11 March 2010

Viewpoint : Manufacturing

Drive to perfection

Published:: 01 October 2007
Article Type:: Viewpoint
Byline:: Terry Onica

As original equipment manufacturers (OEMs) embrace lean manufacturing principles and seek to balance production with demand, it is important 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. There''s a high price to pay for inventory in the wrong place. A thriving global automotive industry in the future will depend on a standard level of performance for materials flow.

Economists have proposed that having access to the right information at the right time is a big part of a perfect market. For manufacturers, having 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.

In 2004, OEMs and suppliers came together under the North American and European industry standards associations, 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. It 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.

For suppliers, the global MMOG/LE assessment helps to identify what process adjustments are needed. 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 has observed that using manual processes rather than automated systems for materials resource planning, bar code scanning and EDI results in more errors.

Since 2004, suppliers have reported notable improvements when MMOG/LE is used each year. These include a 50 per cent reduction in raw materials and finished goods, an 85 per cent reduction in premium freight, and an 80 per cent reduction in obsolescence costs.

Today, global OEMs and multinational tier 1 suppliers, in addition to using MMOG/LE in mature markets are introducing it to emerging markets such as China, India and Brazil to help educate suppliers on best practice for materials management in the automotive sector. MMOG/LE is used in order to save time and costs while helping to ensure effective, efficient management of materials.

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 assessment last June, a long distance supplier to North and South America based in China was able to achieve a perfect score on its delivery rating. Quite an achievement.

A recent joint survey by AIAG and Odette of automotive suppliers that have been using MMOG/LE from one to more than three years found that one of the most significant performance improvements has been increased data accuracy.

The use of such systems brings uniformity to data capture and communications as well as providing a means of tracking and tracing the accuracy of data.

Beyond this, the use of technology in the materials process helps to get the right information to customers and suppliers at the right time.

Many organisations in the automotive community are interested in driving industry standards, QAD among them. From my experience, I can see the benefit of global initiatives such as this for customers and suppliers, and how it could be used as a benchmarking and development tool not just for the automotive industry but for manufacturers in other sectors too.

Terry Onica is director of automotive marketing at QAD

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