. The medium-term production planning depicts production in week-buckets per production-line, therefore supply should also be depicted in week buckets per production-line.

2. Demand analysis

Demand Analysis encloses the degree of skills and competences required to produce demand. To calculate the required skills OEE is used, by multiplying the theoretical output with OEE. This results in actual output. Compared with the supply of personnel this results in a personnel productivity. This productivity can be used to calculate how much time and how many skills are needed to produce a certain demand. The characteristics of demand determine the variation in required skills and required time. Past demand is used to determine the characteristics of demand. The medium-term planning horizon has to be considered here. The demand analysis results in a calculation model which provides insight in the relation between demand and required skills as well as the time to produce this demand.

3. Gap & solution analysis

The Gap and Solution Analysis involves the actual medium-term planning. This planning contains information gathered in the supply and demand analysis. Possibilities concerning functionality and the influence of this level of multi-functionality on personnel planning are examined. In order to do this the current level of multi-functionality and factors influencing multi-functionality are examined.

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employee productivity is also measured on medium-term level and is an independent variable on the short-term level.

3.6.2 Short-term planning

The content of supply, demand and gap & solution analysis on short-term level is different compared to medium-term as these categories have a shorter time horizon and therefore involve analysis on a different level.

4. Supply analysis

Short-term planning is made for production and personnel. When a medium-term planning is made, this will influence the short-term planning. Employees are assigned to tasks in the short-term personnel planning. The supply side of this planning involves the available skills and available time. The consequences of a medium-term planning are determined here.

5. Demand analysis

The demand analysis contains variables which determine the weekly required machine capacity and human capacity. For short-term planning this is very precise and detailed. The required skills and production time are based on this detailed production planning.

6. Gap & solution analysis

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3.6.3 Sub questions

The sub questions are based on the theoretical framework and the conceptual model which resulted in the following:

Medium-term:

1. What does the supply side of Douwe Egberts CT&S look like 2. What does the demand side of Douwe Egberts CT&S look like

3. What should a medium-term planning look like and what is the possible surplus value

and the influence of multi-functionality on this planning.

Short-term:

4. What are the consequences of a medium-term planning for the short-term planning

and what is the influence of multi-functionality in this planning.

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4 Current situation

This chapter will study the current situation for the planning processes. First a description of the production planning is given and after that a description of the personnel planning. Details about the planning horizon and the level of detail are given for each different type of planning. A conclusion is then given regarding the different levels of production planning and personnel planning.

The objective of this chapter is to reveal the exact ‘planning gap’. On the basis of this information it determines the need of a medium-term planning, including the level of detail and planning horizon.

4.1 Production & demand planning

The production planning can be split up into three different levels: long-term, medium-term and short-term, corresponding with the planning horizon. Figure 4.1 shows the different levels including the type of planning being made. An explanation of the different planning levels is given below.

Long-term planning includes a Long Range Plan which involves strategic decisions. Increasing or reducing the capacity at the factory is a typical decision being taken on this level. This decision is based on the estimated sales for the coming years. Together with several departments the estimated sales, shifts in product groups and introduction of new product groups are determined.

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Planning at Douwe Egberts Coffee Treatment & Supply Long Range Plan Supply Network Plan Transport Load Builder

Planning horizon Level of detail

Demand per customer on short- and medium-term

Production planning per resource, blend specific. Time per order is depicted in minutes

Demand per customer in week buckets

Capacity planning per resource, in week buckets

Amount of products to be distributed to a customer in 1 week, product specific

Amount of end-products to be distributed to which customer, blend specific Per product group, estimated sales & related personnel growth/reduction Per customer, per product group, total amount of products for one year 1 year 40 weeks 18 months 40 weeks 40 weeks 4 weeks 1 week 1-5 years Planning process MEDIUM-TERM Scheduling SHORT-TERM Sales & Operating Planning Annual Operating Plan Deployment Plan Production Planning & Detailed Scheduling Demand Planning

Figure 4.1: Production planning5

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update is made for this planning. This plan depicts demand per product group. The results of this plan are used as input for the Supply Network Plan. The Supply Network Plan is updated every week and discussed during a short meeting of the planning and logistics department. This planning contains the total amount of products to be produced specified per resource and is depicted in week buckets. When making the Supply Network Plan it is tried to spread demand equally over the coming weeks to avoid major fluctuation in production.

Based on the production need per week of the Supply Network Plan, a more detailed plan is set up for production. The result of this Production planning & Detailed Scheduling is a detailed production plan per production-line for the whole week. Every blend is separately visible in this planning. Though supported by ERP, this requires a lot of knowledge about the production process. Some restrictions have to be taken into account in this detailed planning. Not all blends for example can be produced one after the other. Before producing caffeine free coffee the machines have to be cleaned for example.

The last two planning processes, Deployment plan and Transport Load Builder are not production planning processes. These two planning processes are shown to make the process from production to distribution to customer complete. The Deployment plan is a function of the ERP-system. This function lists products that should be delivered the following week and indicates how many products can be delivered from inventory and which products still need to be produced. Available products are allocated to different customers. The

Transport Load Builder ensures that only full pallets are being sent to the customer. This

function optimizes the amount of products to be distributed.

4.2 Personnel planning

Personnel planning distinguishes two different planning levels, long-term and short-term planning, as depicted in figure 4.2. The first planning level, long-term, considers strategic decisions and is made by the management team of Douwe Egberts CT&S. The Long Range

Plan is the same plan as used in production planning. This plan shows the direction Douwe

Egberts wants to take the coming years. Consequences for the future workforce are determined in this plan. For example, when the Long Range Plan is heading to increase the production capacity, this will have an influence on required workforce.

The FTE Overview is based on the Annual Operating Plan of the production planning. This

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Long Range Plan

Planning horizon Level of detail

Assignment of an employee to a specific task(s)

Total amount of shifts per production-line &

assignment of shifts to a production-line

Per product group, estimated sales & related personnel growth/reduction Total amount of FTE’s specified per production department 1 year 1 week 1 week 1-5 years LONG-TERM SHORT-TERM Personnel Allocation Plan FTE Overview Shift Plan Planning process

of shifts required per department is also determined in this stage. For each department the construction of the FTE calculation is given. This shows the net and gross occupation per department. The FTE Overview includes temporary employees.

Figure 4.2: Personnel planning

The short-term planning is made separately for each production-line except for Roasting, Extraction and Drying. Short-term planning for these departments is combined and made by the first operator responsible for these departments. Planning for these departments is combined because employees from these departments are multi-skilled and are able to perform tasks on two or more departments.

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The Powder-Preparation planning is also made by the first operator. For Powder-Preparation an Excel sheet is used. Planned output per week is completed per machine and the Excel sheets calculate the amount of required shifts. Another table on the same sheet is then used to spread these shifts manually over the whole week. This result is an overview of the amount of shifts per machine per week and an overview of which shifts work on which machines. This planning is called Shift Plan. Employees are not assigned to a task in this plan. This is done in the Personnel Allocation Plan. At the beginning of each week employees change tasks so that each employee regularly performs different tasks. The

Personnel Allocation Plan shows who is assigned to which machine during which shifts.

At Instant Packaging the planning is basically the same. The first operator uses an Excel sheet to determine the required amount of shifts, based on the required output per production-line. This results in a Shift plan. A plan board is used to make the Personnel

Allocation Plan. This planning board shows an employee which tasks he/she should perform

and when. In this department a cyclic schedule is also used.

The Liquid Packaging department has only one production-line to fill and produces continuously. Therefore a shift plan is not needed in this department. The Personnel

Allocation Plan assigns the employees to a specific task on the line. Almost all employees

are capable of performing tasks for every position on the line. The employees change tasks regularly by making use of a cyclic schedule.

As can be seen in figure 4.2 there is not a formal medium-term personnel planning level. However during informal meetings some arrangements are made regarding medium-term decisions. The group leader of Powder-Preparation and Instant Packaging and the SNP-planner have agreed upon some planning issues. When the VL15s is producing, employees from Powder-Preparation are needed at the Packaging line. The SNP-planner knows this and plans almost nothing on the Oblicone, Agglo and Meng/zeef line.

4.3 Conclusion current situation

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Planning at Douwe Egberts Coffee Treatment & Supply Supply Network Plan Transport Load Builder Personnel planning Production planning MEDIUM-TERM LONG-TERM SHORT-TERM FTE Overview Personnel Allocation Plan Shift Plan Sales & Operating Planning Annual Operating Plan Long Range Plan Deployment Plan Production Planning & Detailed Demand Planning

processes and the consequences of production planning for personnel planning. To determine the planning horizon and required detail of a medium-term planning, the relations between the production planning and personnel planning are defined first.

Figure 4.3: Comparison production and personnel planning + relationship

Figure 4.3 shows the relationship between production planning and personnel planning. The

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Detail Scheduling is used to make the Shift Plan and the Personnel Allocation Plan. At the

side of production planning several plans are available which are all sufficient to use as a base to make a medium-term personnel planning. For medium-term personnel planning it is not necessary to know which employee produces for which customer and on which location. The total amount of products to be produced is of importance. A medium-term personnel planning should cover several weeks, based on the described problems.

A discussion session is used to show this planning gap to several departments and discuss the opportunities and to determine the planning horizon. During this discussion it became clear that it would be reasonable to start with an overview of required personnel for a period of ten weeks. A planning horizon of 10 weeks gives enough time to level production, use reserves to equal required shifts and exchange employees between departments.

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5 Medium-term personnel planning and multi-functionality

This fifth chapter introduces the different areas of the medium-term personnel planning. Furthermore the link is made between the higher long-term level and the lower short-term level. The design of the new medium-term planning model is introduced and it is explained what input is required from the Supply Network Plan. Moreover, the level of multi-functionality is examined and the opportunities for improvement and consequences for the different planning levels are explained. The structure of this chapter is depicted in figure 5.1.

Figure 5.1: Structure chapter 5

5.1 Influence long-term planning

The higher long-term level determines conditions for the lower planning levels. A medium-term personnel-planning is not only dependent on higher personnel planning levels for input but also on long-term production planning. As described in chapter 4, the Long Range Plan,

Annual Operating Plan and FTE Overview contain long-term decisions. These plans include

the future direction of Douwe Egberts CT&S, expected sales per customer and FTE’s per department. All these conditions need to be taken into account when making a medium-term personnel planning.

Shift composition and level of multi-functionality are also determined on this level. It has been calculated how many competent employees are required for every position in production performing a specific task. Deciding factors influencing the number of employees to train for a task are: continuity, required training and flexibility. Keeping these factors in mind and based on experience the degree of required competences is determined. This calculation includes absenteeism to avoid stoppage at the factory because of employee illness or holidays. The height of the multi-functionality depends upon factors which find expression on medium- and short-term level. The occurrence of planning gaps where supply exceeds demand or demand exceeds supply and fluctuation in demand on medium- and short-term

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5.2 Medium-term personnel planning

This paragraph contains the different areas which collectively show the medium-term personnel planning. These are the first three areas of the conceptual model. First the supply analysis will be discussed, next the demand analysis and last the gap & solution analysis as well as the influence of multi-functionality in this area.

5.2.1 Supply analysis

First more insight is given in the capabilities of Douwe Egberts CT&S. The quantitative and the qualitative side of supply are considered here. The quantitative side contains the availability of personnel and the qualitative side contains the availability of competences.

5.2.1.1 Quantitative supply

All production-lines work in shifts. The available hours for production depends on the amount of shifts, as producing automatically without personnel is not possible. The Preparation department and Liquid Packaging both have five shifts. These lines are available for 168 hours per week. The Powder-Preparation has three shifts and is available for 120 hours per week, except for the Oblicone. This production-line can not produce during lunch breaks and is available for only 113 hours per week. The Instant Packaging department currently works in two shifts and is available for 80 hours a week.

All production-lines need a minimum of employees to generate output. The minimal occupation for each production-line is depicted in figure 5.2.

Figure 5.2: Minimal Occupation

The minimal occupation for VL08a is three employees. However this production-line can not produce during lunch breaks when only three employees are available as this would mean that only two are available during lunch break. It is therefore desired to have four employees working on the VL08a. The Oblicone and Meng/Zeef line have a minimal occupation of one employee. More output can be realised when two employees are assigned to these

Production-line Minimal occupation Production-line Minimal occupation Production-line Minimal occupation Branderij 1 Oblicone 1 VLBB 2

Extraction 1 per battery Meng / Zeef 1 VL10 3

Droger 2 2 Agglo 2 VL15 7

FD1800 2 VL08a 3 VL15s 14

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Planning at Douwe Egberts Coffee Treatment & Supply 0 10 20 30 40 50 60 70 80 90 100

Veiligheid, Procedures & Milieu

Mindset & Behaviour Lean Listericase

Mindset & Behaviour GBP-training 5S MSS EHBO/BHV Utilities Bereiden I Utilities Bereiden II Branden Deel I Branden Deel II Branden Deel III Extraheren I Extraheren II Extraheren III Extraheren IV Mengen Spraydrogen FD 1800 FD4000 Praktijktoets online Praktijktoets op locatie NEN 3140 Gevaarlijke stoffen Heftruck Competences available Competences required

production-lines. The precise effect is given in paragraph 5.2.2.1. The production speed of the other production-lines is not influenced by the number of assigned employees.

5.2.1.2 Qualitative supply

Figure 5.2 illustrates the minimal occupation per production-line. This should be employees with proper skills and competences to perform the tasks. However employees in a shift are not capable of performing all tasks. Available and required skills are illustrated in a training diagram as depicted in figure 5.3. The level of required skills is determined on higher planning levels. This diagram gives the training coordinator a clear overview of required competences and available competences for each shift. In the situation where competences are not spread equally among shifts the training coordinator can decide to train employees or an exchange of employees between shifts takes place.

Explanation Figure 5.3: For the skill ‘FD1800’ only 43.75% of the employees of the depicted shift is trained to perform this task while 50% is required. The depicted shift exists of 16 employees. This means that 7 employees are capable performing this task, while 8 is required.

Differences in experience are not taken into account. The machines are leading and determine the production speed. The experience of an operator is not of influence Figure 5.3: Training Diagram for one shift here.

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definition of short-chain and long-chain flexibility is illustrated in figure 5.4. The marked boxes indicate which employees are capable of performing which tasks.

T# = Task E# = Employee

Figure 5.4: Definition short-chain & long-chain flexibility

The level of functional flexibility can be defined as a team’s total skills related to the total number of tasks to be performed by that team and the number of available workers. (Slomp et al, 2002) Figure 5.5 shows a summary of the number of skills, tasks and available employees within the different production processes. The four production processes in figure 5.5 correspond with the three short-chains and one long-chain of flexibility.

* Exams are not taken yet. Therefore exact number of skills can not be determined and is estimated ** Number of finished exams

*** D = A/(BxC)

Figure 5.5: Functional Flexibility

This level of functionality is based on the amount of finished exams. After each training an exam takes place. When an employee passes an exam the employee is capable of performing this task and possesses that skill. Differences in experience are not taken into account. The production environment of Douwe Egberts CT&S can be described as a process industry. The machines are leading and determine the production speed. The experience of an operator is not of influence here. Not all employees of Powder-Preparation and Instant Packaging have finished their exams yet, as a result of the recent introduction of an exam and training programme. Though, they are capable of performing tasks at this department. For Powder-Preparation functionality is almost 100 % and for Instant Packaging

Short-chain flexibility T1 T2 T3 T4 T5 E1 x x E2 x x E3 x x x E4 x x x E5 x x x Long-chain flexibility T1 T2 T3 T4 T5 E1 x x E2 x x E3 x x E4 x x E5 x x

Production process Preparation

& Drying Powder-Preparation Liquid Packaging Instant Packaging A: Total skills available**

B: Total number of tasks

C: Total number of available workers

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this level can be estimated at 80%. For the purpose of a medium-term planning the specific competences per employee are not of importance, however the level of multi-functionality is. Multi-functionality makes it possible to look at the workforce as one personnel pool, where employees can easily switch tasks. The four groups depicted in figure 5.4 can each be viewed as one personnel pool because of the multi-functionality. Under current circumstances Douwe Egberts CT&S is able to deliver high personnel flexibility. Experience from production shows that this level of flexibility per department is perceived as sufficient. However, this does not mean that the level of flexibility is optimal. It could be too high or badly spread among employees and departments. This question is part of the gap & solution analysis.

5.2.2 Demand Analysis

The demand analysis shows how many skills and shifts are needed to produce demand. By the use of capacity, OEE and personnel occupation the employee productivity is calculated. The employee productivity is used to calculate the required shifts to produce planned demand.

5.2.2.1 Productivity

The capacity is calculated for each production-line. Theoretical capacity is defined in a default value valid for most blends and exceptions are defined per blend. These figures were obtained from the technical department of Douwe Egberts CT&S. After comparison with figures that were given by the production department, this resulted in the theoretical machine capacity. For each production-line the capacity has been converted to capacity in kilograms of coffee per hour. This conversion has been made to have one measure and make the results clear and indisputable. When the theoretical machine capacity is multiplied by the OEE percentage, the result is reasonable output per production-line.

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reliability of the results. Historical data of realized production is used here. The results are illustrated on the left side of table 5.5.

To calculate employee productivity, the personnel occupation is compared with the capacity. The personnel occupation and number of shifts are known to several departments of Douwe Egberts CT&S and could easily be requested. The net occupation has been used, as the productivity of employees actually working on the production-line has to be calculated. Now capacity and employee occupation are known, the productivity per FTE can be calculated. The calculation of the productivity is illustrated in Figure 5.6. The table includes an overview of capacities and OEE per production-line. As described, the Powder-Preparation can function with 1 or 2 employees per production-line. The effect of this on productivity and output is illustrated in figure 5.6.

The complete table has been added in Appendix III. This table and the table below show not an OEE number for all production-lines. Internally it has been decided that first the OEE’s are calculated only for those processes that are performed frequently and have a relatively stable process.

Planning at Douwe Egberts Coffee Treatment & Supply

Planning at Douwe Egberts Coffee

Treatment & Supply

Planning at Douwe Egberts Coffee

Treatment & Supply

Preface

Summary

Table of Contents

1 Introduction

2 Douwe Egberts Coffee Treatment & Supply

3 Theoretical framework

+

+

OEE

=

4 Current situation

5 Medium-term personnel planning and multi-functionality