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Terry Onica

Supply Chain

The Drive to Digital for MMOG/LE v. 5: What to Expect

Next evolution in facilitating effective relationships between suppliers and OEMs

Published: Thursday, May 2, 2019 - 12:03

Since the Automotive Industry Action Group (AIAG) and Odette International introduced the Materials Management Operations Guideline/Logistics Evaluation (MMOG/LE) more than 16 years ago, it has become the de facto standard for evaluating supply chain processes in the global automotive industry.

MMOG/LE is widely used globally among automotive suppliers and original equipment manufacturers’ (OEMs) for internal assessments, benchmarking, and improving supply chain performance to help accelerate development of the global automotive industry and deliver significant improvements in moving the industry toward perfect delivery performance.

In fact, according to AIAG, through the implementation of the MMOG/LE standard, suppliers have seen up to an 85-percent reduction in premium freight costs and a 60-percent reduction in inventory. The standard also mitigates risk by reducing line stoppages, minimizing skills gaps, and better managing suppliers.

AIAG and its European counterpart, Odette International, periodically review the MMOG/LE standards they created in order to reflect and further drive better-performing supply chains in the face of all the transformation and disruption occurring in the industry.

The newest version of MMOG/LE, version 5, will be released in summer 2019. It establishes a common definition of supply-chain management processes and introduces best practices to address critical areas for suppliers and OEMs. MMOG/LE helps organizations:

• Determine the robustness of existing internal processes
• Benchmark supply chain operations
• Facilitate continuous improvement
• Increase customer satisfaction
• Eliminate risk throughout the tiers

What to expect from MMOG/LE v5

New scoring

While MMOG/LE version 5 reduces the number of criteria to 187, achieving a Level A in the Full assessment or ZA score in the Basic assessment will be more difficult. The number of F3 criteria increases from 34 to 43. There are three weighted criteria in the MMOG/LE system: F1, F2, and F3. The F3 criteria are based on fundamental requirements of an organization’s operations and are core to the foundation of supply chain management. Therefore, if an organization misses one F3 criterion, MMOG/LE will automatically give that organization a Level C or ZC score.

These 43 criteria are centered on ERP, EDI/web, bar coding, and quality processes that should be leveraged in the supply chain. In addition, there are criteria that address complementary quality processes that focus on customer and supplier communications, corrective actions, risk management, and subsupplier management. Several of the F3 criteria were updated to align with principles in IATF 16949.

Lastly, in parallel with the additional F3 criteria, an organization must now fulfill 95 percent of the criteria to achieve Level A as opposed to 90 percent in prior versions.

New criteria, alignment, and concepts

A lot has changed in the industry since the last version of MMOG/LE in the areas of technology, supplier and risk management, quality, and performance. Therefore, MMOG/LE was updated as follows:

• Alignment with IATF 16949 (e.g., corrective actions, supplier performance, cascading best practices, and standards throughout the supply chain)
• More emphasis on risk management and contingency plans throughout the supply chain, including a cybersecurity policy
• A deeper alignment between strategies, objectives, and continual improvement
• More emphasis on minimizing or eliminating the skills gap
• Further emphasis on end-to-end systems integration, completely leveraging the planning system
• Strengthened requirements for supplier management (e.g., supplier selection and assessment, new product launch, use of metrics in the supplier assessment process).
• Full electronic exchange of data with subsuppliers by striving to achieve 100-percent EDI/web.
• Adoption of advanced technologies (Industry 4.0, smart manufacturing, China 2020, digital transformation) to increase performance and efficiency.

New way to submit assessment

Although the Excel-based MMOG/LE assessment tool has served the industry since 2002, the time has come to update it to a more modern application. Odette developed a modern browser-based application called MMOG.np (new platform or cloud). MMOG/LE version 4 will be the last assessment that can be submitted in the Excel format. Starting with version 5, the MMOG/LE assessment can only be submitted in the cloud. Suppliers have the coming year to transition to MMOG.np.

MMOG.np includes the same content and capabilities as the previous Excel-based versions. In addition, it provides organizations with a state-of-the-art tool, which includes audit trails, user access management, and data security. MMOG.np supports version 4 today and will support version 5 by summer 2019.

The new MMOG/LE version 5 represents the next evolution in facilitating effective relationships between suppliers and OEMs in a period when the supply chain is undergoing a massive transformation. MMOG/LE is poised to help continue to drive the industry forward in the coming years to realize even further efficiencies and growth.

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About The Author

Terry Onica’s picture

Terry Onica

Terry Onica is director of automotive, at Santa Barbara, California-based QAD, Inc., a leading provider of enterprise resource planning (ERP) software and services to global manufacturing companies.