Capital Productivity
Productivity = (YOY change in cost per unit) X (number of units purchased in the Current Year
Savings may be driven over different timeframes due to the timing of purchases:
- One time (Single Year, buy a PC line)
- Multi-Year (low-cost cooler substitution over 3 years)
- Spend by category is not always repeatable in the same BU (large machines)
- Similar purchases often exceed 2 years
Capital Productivity Guidelines
- Capital Productivity refers to cost reduction initiatives which lead to YOY real P&L savings in fixed & variable costs, excluding the impact of leverage; there must be a historical baseline in order for an initiative to qualify as a Productivity initiative.
- YOY Change in Cost per Unit is defined as the Year-over-Year change in the cost of a: Like-for-Like items, a group of items having the same fit/form/function
- Comparable assets purchased in the last two fiscal years in the same Business/Market Unit, if not available then same sector
- Multi-Year Capital Purchase of Substitution Items (No Like for Like Rate) using Prior Year vs. Current Year across the initiative life
- Year over Year change in spend cannot be used as the productivity calculation, the savings must be a result of a year over year cost per unit reduction
- YoY Productivity inclusive of all costs (i.e. inflation, duties, freight, and taxes) and rebates
- Savings are reported based on BU CAPEX plan as reported to Global FP&A
