MMOG/LE
Materials Management Operations Guideline/Logistics Evaluation
AUTOMOTIVE SUPPLY CHAIN STANDARDS: COMPLY OR DIE
In today’s fast-changing automotive industry, original equipment manufacturers (OEMs) like Ford, Volvo, Renault, Stellantis, John Deere, BMW and many others, and some Tier 1 suppliers, increasingly insist that their suppliers meet global standards that help ensure excellent material delivery performance. Such standards put considerable pressure on tier suppliers because they must comply with standards while continuing to achieve growth and profitability.
The difficulty of maintaining this balancing act for tier suppliers, if anything, will increase during the explosive disruption taking place now in the automotive industry due to electrification, ride sharing, supply chain disruptions and ever-increasing customer expectations. In addition, tier suppliers need to take advantage of rapidly advancing technologies to remain competitive, such as digital twins, digital printing, machine learning, the Industrial Internet of Things, and several others. Many of these disruptions and technologies have been or will be addressed by supply chain standards.
How should an automotive supplier deal with this situation? The initial steps include answering the following questions:
- Which automotive supply chain standard should suppliers care about?
- What does the MMOG/LE standard cover?
- What does the MMOG/LE assessment look like?
- How can an organization effectively meet the standard?
WHICH AUTOMOTIVE SUPPLY CHAIN STANDARD SHOULD SUPPLIERS CARE ABOUT?
While there are several supply chain management standards in the automotive industry, the Materials Management Operations Guideline/Logistics Evaluation (MMOG/LE) is a comprehensive self-assessment required by many OEMs and Tier 1 suppliers. MMOG/LE is widely recognized as a key standard for automotive supply chain excellence. Suppliers around-the-world use MMOG/LE to evaluate production, parts, service and warehousing processes. The Automotive Industry Action Group (AIAG), which is the North American automotive standards association, and its European counterpart, Odette, introduced MMOG/LE in 2002 to improve global supply chain management. AIAG and Odette continue to oversee the ongoing development of MMOG/LE.
The MMOG/LE assessment is not static. As the automotive industry evolves, AIAG and Odette revise the standard. This means that tier suppliers need to adjust their processes and information accordingly. For example, MMOG/LE version 6 was introduced in 2023 and leading suppliers are already working on meeting the requirements stipulated in this latest evaluation. Meeting the MMOG/LE standard, therefore, is not a one-time event on the part of tier suppliers; OEMs and Tier 1 suppliers require periodic proof of commitment and compliance from suppliers.
CAN AN AUTOMOTIVE SUPPLIER SUCCEED WITHOUT COMPLYING WITH MMOG/LE?
Any supplier that provides parts that flow up the supply chain to any of the OEMs that ask their suppliers to adhere to MMOG/LE should meet MMOG/LE’s requirements. Even those few automotive suppliers that operate in supply chains not requiring the MMOG/LE assessment should consider using MMOG/LE as a map and test of good business processes and practices.
MMOG/LE MEANS GOOD BUSINESS
Automotive suppliers use the MMOG/LE assessment to improve their materials management operations and logistics. Companies adopting MMOG/LE practices report many financial and business improvements, such as:
Lower inventory carrying costs up to 60%
Lower premium freight costs by 85%
Lower obsolescence costs by 80%
Better delivery or service ratings by up to 15%
Reduce employee training costs by 50%
Acquire new business
MMOG/LE also highlights areas where technology can help automate processes to eliminate error-prone manual processes. History has shown that companies achieve the best results from MMOG/LE when executive management actively participates in the assessment and when continuous improvement is a discipline rooted in the organization’s culture.
WHAT DOES THE MMOG/LE STANDARD COVER?
MMOG/LE focuses on critical supply chain management issues, including customer requirements, capacity constraints, contingency planning, supplier capability, resource allocation and employee skills. MMOG/LE establishes a common definition of supply chain management processes to help supplier organizations in areas such as:
Determining the robustness of existing internal processes
Benchmarking supply chain operations
Facilitating continuous improvement
Increasing customer satisfaction
Streamlining information flows throughout all tiers of the supply chain
WHAT DOES THE MMOG/LE ASSESSMENT LOOK LIKE?
The MMOG/LE assessment is available in a modern browser-based application located at www.mmogle.com. MMOG/LE consists of the following parts:
Two assessments: Full and Basic
Six chapters that outline the components of supply chain
A gap analysis for recording action plans
Criteria to assess an organization’s supply chain processes and capabilities
An automated scoring and classification system with the categories of A, B, and C in the Full version and ZA, ZB and ZC in the Basic version (A and ZA are the best classifications)
Integrated tools for analyzing gaps, building action plans and tracking progress
Charts to graphically summarize and communicate assessment results
Background information and recommendations on how to use MMOG/LE
With MMOG/LE version 6, the basic structure of the assessment remains essentially intact. Listen to the Automotive Supply Chain Prophets podcast with Tanya Bolden, Vice President, Corporate Responsibility and Supply Chain Products & Services, Automotive Industry Action Group (AIAG) and Terry Onica discuss Version 6 and how MMOG/LE is transforming the industry.
HOW CAN AN ORGANIZATION EFFECTIVELY MEET THE STANDARD?
A few ERP providers offer the business process flows, information capture and reporting to help suppliers readily conduct and report on the MMOG/LE assessment. QAD Adaptive ERP embeds all the business process maps, work instructions and compliance points associated with MMOG/LE. QAD updates process maps, work instructions and compliance points and incorporates it into the next product release each time the MMOG/LE standard changes. The QAD solution includes the mapping of all 176 MMOG/LE criteria which directs suppliers on the steps required in QAD Adaptive ERP to become fully compliant as shown below.
QAD has provided ERP to automotive suppliers for four decades and actively participates in AIAG and Odette. For suppliers requiring a new ERP or needing to replace a legacy ERP, using QAD Adaptive ERP may be the fastest path to MMOG/LE compliance. Some suppliers, however, need an introduction to MMOG/LE, which is quite an in-depth assessment, to understand how to approach MMOG/LE specifically for the supply chain operations and strategy.
In many automotive manufacturers, quality, supply chain and IT functions tend to operate as silos. This leads to suboptimal results for the organization as well as the overall automotive supply chain. After a comprehensive review of AIAG/Odette’s MMOG/LE and IATF 16949 by QAD and Quistem, we identified 24 essential processes which are a basis to improve performance and break down silos. These processes should be reviewed together with quality, supply chain and IT. By working with organizations to focus on these processes, QAD/Quistem has helped automotive start-ups and traditional suppliers to identify gaps and improve performance. Automotive suppliers should consider integrating these into their existing management systems for better supply chain outcomes. Although each of these processes is applicable across all areas of operations, we have aligned them within the functions of the business.
24 Essential Supply Chain Processes
Business Planning
1. SC Objectives
2. Risk Assessment
3. Contingency Plans
4. Advanced SC Technology
5. Corporate Responsibility
6. Supply Base map
Program Planning
7. Customer Forecast & Scheduling
8. Customer Communication
9. Product Realization
10. Service Parts Planning
11. Capacity Planning
12. Constraints management
13. Packaging Design
Operational Planning
14. Supply Chain Process Lead Times
15. Production Scheduling
16. Manpower Evaluation
17. Production Batch/Lot Size & Throughput times
Operational Control
18. Procedures & Work Instructions
19. Electronic Data
20. Container Management
21. Storage
22. Transportation Documentation
Performance
23. Supplier Performance
24. Continual Improvement
AIAG will be providing a supply chain basics course based on our 24 essential supply chain processes. To keep up-to-date on these processes visit the Auto Supply Chain Prophets podcast or subscribe to it on your favorite podcast platform.
QAD MMOG/LE REVIEW ASSESSMENT
The QAD MMOG/LE Review Assessment is a two-day consultation performed by QAD automotive and MMOG/LE experts for organizations who want to increase operational performance, benchmark operations against best practices or meet a specific customer requirement. The consultation prepares the supplier for internal or external audits and helps benchmark operations against industry best practices. The MMOG/LE Review also identifies operational gaps and recommends process improvements in order to attain MMOG/LE Level A classification. The review provides many benefits, such as:
Save time in preparing for and achieving Level A classification
Uncover critical gaps that could result in a Level C score
Fully automate and integrate the planning and scheduling process to ensure customer and supplier orders are processed efficiently
Ensure customer requirements are accurately addressed
Verify that work instructions and assessment comments are properly documented
Confirm management understands the score, gaps and relevant action plans
With QAD Adaptive ERP and the QAD MMOG/LE Assessment Review, QAD has helped many organizations achieve Level A classification and improve business processes. To learn more about how QAD can help you with MMOG/LE, contact QAD.
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