Production efficiency = standard hours for what was made ÷ actual hours worked × 100. Standard hours are what the output should have taken, at the minutes a unit your recipe or routing says; actual hours are what it did take. A sausage shop that made 575 pounds in a week, which should have taken 60.8 hours, and took 69, ran at 88.2%. The 8.2 hours over standard cost $163 that week, about $8,500 over a year. Below is the formula, its two partners, utilization and output per hour, the shop's week batch by batch, where the hours went, and a free calculator.
The short version
- Efficiency = standard hours earned ÷ actual hours on production.
- Standard hours earned = units made × standard minutes a unit ÷ 60.
- Utilization = hours on production ÷ hours paid; the rest is cleaning, deliveries, waiting.
- Overall = standard hours earned ÷ hours paid = efficiency × utilization.
- Look batch by batch: the week's average hides the one that went wrong.
- TaroStack records labor minutes on every batch and sets actual cost beside standard. More below.
The formulas
| Measure | Formula | The sausage shop's week |
|---|---|---|
| Standard hours earned | Units × standard minutes ÷ 60 | 60.8 hours |
| Efficiency | Standard hours ÷ actual hours | 60.8 ÷ 69 = 88.2% |
| Utilization | Actual production hours ÷ hours paid | 69 ÷ 80 = 86.3% |
| Overall | Standard hours ÷ hours paid | 60.8 ÷ 80 = 76.0% |
| Output per production hour | Units ÷ actual hours | 575 ÷ 69 = 8.3 lb |
Efficiency says how well the production hours were used; utilization says how many of the paid hours were production at all. A standard is only as good as how it was set: time a few ordinary runs, not the best one.
An example: a sausage shop's week
Nanticoke Sausage Kitchen, a made-up sausage shop in Wilkes-Barre, Pennsylvania, I use in these examples, sets its standards from its recipes: 6 minutes a pound for fresh bratwurst, 9 for smoked kielbasa, 8 for breakfast links and 3 for bulk sausage. Two people are paid 40 hours each.
| Day | Product | Pounds | Standard minutes a lb | Standard hours | Actual hours | Efficiency |
|---|---|---|---|---|---|---|
| Monday | Fresh bratwurst | 90 | 6 | 9.00 | 10.5 | 85.7% |
| Monday | Bulk sausage for restaurants | 50 | 3 | 2.50 | 3.5 | 71.4% |
| Tuesday | Smoked kielbasa | 125 | 9 | 18.75 | 20.0 | 93.8% |
| Wednesday | Breakfast links | 100 | 8 | 13.33 | 17.0 | 78.4% |
| Thursday | Fresh bratwurst | 135 | 6 | 13.50 | 14.0 | 96.4% |
| Thursday | Bulk sausage for restaurants | 75 | 3 | 3.75 | 4.0 | 93.8% |
| The week | 575 | 60.83 | 69.0 | 88.2% |
Thursday's bratwurst ran at 96.4%, close to standard. Wednesday's links lost the most: sheep casings tore on the stuffer and a third of an hour went to restringing each time, 3.7 hours over standard in one run. Monday's small runs ran slower than Thursday's bigger ones of the same products, because setup and cleanup take about the same time for 50 pounds as for 75. How many pounds the shop can make in a week is in how to calculate production capacity.
Where the other hours went
Eighty hours were paid and 69 went on production. The other 11 were the Friday deep clean, receiving the pork, and delivering to the restaurants: real work, but not production. That's utilization of 86.3%, and with efficiency, an overall 76.0%: of 80 paid hours, 60.8 hours' worth of sausage came out. How the labor in a product is costed is in how to compute labor cost in baking, and the shop's plan in sausage making business plan.
What the gap costs
The 8.2 hours over standard cost $163 at $20 an hour, about $8,500 over 52 weeks. Nearly half of it was the links: casings stored too dry before use. Fix that, and the week runs at about 93%. Making the bulk sausage in one run on Thursday instead of two saves another half hour of setup. Neither change needs more people or longer hours, only a look at which runs went over.
Get the calculator
Download the production efficiency calculator. One line for each batch or run: type the units made, the standard minutes a unit and the actual hours, and the standard hours and efficiency fill in, with the week's totals. At the side, the hours paid give utilization, the overall figure, output per production hour and what the hours over standard cost. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The calculator needs the actual hours for each run, and most kitchens only know the hours on the timesheet for the day. Without hours by batch, a slow run of links and a fast run of bratwurst average out, and the casings never get noticed. And the standard minutes drift out of date as the shop gets a bigger stuffer.
How TaroStack does it
TaroStack records labor minutes on every batch and sets actual cost beside standard.
Minutes on the batch. Each batch records its labor minutes beside the meat, casings and spices it used, so Wednesday's links carry their 17 hours, not a share of the day's timesheet.
Actual against standard. Each batch's actual cost sits beside the recipe's standard cost, so a run that took 3.7 hours too long shows as a cost over standard on that batch, the day it happened. How actual costs drift from the recipe is in food cost variance formula.
Recipe truth. From your own batch history, TaroStack says whether a recipe yields what it claims and which ingredient's quantity is off, so torn casings that cost pounds as well as minutes show too.
| The job | Timesheet | In TaroStack |
|---|---|---|
| Hours for each run | Not recorded | Labor minutes on every batch |
| A run that went over | Lost in the day | Actual cost beside standard |
| Torn casings | Thrown out | Yield and rejects on the batch |
| Standard minutes | Set once, years ago | Compared with batch history |
Recipes, batches, labor minutes and costing are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.