FAMILY CARE SECTOR

Stock Keeping Unit (SKU) Criteria

SKU Definition: An SKU is any product for which a unique Finished Product Code (full 8 digits e.g. S4008011) exists in SAP (ECSS) and hence all other KC systems. This includes standard SKUs regularly sold every month and promotional SKUs sold for a defined period of time. Scope of Criteria: The criteria have been defined to take account of: Business objectives Mill Efficiency Logistics (Turnover per year) All new business proposals (Branded and Retailer Brand) must meet all three of the following criteria, in order to introduce a new SKU: 1. $ Contribution / Gross Profit 2. Converting Volume 3. Tissue Machine Volume For promotional codes the volume criteria (2 and 3) will be adjusted according to the duration of the promotion (see below). Approval Process for New SKUs All new SKUs must be approved via a Project Initiation Request through Gate 1 of the Steps & Gates Project Management Process and / or via the Product Change Process (PCP). These criteria are a guideline as to the potential for approval. Any strategic exceptions must be agreed at Gate 1. All new SKUs passing the criteria will be based on Forecast sales. A review after 6 months (or at the end of a promotion) should be carried out to ensure the criteria have actually been met, hence whether to continue or plan to phase out.

SKU Criteria Version 2

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FAMILY CARE SECTOR Elements of the Criteria for SKUs: 1.$ Contribution / Gross Profit For each SKU there is a Target: Gross Profit Less Promotion (trade & consumer) Less advertising >= 20% of NSV For Retailer Brand only the following Variable Contribution Criteria apply whilst spare capacity exists: US$/ Ton Rolled Facial Target Contribution 500 1500 Minimum 350 1000 Variable Contribution is defined as NSV Less Total Distribution Cost Less All Variable Mill costs * Less All Variable Marketing Cost e.g Promotional expenditure, pack redesign * Unit labour is assumed fixed in the short term as crews are assumed to be spare. 2. Converting Volume This volume criteria has been defined based on an average across all Family Care Mills of the following: Minimum Production Run (optimising change overs / output) Minimum Order Quantities for Finishing Materials Stock Holding Target for Finished Products (Turnover per year) This volume criteria does not apply to SKUs repacked outside of Family Care Mills from standard products. For Promotions the volume criteria should be divided by the number of full months the activity will run. For example : A promotion that runs for 2 full months on Bath tissue should be a minimum of 6,666 SU's (40,000/12*2) For all product groups the criteria can be expressed in hours of operation. Minimum = 300 Hours / Annum on a converting line (except Facial Boxes) This assumes a minimum of a single days production every month. A code should be produced every month to satisfy the Average Stock Holding target (less than 23 days sales cover per SKU) and the Inventory Turnover rate (more than 12 times per annum).

SKU Criteria Version 2

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FAMILY CARE SECTOR The 300 hours can be expressed in Standard Units (SUs) and Tissue Machine production Tons as follows: Bathroom Tissue Minimum = 40000 SUs / Annum Household Towel Minimum = 15000 SUs / Annum = 250 Tons / Annum = 600 Tons / Annum

Implies the basesheet must be shared with an existing specification. The embossing pattern and printing design required must already exist on the appropriate converting line. Hanks Minimum = 3000 SUs / Annum = 120 Tons / Annum

Implies the basesheet must be shared with an existing specification. Facial Boxes Minimum = 4000 SUs / Annum = 100 Tons / Annum

Based on minimum Carton order and stock cover for materials. Implies the basesheet must be shared with an existing specification. Napkins Minimum = 9000 SUs / Annum = 180 Tons / Annum

Implies the basesheet must be shared with an existing specification.

3. Tissue Machine Volume Minimum = 3000 Tons / Annum For a unique basesheet specification, excluding variations in colour. Minimum = 600 Tons / Annum For a unique colour on an existing specification.

SKU Criteria Version 2

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