Materials Management Operations Guideline/Logistics

Evaluation

January 2008

MMOG/LE

Agenda

• Why MMOG/LE?• What is MMOG/LE?• Completing the Self-Assessment• Who is Requiring MMOG/LE?• MMOG/LE Key Criteria• AIAG/Odette MMOG/LE Benefits Survey• Customer Success Stories• Supporting Training and Documents Available

Why MMOG/LE?

Improving Supply Chain Delivery Performance

• Gain control of processes– Reduce inventory carrying

costs, premium freight, rework, line stoppages, lead times

• Gain control of supply chain– Increase inventory visibility– Reduce supply chain risk

• Support continuous improvement • Increase customer satisfaction• Increase competitiveness

Actionline Magazine, Fall 2006

Who is Implementing MMOG/LE?

• Suppliers to comply with OEM requirements• Suppliers in emerging markets• Companies looking to

– Reduce supply chain risks– Improve supply chain compliance and – Increase delivery and long distance performance

• Regional industry associations– Brazil, Romania, China, etc.

MMOG/LE Outside the Automotive Industry

• Universities• High Schools• Other non-automotive industries

– Hospitals– Construction– Aerospace– Chemistry– Electronics– Industrial– Retail

What is MMOG/LE?

Principles of Global MMOG/LE

• Recommended standard for materials and logistics• Self-assessment tool for identifying gaps in

processes• Based on agreed business processes

– By OEMs and suppliers• Ford, Chrysler, PSA, Renault, Volvo Car, Volvo Truck, etc.

• Based on extensive, best practices– 6 chapters– 206 criteria

• Determine current level of plant performance

Scoring Summary (ABC Classification)

A Level Supplier is considered to be at or near “world class” standards (90% or higher).

B Level Supplier is deficient in two or more aspects of a given category or multiple categories (75% < 90%). An action plan should be put in place and the corrective action should not require a significant amount of time to implement.

C Level Supplier is deficient in one or more critical or high impact aspects (75% or less). Action plans required to ensure deficiencies do not result in serious or prolonged issues to the customer.

MMOG/LE Self Evaluation Categories

• Strategy and Improvement• Work Organization• Production and Capacity Planning• Customer Interface• Production and Product Control• Supplier Interface

MMOG/LE Translations

• Available in 10 languages including:English French German

Spanish Portuguese Chinese

Romanian Czech Russian

Turkish

What Does this Mean to Me?

1. Attend AIAG/Odette MMOG/LE standard training • Understanding and building a team to complete assessment

2. Complete self-assessment • Attend self-assessment education and review

• Develop gap analysis and action plan customer, internal, and sub suppliers

3. Implement Action Plan • Internal processes and systems

• Sub suppliers (e.g, Tier 2)

4. Customer certifies self-assessment score

Completing the Self-Assessment

Download the Self Assessment

odette.org or aiag.org

ENGLISH

FRENCH

CHINESE

1.2 Objectives

1.2.1Objectives relative to the Materials Planning and

Logistics function are defined, communicated and understood within the organization.

Why?

Objectives allow departments and employees to focus on areas of importance to achieve customer satisfaction and the organization's Materials Planning and Logistics strategy.

Criteria

F2 XAll objectives are measurable and consistent with the

organization's Materials Planning and Logistics strategy.

EQOS - Inventory accuracy is measured by the cycle count program, supplier delivery performance, customer delivery performance.

 

F2 xObjectives are accepted by all relevant functions and

are clearly cascaded throughout the organization.

EQOS reviewed by operations and at staff meetings and posted monthly for all employees to review.

 

F2Objectives are reviewed with senior management at

planned intervals.

Complete the FormEach Question is Yes (“X”) or No (Blank)

Populates the gap analysis tab

Each Question is Weighted

F1

F2 Missing six results in “C” level

F3 Missing one results in “C” level

Submit Scoring Summary

Submit Gap Analysis List of All Unanswered Questions (Blank)

Who is requiring MMOG/LE?

OEM EMEANorth

America

South

America

Asia/

PacificFrequency of Submission

Comments

Europe Yes TBD Yes Annually

Chrysler’s requirement for 2008 is that suppliers must complete the MMOG/LE document and have it available upon request.

Yes Yes Yes YesAnnually. This is a requirement for Q1.

Currently, all regions using MMOG for Q1 require Level

A; exception for Europe: for current Q1 suppliers Level B is accepted for 2008 certification update period (May 1st - July 31st), changed to be communicated 2nd half of 2008.

Western Europe and Central and Eastern Europe only

Yes New vehicle project

Strong involvement of the plant management is required in order to make sure that progress is in place.

Yes Yes Yes Yes Required all suppliers

Volvo Car

Yes Yes Yes YesAnnually. This is a requirement for Q1

Volvo Group

Europe, a few suppliers in the Middle East

Yes Yes, BrazilIndia, China

Annually self-audit submission and follow-up to be implemented

OEM Supplier Audit Policy

Supplier evaluations are completed by Chrysler personnel using the Supply Process Sign Off (SPSO) for new suppliers, new supplier locations, and problem suppliers. The SPSO encompasses elements inclusive of the MMOG self-assessment. Additional audits will be conducted on suppliers that have a significant variance in the self-assessment ranking and their actual Chrysler Supply performance rating.

Potential suppliers, new suppliers, and problem suppliers. All suppliers will eventually get an audit. Major and problem suppliers will be prioritized.

Suppliers are consulted on the Global MMOG/LE in the Project Phase. Annual audits are not required annually, only during the project phase. In the Trial phase, evaluations are carried out if there are problems with the supplier.

New and problem suppliers.

Volvo Car

An attempt is made to visit all new suppliers and big volume suppliers. For potential suppliers self-assessment is the first step.

Volvo Group

Potential suppliers, new suppliers, and low performing suppliers.

OEM Focus During MMOG/LE Audits

• Strategy and Improvement– Management commitment

• Capacity and Production Planning

• Supplier Interface (Tier 2)– Performance measurement

– Sub-tier supplier communication

– Sub-tier suppliers in emerging markets

• Improvement Plan

• Self-Assessment Quality

Key MMOG/LE Criteria

MMOG/LE Processes

Key Criteria

• Materials Management Objectives

– Analyzed, measured (action plans if necessary)

– Defined, documented, communicated and understood

– Identify continuous improvement opportunities

– Corrective action for bottleneck processes

– Job descriptions, work instructions and training plans

Key Criteria

• Key Performance Metrics

– Delivery Performance

– Supplier Performance

– Internal performance (plan versus actual)

KPI’s for MMOG/LE*

ASN Message

KPI4GMML 1ASN Performance

KPI4GMML 5Production Disruption

Schedule Modifications

Incomplete unitsLine Stops

KPI4GMML 4Material Handling &

Identification

or

KPI4GMML 2Delivery

Accuracy

or

KPI4GMML 6 Supplier Communication

& Cooperation Criteria : Self-sufficiency, Reliability,

Responsiveness Supplier problem notification, Availability, Flexibility

Delivery Requirements

Supplier

Plant Customer Plant

WarehouseAssembly Line

DOCK

DOCK

KPI4GMML 3“VMI”

*Key Performance Indicators for Global Materials Management and Logistics

Key Criteria

• Resource Planning – Flexibility and availability are optimized

– Contingency plans and emergency procedures exist

• Employees are trained

• Capacity Planning – Long, medium, short-term plans reviewed regularly

• Process in place to notify of shortages

• Support all requirements for all customers

– Minimize inventory• Obsolescence• Raw material• WIP• Finished goods

Key Criteria

• Communication

– Scheduling automatically integrated into system without manual intervention

» 830/DELFOR/Planning Releases

» 862/DELJIT/Shipping Releases

– System compares resources versus requirements

– Process in place to notify of resource limitations

• Material Identification

– Segregate good/bad material

– Packaging and bar code labeling

Key Criteria

• Production and Product Control– Process to monitor inventory levels

» Safety stock, minimum stock, etc.– Count Accuracy– Product structure accuracy– Control and handling of WIP, scrap, rejects, returns– Traceability

Key Criteria

• Engineering Change Control− Participate and formal sign off− New parts/past models/inactive parts

• Shipping– Timing, contents and accuracy of shipping labels– Labels match customer requirements– Data content of ASN is 100% accurate– Controls in place to prevent shipping discrepancies– Customs clearing process (if applicable)

Key Criteria

• Supplier Communication− Process to ensure sub-tier suppliers can support

production on-time with the right quantities− Electronic communication (EDI or Internet)

» Releases, schedules and ASNs» Planning horizon is appropriate » In-transit visibility from ASNs

− Customs clearing process (if applicable)− Process for suppliers to notify of shortages

Key Criteria

• Supplier Packaging

−Bar code labels

−Process to define packaging and pack size

−Ensure sufficient packaging material is available

Key Criteria

• Supplier Assessment

– Methodology to select and evaluate suppliers

– Continuous improvement process for sub-suppliers

– Supplier performance metrics

AIAG/Odette Benefits Survey

AIAG and Odette MMOG/LE Survey

• Survey administered in March/April 2007

• Over 160+ survey respondents

– North America

– Europe

– China

• Respondent demographics

– Tier 1, Tier 2, Tier 3 and Aftermarket

– Large, Midsize and Small Companies

– Implementation time was from 1 to 3+ years

• Management commitment was not measured

Top Five Performance Improvements: Tier 1 and Tier 2-3

1. Ability to meet ISO TS-16949

2. Ability to keep existing business

3. Data accuracy

4. Ability to support lean (Tier 1)

4. Overall supplier rating (Tier 2-3)

5. Inventory Control

Regardless of Tier:

Top Five Performance Improvements: Large, Midsize and Small Companies

1. Data accuracy

2. Ability to meet ISO TS-16949

3. Ability to keep existing business

• Large suppliers also indicated – Delivery accuracy and inventory control

• Midsize suppliers also indicated – Supports lean implementation and new business

• Small suppliers also indicated – Overall supplier rating and new business

Regardless of Size:

Top Five Performance Improvements: by Time Implemented

1. Data accuracy

2. Ability to meet ISO TS-16949

3. Ability to keep existing business

Also indicated:• < 1year: Ability to support lean and inventory control• 1-2 years: Inventory control• 2-3 years: Delivery accuracy and line shortages• 3+ years: Reduced manual entry and inventory control

Regardless of Time Implemented:

Data Accuracy Positive Performance Improvement Mean Score Over Time

58

60

62

64

66

68

70

<1 Year 1-2 Years 2-3 Years 3+ Years

Notes:

• On a 100 point scale• Over 60 is considered a strong positive response

General Findings

• Meeting customer requirements and data accuracy are

consistent benefits regardless of time, size or tier

• MMOG/LE usage continues to improve year after year– MMOG/LE is an investment in first year of implementation

– Continuous improvement is a journey, not a destination

• Minimal differences between N.A. and Europe– Performance improvements were consistent

MMOG/LE Results Identified by OEMS

Renault and MMOG/LEGlobal Benefits

• Renault requires the use of Global MMOG/LE in project

phase (vehicles or engines)

• In July 2007 for the “Twingo” program:

– For 28 suppliers using Global MMOG/LE • Service Rate = 91 %

– For the others : • Service Rate = 80 %

Ford and MMOG/LE Delivery Rating Improvements

• 1641 suppliers in North America completed MMOG/LE

• As of December 31st, 2007:

– 90% of suppliers reporting MMOG/LE Level “A”

– 90% of suppliers have a delivery rating > 80

– 15% delivery improvement in the past 10 years

Ford and MMOG/LEBenefits

• Improved Ford Delivery Ratings – ASN data accurate and timely– Up-to-schedule shipments– Correct packaging and labeling– Premium instances reduced

• Improved communication with the Ford customer locations

• Fewer Ford plant shut downs due to materials management issues

All of which lead to increased customer

satisfaction!

Ford and MMOG/LEBenefits

Feedback and observations from supplier onsite audits– Cost reductions; specifically inventory carrying cost of raw

material, WIP, and finished goods– Optimization of inventory safety stock levels– Improvement in floor space utilization– Adherence to FIFO practices – Accurate labeling of material– Efficiencies in shipping and receiving areas with established

window times– Accurate part tracking– Correct shipment being loaded on the truck– Better understanding of material management system– Visual organization – Plan For Every Part

Ford and MMOG/LE China Tier 1 Supplier’s Opinions

• Reduction in raw material, work-in-process and finished inventory• More efficient process from receiving raw material to shipping inventory• Visible signs on shop floor identifying manufacturing operations• Use of metrics to capture failure in process• Importance of appropriate packaging• More organized warehouse: FIFO process used more effectively• More control and accountability in the material ordering process• More warehouse space• Ease of production planning and scheduling process• Ability to compare material received versus material shipped • Ability to see ASN’s from tier 1’s and pay tier 1’s electronically• Improved communications within the supply chain• Less errors in delivery rating

Chrysler and MMOG/LEDelivery Score Improvements

• 600+ suppliers completed MMOG/LE in 2006/2007

• 54% improved in Chrysler delivery rating

• Average improvement in Chrysler rating = 30%

• 36% improved MMOG/LE score

• 85% are at “A” Level

Chrysler and MMOG/LEMMOG Benefits

For Chrysler• Improved Delivery Ratings

in multiple categories:– Shipment data is improved– Maintained deliveries to

schedule– Reduction in expedited freight

• Improved plant up-time• Improved communication

with plants• Provides measurable,

objective data for supplier improvement

For Suppliers• Supports LEAN principles• Reduction in material,

inventory, safety stock• Improved communications

with customers• Reduced downtime incidents• Improved quality and

efficiency of window time conformance

• Provides measurable, objective data for supplier improvement

Volvo Group and MMOG/LEBenefits

• All new suppliers are requested to submit the document• A Requirement for existing major and poor performing suppliers • A Criteria of Volvo Group Key Elements Procedures, Logistics • > 850 assessments received, > 230 verified with Volvo internal personnel (most often

on location)• Linked to supplier relationship development process• Example N-America: Self-assessed 44% of suppliers on A-level

After verification 37% of suppliers on A-level

• Example S-America: Adherence to supply instructions (Mar to Aug)• Total local suppliers average 89.0% correct day/quantity• Total self-assessed suppliers 86.7% • All verified level A-suppliers 96.7% • All verified level C-suppliers 85.8%

not included: Volvo Car Corporation

MMOG/LE Benefits and Success Stories from

Suppliers

JCC

• Company size $50 million USD– Supplier in Fuzhou, China

• Parts produced– Aluminum alloy pistons– Motor air compressors– Diesel engines– Outboard engines

• OEM and aftermarket supplier

JCC and MMOG/LEBenefits

• Reduced raw material and finished goods inventory by 50%

• Ability to achieve 100 points for monthly delivery rating

• Decreased premium freight• Improved overall rating by 20%• Obtained a competitive advantage • Obtained new customers• Enterprise visibility into customer

requirements drives business• Gained efficiencies in productivity, quality

and delivery

GATES – London Operations

• Products manufactured include pulleys, dampers and idlers.

• Approx $55 million in sales (medium size)

• Supplies to both OEMs and major Tier 1’s– Ford, General Motors,

Nissan, Automotive Component Holdings (Visteon)

GATES and MMOG/LEBenefits

CUSTOMER DELIVERY PERFORMANCE• On time shipping performance to customers in 2007 was

99%• Delivery ratings to customers providing feedback is 100

SUPPLIER PERFORMANCE• On time delivery from suppliers is 100% on date required• 97% of material requirements are communicated

electronically to suppliers• 95% of incoming material shipments are transmitted via

ASNs

GATES and MMOG/LEBenefits

PHYSICAL INVENTORY• As accuracy improved went 12 to 1 a year

– Estimated cost for a physical inventory is $15-20K (overtime wages, equipment rental, inventory tags, etc.)

INVENTORY VALUE• Reduction of approx. 50% since 2001

– Since 2001 sales have increased by 20%

EXPEDITED SHIPMENTS• Premium freight on inbound/outbound material has

gone from $180K in 2002 less than $25k last year

Supporting Training and Documents Available

Harmonized Global Training

1-Day standardized global AIAG/Odette training

Training Slides &Instructor Manual

ParticipantManual

ImplementationToolkit

Odette/AIAGMMOG/LEWork Group

MMOG/LE Course Objectives

• Continuous Improvement Tool

• What is the MMOG/LE?

• Assessment

• Gap Analysis

• Implementation

MMOG/LE

MMOG/LE Training and Seminars World Wide

America’s Europe Others

177 people

130 people

180 people

50 people

640 people

160 people

700 people

200 people

100 people

6 people 4 people

55 people

25 people

23 people

13 people

United States of America

Canada

Mexico

Brazil

United Kingdom

Sweden

Germany

France

Spain

Czech Republic

Slovac Republic

Romania

Poland

Russian Federation

China

Iran

*

• India (2008)

Additional Seminars held:• Japan• Taiwan• Hong Kong• Thailand

15 people

Turkey

Related Guidelines and Best Practices

• M-7: Materials Management Operations Guideline/Logistics Evaluation (MMOG/LE)

• M-8: Key Performance Indicators for Global Materials Management and Logistics (KPI4GMML)

• Trading Partner Agreement for Global Materials Management and Logistics (available March 2008)

• E-17: Joint Automotive Industry Forum China B2B Recommendation

• EDI/XML Project Planner

• Global Evaluation for Carriers and Logistics Service Providers

Available at www.aiag.org or www.odette.org

MMOG/LE Seminars held Globally

• Americas– US – Mexico – Brazil

• Asia– Japan – Taiwan – China - Hong Kong – Thailand – India

• Central and Eastern Europe– Poland - Czech Republic – Slovakia – Turkey – Russia – Romania

• Europe– France – UK - Spain

Example of Bulleted List

• Automotive Industry Action Group– Not-for-profit Association

• Not against it, either

• Everyone wins• Money

– Money– More Money