MMOG/LE is simply good business

As automotive manufacturers extend their supply chains to tap a global supply base, it becomes more critical that delivery performance remains uninterrupted. Maintaining a standard of performance for materials flow both locally and across extended supply chains is critical to maintaining a thriving global automotive industry.

As the industry and world economies become more intertwined, the need to leverage global standards in an effort to reduce costs for key manufacturing capabilities and expectations becomes more critical.

A common, industry-wide set of best practices for materials management and logistics will accelerate development of the global automotive industry and move the industry toward perfect delivery performance.

In the past, automotive OEMs typically established their own best practices for managing materials, both internally and for their suppliers. Given that many suppliers serve multiple OEMs, the industry as a whole is coming to recognise the value in standardising these best practices.

In 2004, under the auspices of the automotive industry associations Automotive Industry Action Group (AIAG) and Odette, OEMs and suppliers from around the world came together to refine their multiple best practice guidelines into a single document. The result was the Global Materials Management Operations Guideline/Logistics Evaluation (MMOG/LE) tool for operational excellence that is intended for suppliers from Tier 1 to Tier n.

MMOG/LE is used to measure and improve materials management efficiency within a manufacturing facility. It is a guideline designed to eliminate supply-related delivery risk for all partners within automotive supply chains.

The MMOG/LE self-assessment process will ready suppliers by uncovering critical areas where operations need improvement prior to business award, as well as fostering ongoing improvement. The self-assessment will:

* Automatically score/rate (Level A, B, or C) suppliers' operations
* Level A means the supplier is at or near world-class
* Level B means the supplier is deficient in several areas that will impact its ability to support the needs of the customer
* Level C means the supplier is deficient in one or more critical high-impact areas
* Automatically generate a gap analysis, which identifies necessary actions for improvement

Currently, Ford, Chrysler, Renault, PSA, Volvo Car and Volvo Truck require their suppliers to complete the MMOG/LE self-assessment. Because of the success these OEMs are achieving, other global OEMs as well as other industries are also investigating the use of MMOG/LE for their supply bases.

MMOG/LE is available in 12 different languages, including English, German, French, Czech, Chinese, Russian, Turkish, Spanish, Romanian, Portuguese, Japanese and Slovene. Since OEMs are using MMOG/LE worldwide, training and support already is available in all regions of the world, including emerging markets like Russia, China, India, Brazil and most recently in South Africa.

MMOG/LE is designed to ensure that information flow follows material flow. During the self-assessment process, a supplier will uncover critical areas in which operations can be improved. MMOG/LE helps to highlight areas where enterprise technology can automate processes to eliminate error-prone manual processing of customer and supplier data.

Why is MMOG/LE a Powerful Tool for Suppliers and OEMs*

MMOG/LE is used to increase supply chain (Tier 1 to Tier N) delivery performance for production.

OEMs have experienced improvements in:

* Delivery rating scores reaching 100%
* More accurate and timely ASN data
* Up-to-schedule shipments
* Correct packaging and labelling
* Reductions in premium freight
* Plant uptime due to better handling of materials management issues
* Sourcing decisions for new and additional business
* Preventing costly supply chain issues that occur after business is awarded
* Capacity planning
* New product launches
* Overall customer satisfaction through better supplier delivery performance

Suppliers improve supply chain operations, documenting benefits such as:

* 25%-50% reduction in raw materials and finished goods
* 85% reduction in premium freight
* 80% reduction in obsolescence costs
* 10%-25% percent improvement in monthly delivery ratings or service rates
* Increased delivery performance with sub suppliers (Tier 2)
* Improvement with overall corporate operational performance and inventory by taking internal Level A sites and comparing to Level B and C sites to find and share best practices

The self-assessment tool is provided in an easy-to-use Excel spreadsheet that includes sections for the self-assessment, scoring summary and gap analysis. A copy of the MMOG/LE can be obtained from Odette at http://www.odette.org.

The self-assessment consists of 206 questions organised into six chapters (see Figure 1 below); a weighted scoring system provides guidelines that help the manufacturer prioritise continuous improvement activities. The MMOG/LE tool automatically scores and rates compliance levels, identifying the actions necessary to satisfy requirements. When all six chapters of the self-assessment are complete, the Scoring Summary generates an A, B, or C, level classification.

Suppliers who follow the principles and practices of MMOG/LE gain better control of processes by reducing inventory carrying costs, premium freight, rework, line stoppages, and lead times within their facilities. Suppliers report much better control of their sub suppliers; increasing inventory visibility helps reduce supply chain risk. Also, MMOG/LE helps suppliers significantly improve their delivery performance scores and increase customer satisfaction.

A global survey of suppliers currently using MMOG/LE, with histories of one year to more than three years, found that overall data accuracy is another significant benefit to following MMOG/LE. The use of ERP and planning systems brings uniformity to the data capture and communication, as well as a means of tracking and tracing the accuracy of the data and how it was calculated.

Using MMOG/LE helps to get the right information to customers and suppliers at the right time, ensuring perfect delivery performance. And that's just simply good business.

AIAG and Odette revise the MMOG/LE at a minimum of every three years to ensure the assessment tool reflects the needs of the global automotive industry for materials and logistics processes. The MMOG/LE recently has undergone the most extensive review and enhancements since its inception. The global team responsible for updating MMOG/LE to version 3 reviewed and incorporated more than 130 requests from around the world. Enhancements to this version include additions of Radar and Progression charts for easier visualisation of current status and improvement progress. MMOG/LE Version 3 release is targeted for an October 2009 release. MMOG/LE is available at AIAG at http://www.aiag.org or Odette International at http://www.odette.org.

Terry Onica will be presenting: 'Managing supply chain in a turbulent, competitive, global economy' at SAPICS and QAD's Professional Development breakfast on 15 October 2009. For more information on how to register, please contact gmb@qad.com or contact QAD on 011 461-6900.