In the summer of 2019, the Automotive Industry Action Group (AIAG) and Odette International are releasing Version 5 of the Materials Management Operations Guideline/Logistics Evaluation (MMOG/LE) assessment. This update is part of a trend toward tightening compliance regulations.
Since 2002, automotive companies have used MMOG/LE standards to choose Tier 1 and Tier 2 manufacturers and parts suppliers. Now, these automotive manufacturers and suppliers must be prepared to meet more stringent requirements in order to win bids with top car companies across the U.S. and around the world.
MMOG/LE Version 5 emphasizes risk management and requires that manufacturers and suppliers go digital. The good news is that QAD CEBOS EQMS can help your company make the transition to MMOG/LE Version 5.
How Standards Are Toughening
MMOG/LE Version 5 emphasizes risk management and contingency planning more than the previous version. The new version stresses the need for cybersecurity policies. Emphasis is also placed on minimizing skills gaps.
Now, companies will no longer be able to rely on spreadsheets. ERP and EQMS need to be integrated, and companies must use an Electronic Data Interchange (EDI).
While the number of criteria has been lowered to 187, achieving a Level A or ZA score has become more challenging. The number of F3 criteria increases from 34 to 43, and companies must fulfill 95% of the criteria to achieve Level A, instead of 90%. If a company misses a single criterion, it will be given a C or ZC rating.
The criteria focus on ERP, EDI, barcoding, and quality processes related to the supply chain, as well as customer and supplier communications, corrective actions, and risk management. If manufacturers and suppliers fail to meet these requirements, top automotive companies will refuse to work with them.
Importance for Suppliers and Manufacturers
Tier 1 companies can’t afford not to meet the new requirements. They must undergo a full assessment. For example, all suppliers for Ford must be compliant. If a supplier misses one of the 187 criteria, they fail and can’t supply to Ford.
Other original equipment manufacturers (OEMs) that demand compliance are Fiat, Chrysler, VW, GM, IVECO, Jaguar/Land Rover, PSA, Renault, and Volvo Car and Truck.
At the Tier 2 level, there are 102 requirements, including 43 F3s, 50 F2s, and 9 F1s. Car companies that require compliance at the Tier 2 level are Autoliv, Benteler, BERU, Bosch, Continental, Faurecia, Gates, Johnson Controls, Lear, Magna Powertrain, MGI, Courtier, Pierburg, Selzer, Snop, Valeo, and WABCO. The Mexican and South Korean governments are also promoting the need for compliance.
Benefits of MMOG/LE Changes
Companies that adopt the more stringent regulations of MMOG/LE experience some pleasant side effects. Greater compliance efforts mean less risk and optimal supply chain and production performance.
QAD reported many improvements for automotive manufacturers, including:
- 50% reduction in inventory
- 50% lower inventory carrying costs
- 85% reduction in premium freight costs
- 50% less employee training
- 15% improvement in service rates or delivery rating
MMOG/LE regulations eliminate many costly errors that come from manual processes. Companies are able to grow without adding resources or staff because of greater efficiency. Better alignment between supply and customer demand doubles sales in 2 to 3 years and boosts customer satisfaction anywhere between 8% and 20%.
What QAD CEBOS EQMS Can Do
Fortunately, automotive manufacturers and suppliers don’t need to make the transition to MMOG/LE Version 5 requirements alone. When they partner with QAD CEBOS for EQMS, the transition is smoother because of our solution’s features and functions.
EQMS helps with compliance by integrating and digitalizing operations. QAD CEBOS EQMS provides software for supplier management, auditing, corrective action, document management, and training management.
QAD CEBOS APQP makes it easy for companies to adopt a proactive approach to quality and carry out continuous improvement for new product introduction.
Get prepared for MMOG/LE Version 5. Register for the QAD CEBOS webinar Summer 2019 Updates to MMOG/LE: What Automotive Manufacturers and Suppliers Need to Know about Version 5.