Global Standards for the Global Supply Base

Achieving the "perfect lean market" in the auto industry has meant adopting universal standards to help suppliers in emerging markets achieve best-in-class performance


By Terry Onica

A thriving global automotive industry depends on a standard level of performance for materials flow, no matter where the supply base is located. As original equipment manufacturers (OEMs) embrace lean manufacturing principles and seek to balance production with demand, it is paramount that the right supplier is at the right plant at the right time for production to stay on schedule. For automotive suppliers, this means delivery performance must be perfect, as there is a steep price to pay for inventory that's in the wrong place at the wrong time.

Now, as automotive manufacturers extend their supply chains to tap a global supply base, they also are adopting global standards that help suppliers in emerging markets comply with OEM requirements and demonstrate best-in-class manufacturing capabilities.

The Perfect Lean Market

Economists have proposed that having access to the right information at the right time is a major part of a "perfect" market. The principles of lean manufacturing are being adopted by automotive manufacturers everywhere, and the benefits of practical applications can be seen as companies implement enterprise resource planning (ERP) technology to automate business processes across systems, improving operational efficiency and customer satisfaction.

But achieving the "perfect lean market" is about more than just speeding up production and "slimming down" by eliminating waste in the production process. In the perfect lean market, manufacturing data move through the supply chain unconstrained by geographic, technical or business obstacles; it doesn't depend on human intervention to get data from one business partner to another. Also, in this same context, access to data by multiple functional domains within the distributed enterprise should be available as needed rather than constrained by standalone systems that support a single functional domain or even single business process.

E-mail, fax machines and telephones are still the mainstays of many manufacturing supply chain communications; however, data do not actually get into the end user systems any faster than people can re-enter the data — hopefully, accurately. By improving supply chain communications, manufacturers can get ever closer to achieving the perfect lean market.

Common Guidelines for the Global Supply Base

The perfect lean market exhibits more than waste minimization. The right data at the right time and place might help a manufacturer act before a supply chain or component glitch puts flawed products out to the marketplace. And when problems do occur, it is vital that issues be resolved quickly because time is money. To sense and respond to problems quickly, the right data must be accurate, available and accessible.

What's more, the perfect lean market can provide insight from your office into plants all around the globe. The right information at the right time could let you trace and recall only goods containing parts from a specific assembly lot. By introducing timeliness and clarity into supply chain communications, the perfect lean market could serve as a venue for trading partners to collaborate and achieve collective competitive advantage.

For manufacturers, the right supply-and-demand information at the right time can mean the difference between lean and wasteful operations. For this collaboration to take place, some kind of industry commitment is needed. A common set of guidelines gives shape to what can often be a fragmented and globally diverse supplier landscape.

An Industry Approach

Over the years, automotive OEMs typically established their own best practices for the way materials should be managed — internally as well as by suppliers — to achieve that balance. In 2004 OEMs and suppliers came together under the North American and European industry standards associations, the Automotive Industry Action Group (AIAG) and Odette to collaborate on how to streamline supply. The result was the Materials Management Operations Guideline/Logistics Evaluation (MMOG/LE), a self-assessment charter for measuring materials management efficiency within a supplier manufacturing facility. MMOG/LE provides a set of best practices for suppliers to assess and improve materials management, with an emphasis on using automation for increasing efficiency and streamlining processes.

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