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Materials Management Operations Guideline/Logistics Evaluation

Materials Management Operations Guideline/Logistics Evaluation November 2007 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

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Materials Management Operations Guideline/Logistics Evaluation

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  1. Materials Management Operations Guideline/Logistics Evaluation November 2007 MMOG/LE

  2. 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

  3. Why MMOG/LE?

  4. Improving Supply Chain Delivery Performance • Gain control of processes • Reduce inventory carryingcosts, 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

  5. 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.

  6. MMOG/LE Outside the Automotive Industry • Universities • High Schools • Other non-automotive industries • Hospitals • Construction • Aerospace • Chemistry • Electronics • Industrial • Retail

  7. What is MMOG/LE?

  8. 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

  9. Scoring Summary (ABC Classification)

  10. MMOG/LE Self Evaluation Categories • Strategy and Improvement • Work Organization • Production and Capacity Planning • Customer Interface • Production and Product Control • Supplier Interface

  11. MMOG/LE Translations Available in 10 languages including: English French German Spanish Portuguese Chinese Romanian Czech Russian Over 2000 trained users in 16 different countries

  12. What Does this Mean to Me? Attend AIAG/Odette MMOG/LE standard training Understanding and building a team to complete assessment Complete self-assessment Attend self-assessment education and review Develop gap analysis and action plan customer, internal, and sub suppliers Implement Action Plan Internal processes and systems Sub suppliers (e.g, Tier 2) Customer certifies self-assessment score

  13. Completing the Self-Assessment

  14. Download the Self Assessment odette.org or aiag.org ENGLISH FRENCH CHINESE

  15. Complete the FormEach Question is Yes (“X”) or No (Blank) Populates the gap analysis tab 15

  16. Each Question is Weighted

  17. Submit Scoring Summary

  18. Submit Gap Analysis List of All Unanswered Questions (Blank)

  19. Who is requiring MMOG/LE?

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  21. 21

  22. 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

  23. Key MMOG/LE Criteria

  24. MMOG/LE Processes 24

  25. 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

  26. Key Criteria Key Performance Metrics • Delivery Performance • Supplier Performance • Internal performance (plan versus actual)

  27. KPI4GMML 5 Production Disruption Schedule Modifications Incomplete units Line Stops KPI4GMML 6 Supplier Communication & Cooperation Criteria : Self-sufficiency, Reliability, Responsiveness Supplier problem notification, Availability, Flexibility KPI4GMML 4 Material Handling & Identification or Delivery Requirements ASN Message Customer Plant DOCK DOCK Warehouse Supplier Plant Assembly Line or KPI4GMML 2 Delivery Accuracy KPI4GMML 3 “VMI” KPI’s for MMOG/LE* KPI4GMML 1 ASN Performance *Key Performance Indicators for Global Materials Management and Logistics

  28. 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

  29. 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

  30. 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

  31. 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)

  32. 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

  33. Key Criteria • Supplier Packaging • Bar code labels • Process in place to define packaging and pack size • Ensure sufficient packaging material is available

  34. Supplier Assessment • Methodology to select and evaluate suppliers • Continuous improvement process for sub-suppliers • Supplier performance metrics Key Criteria

  35. AIAG/Odette Benefits Survey 36

  36. 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

  37. Top Five Performance Improvements: Tier 1 and Tier 2-3 Ability to meet ISO TS-16949 Ability to keep existing business Data accuracy Ability to support lean (Tier 1) Overall supplier rating (Tier 2-3) Inventory Control Regardless of Tier:

  38. Top Five Performance Improvements: Large, Midsize and Small Companies Data accuracy Ability to meet ISO TS-16949 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:

  39. Top Five Performance Improvements: by Time Implemented Data accuracy Ability to meet ISO TS-16949 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:

  40. 70 68 66 64 62 60 58 <1 Year 1-2 Years 2-3 Years 3+ Years Data Accuracy Positive Performance Improvement Mean Score Over Time Notes: • On a 100 point scale • Over 60 is considered a strong positive response

  41. 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

  42. MMOG/LE Results Identified by OEMS

  43. Global MMOG/LE 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 % 44

  44. Delivery Rating Improvements 1641 suppliers in N.A. completed MMOG/LE 2006/2007 As of October 2007, 93% are >80 15% improvement in past 10 years 85% of suppliers are at MMOG/LE Level “A” 45

  45. Benefits of Using 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 • Less errors • 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

  46. Delivery Score Improvements • 602 suppliers completed MMOG/LE 2006-2007 • 54% improved in Chrysler delivery rating • Average improvement to Chrysler rating = 30% • 36% improved MMOG/LE score • 85% are at “A” level

  47. MMOG/LE, Volvo Group, update Sept ‘07 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 48

  48. MMOG/LE Benefits and Success Stories from Suppliers

  49. JCC Company Background • 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

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