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


For automotive suppliers, the global MMOG/LE self-assessment helps to identify what process adjustments are needed for world-class capabilities. It shows where enterprise technology can help automate processes to avoid manual processing of customer and supplier data. One major OEM that uses MMOG/LE with its supply base observed that using manual processes rather than automated systems for materials resource planning, barcode scanning and electronic data interchange (EDI) and the like resulted in more errors.

Since 2004, suppliers have reported noticeable improvements when MMOG/LE is used each year as a continuous improvement self-assessment. These have included such performance improvements as a 50 percent reduction in raw materials and finished goods, an 85 percent reduction in premium freight, and an 80 percent reduction in obsolescence costs.

Bringing Standards to Emerging Markets

Today global OEMs and multinational tier-one suppliers, in addition to using MMOG/LE in mature markets, are now introducing it to emerging markets such as Central and Eastern Europe, Russia, China, India and Brazil to help educate suppliers on best practices for materials management in automotive. MMOG/LE is used in order to save time and costs while helping to ensure effective, efficient management of materials.

The suppliers in these emerging markets are looking to adopt standards such as MMOG/LE that will help them implement best practices and demonstrate to OEMs and tier-one suppliers that they have global manufacturing capabilities. And the OEMs and tier-one suppliers use MMOG/LE guidelines as a development tool to help suppliers in these emerging markets ensure they have best-in-class manufacturing and materials management capabilities.

In addition, for OEMs and tier-one suppliers now working in these emerging markets, the long distances from overseas customers add another dimension to the supply-related risk that materials management guidelines were designed to eliminate. Labor- and materials-related cost savings — not to mention business relationships — could be wiped out by the expense of expediting a late shipment or the delay to exchange the wrong components for the right ones.

The MMOG/LE global guidelines help address some of the variables that impact supply quality and that keep inventory from getting to the cargo hold and to the customer. By encouraging suppliers to adopt technology for certain types of communication such as EDI and barcode data, materials management standards encourage automation and uniformity that makes the communication aspect of supply chain interaction more reliable.

Increasing Data Accuracy

In fact, MMOG/LE is already helping to bring new suppliers up-to-speed with the requirements of their multinational customers and industry practices. Having completed the MMOG/LE self-assessment last June, a long distance supplier to North and South America based in China was able to prove its global capabilities and achieve a perfect score on its delivery rating of 100.

A recent joint survey by AIAG and Odette of automotive suppliers that have been using MMOG/LE from one year to more than three years found that one of the most significant performance improvements from using the self-assessment tool was increased data accuracy. The use of such systems brings uniformity to data capture and communication, as well as providing a means of tracking and tracing the accuracy of data and how it was calculated. Beyond this, the use of technology in the materials process helps to get the right information to customers and suppliers at the right time. Manual procedures will not lead to best-in-class materials management process or consistent operations, which are both required for world-class performance.

Implementing MMOG/LE typically takes about six months to a year for most suppliers. For one supplier it involved conducting an internal self-assessment that was followed by a customer assessment of all its materials handling operations. After this self-assessment was performed they realized that they needed more than materials resource planning to meet their global materials requirements. They also needed to replace e-mail, telephone conferences and video conferences with EDI to communicate with customers. Then they integrated their EDI and ERP capabilities in order to execute global MMOG/LE best practices for tasks such as material release, shipping schedule and advance ship notice.

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