You’ve heard the warnings before, you know the risks, you’ve seen it happen to others…but how prepared are you? Whether you are supplying an automotive part to an OEM (original equipment manufacturer) or a Tier 1 supplier, the risk of encountering a business interruption is almost inevitable. What will you do in the result of that business disruption? How will you deliver the product to your customer? In the automotive industry, the demand for superior delivery standards is actually the norm, and the good news is…MMOG/LE is the tool to help you meet them.
What is MMOG/LE?
Materials Management Operations Guideline/Logistics Evaluation (MMOG/LE) is a comprehensive self-assessment required by many OEMs and Tier 1 suppliers. The self-assessment defines a common set of best practices for the service, warehousing, production and parts processes, and it’s used by nearly the entire automotive industry.
MMOG/LE can help your company reduce inventory and freight costs and increase customer satisfaction. Click here for a complete overview of MMOG/LE. If your company is not at least seeing a reduction in inventory, then it could be a sign that your company may not be taking the assessment seriously. When top management was fully engaged in getting results from the process, companies that QAD helped with the MMOG/LE assessment reported a reduction in inventory of up to 60%.
At the request of a customer, your company could be required to perform the self-evaluation. In the past few years, we have seen MMOG/LE expand between Tier 1 and Tier 2. In fact, every year, OEMs such as Ford, GM and FCA require you to annually update your MMOG/LE submission between May 1 and July 31.
The ability to manage risk is new in the current version of MMOG/LE. This can be found in sub chapters 2.5.1, 2.5.2 and 6.2.1. In general, these three sub chapters ask you to provide evidence of the following:
- Defining a process for managing, prioritizing and reducing risk
- Developing risk/action/contingency plans based on risk
- Training, testing and validating contingency plans
- Evaluating and applying lessons learned after a risk event
- Communicating contingency plans to sub suppliers for customer managed processes (e.g., transportation, packaging)
- Requiring sub suppliers to develop risk assessment process and contingency plans
Customers need to know that your company will be prepared to keep going AFTER a business disruption takes place.
I want to also note that Risk-Based Thinking was included in ISO/9001:2015 and will also be included in the upcoming ISO/TS 16949 which is due out in December of this year. So, from both a quality and delivery perspective, your organization will be required to focus on risk.
Why should you care about risk-based thinking and risk management?
If you haven’t been required to complete the MMOG/LE yet, you may be wondering why you should care. The failure to assess your company’s risk management strategy could result in the failure to gain new business or even lose existing business. But mostly, MMOG/LE is just smart business!
Take a look at this infographic for the reasons your company needs a Risk Management Strategy in place.
Where do you start creating a risk management strategy?
This all might sound overwhelming, but don’t worry, I’ve got you covered! AIAG (Automotive Industry Action Group) recently asked me to deliver an online course, which was designed to improve materials management efficiency and effectiveness in an organization’s supply chain.
The new e-learning course provides a great opportunity for those who support their company’s materials management team to gain an understanding of MMOG/LE without having to come on-site for the class. While the materials managers really need to attend the on-site class, those in a supporting role or who simply cannot get to AIAG headquarters now have the e-learning class as a viable tool to build their knowledge of MMOG/LE. To register for the classroom training, which I also instruct, visit the Global MMOG/LE Implementation Training page.
QAD is the proven industry leader when it comes to helping organizations achieve MMOG/LE Level A classification and help suppliers understand risk as it pertains to industry requirements. For more information about how QAD’s MMOG/LE solutions, please visit www.qad.com/mmogle or contact firstname.lastname@example.org.