Planning & Checking
Within the Plan, Do, Check, Act cycle, the work of Odette in the Buy-Ship-Pay process is mainly focused on the Doing but Planning and Checking also form an essential part of our portfolio of tools and best practice recommendations.
Standardised exchange of Automotive SCM KPIs
07 Jul 2021
The joint Odette/AIAG recommendation Key Performance Indicators for Automotive Supply Chain Management (LK03) insists that reports on the accuracy of deliveries and alerts concerning deviations from the logistics agreement must be communicated by the customer to the supplier immediately after each delivery or each deviation.
Updated version of KPIs for Automotive Supply Chain Management
01 May 2020
Key Performance Indicators (KPIs) are much more than just the numbers you report regularly. They are essential tools helping you to understand the performance of your business allowing you to take action and make critical adjustments to achieve your strategic objectives.
The dynamic nature of vehicle production, especially with the increasing demand for customised end products, has a major impact on the ability of organisations to accurately forecast demand at all levels of the supply chain. This, combined with the continual supply disruptions experienced by the industry, has a direct effect on the overall performance of the order fulfilment process.
To be successful, the different actors in supply networks need to work together in the planning process and Odette has developed a number of tools and recommendations to assist this collaboration.
Effective Demand Capacity Planning (DCP) leads to earlier and more reliable detection of capacity issues and is key in avoiding significant shortfalls of supply and situations of serious under-utilisation of assets. However, to be effective, DCP requires accurate data. Odette Forecast Accuracy Measurement recommendation, coupled with Collaborative Forecasting guidelines, provides OEMs and suppliers with the tools to measure the quality and stability of demand schedules and gives advice and support on the practical and technical aspects of implementing a Forecast Accuracy Index.
In addition, the Production Capacity Assessment Tool offers the advantage of standardising the business parameters that are necessary to calculate production capacity and helping to establish a proactive risk management methodology for checking the planned against the actual capacity of a production facility.
We all know the phrase “What gets measured, gets managed” and, while some may question this being a universal truth, in general we accept that we need to measure the effectiveness of our own organisation and the capability and performance of our supply chain partners.
The MMOG/LE tool developed by Odette and AIAG is the recognised industry standard for measuring the SCM capability of your own internal logistics organisation and of your supply chain partners. It provides the means for planning and checking improvements in areas where shortcomings and weakness have been identified.
Capability is one thing, actual performance is another, and all major players use Key Performance Indicators (KPIs) to measure their own performance and that of their suppliers and service providers. The Odette/AIAG recommendation ‘KPIs for Automotive Supply Chain Management’ promotes better understanding between business partners:
- for suppliers, by harmonising the way that different customers measure logistics performance making results comparable.
- for customers, by facilitating the development of Supplier Appraisal systems based on standard indicators
To further support this recommendation, Odette has developed two standard XML messages, which allow KPI reports to be exchanged between customers and suppliers electronically.
A growing requirement for the automotive supply chain, is of course, the measurement of how green it is, especially in terms of CO2 emissions. At Odette we were rather ahead of the game with our ‘Guidelines for Reporting Freight Greenhouse Gas Emissions’ first published in 2013. There is clearly more work to be done here.
This guideline has been developed to provide practical advice and guidance in the use of existing, proven techniques to identify, measure, monitor, mitigate and manage supply chain risk by both large and small organisations, whatever their level in the supply chain.
Vehicle manufacturers and Tier 1 suppliers who already have well developed SCRM processes and plans in place will be able to compare themselves with industry best practice contained in this guideline.
It is also aimed at those organisations that do not currently have robust SCRM processes in place, or have not yet started implementing SCRM and are seeking to have a better understanding of the processes involved and need support to identify a practical starting point.
The Production Capacity Assessment Tool detailed in this document is recommended as the preferred, proactive risk management methodology for checking the planned and actual capacity of a production facility. The Tool offers the advantage of standardising all of the business parameters that are necessary to calculate production capacity.
Forecast accuracy is a fundamental requirement for the alignment of manufacturing and logistics processes throughout the supply chain, involving OEMs, suppliers, and transport and logistics providers. This Odette Best Practice recommendation defines a methodology for measuring the forecast accuracy of customer schedules.
This measurement is essential to support improvement initiatives that can simultaneously increase service levels and reduce inventory, both at the customer side and the supplier side The Guidelines list the data to be collected and the mathematical approach to calculating the Forecast Accuracy Index (FAI) and an associated Weighted Tracking Signal (WTS).
Demanding supply chains require efficient and comprehensive management processes to avoid capacity shortfalls and the under-utilisation of resources. Demand Capacity Planning (DCP) plays a significant role in this area, by incorporating business process models, functionalities and respective data elements.
This publication defines standards for successful DCP in the automotive industry including a basis for the interoperability of applications from different software providers.
XML Implementation Guideline
The XML message specified in this publication is intended to provide a means for a customer in the Automotive Supply Chain to transmit a report of a Logistics Catalogue Deviation to a supplier electronically as recommended in the Odette/AIAG Recommendation ‘KPIs for Automotive Supply Chain Management (LK03)’.
XML Implementation Guideline
The XML message specified in this publication is intended to provide a means for a customer in the Automotive Supply Chain to transmit a report of a Delivery Accuracy Rating to a supplier electronically as recommended in the Odette/AIAG Recommendation ‘KPIs for Automotive Supply Chain Management (LK03)’.
Originally serving as a supplemental product to the Global MMOG/LE tool, this recommendation defines standard key performance indicators (KPIs) for global supply chain management in the automotive industry. These common indicators not only align with the requirements of Global MMOG/LE, but also help facilitate greater understanding between business partners and support risk management. This KPI document provides greater transparency between OEM and supplier performance expectations.
These Guidelines have been published by Odette specifically for the automotive sector. They are directed at helping all those involved to understand the principles and to adopt a consistent approach that will support both recent and future standards and legislative requirements. Rather than introducing new methodologies, these Guidelines make recommendations based on use of the most appropriate existing initiatives.
The market for automotive spare parts is highly dynamic and volatile, and presents significant challenges to both manufacturers and suppliers in maintaining service and inventory levels Effective forecasting in this area is vital for increasing supply chain performance, and this Odette publication has been developed to provide a standardised method for measuring forecast accuracy, based on an in-depth industry study.
This tool has been created to help organisations develop and implement a world class Materials Planning and Logistics Management system. It consists of a set of recommendations and best practices that can be used by Logistics Service Providers (LSPs) to move towards establishing a common international approach to assessing best practices.
All organisations know that maintaining logistics performance is vital for an effective supply chain – but this can only be achieved when suppliers at all levels have consistent measurements of good performance in place. To help achieve this, Odette has produced this set of common definitions of standardised KPIs for measuring logistics performance that can help improve efficiency and decrease costs across the supply chain.