One Network Enterprises Auto Oem Wp 2014 (1)
Transcript of One Network Enterprises Auto Oem Wp 2014 (1)
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
Automove Inbound
Supply Best PraccesExploring the Network Model
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
AUTOMOTIVE SUPPLIER PROCESS ANDPERFORMANCE REQUIREMENTS
Supply chain organizaons within the automove supplier
industry contribute to manufacturing excellence in many
ways, including quality, cost and delivery, to their OEM
and subsystem customer base. Focused on outcomes, a
compeve supply chain capability not only assures the on-
me delivery of component material, but also the execuon
of inbound supply to ensure the shipment of quality nished
goods at a compeve price while delivering on-target
margins for the manufacturers.
In order to accomplish these goals, connuous improvement
in global supply chain execuon becomes a core supply
capability required by most automove OEMs today.
Strategies around lean replenishment and logiscs must be
deployed to accomplish performance goals, many of which
may be required to remain in good standing. Execung these
strategies requires manufacturers to fully leverage the
potenal of todays innovave network-based supply chain
systems and processes.
Today it is possible to fully engage the knowledge and
capabilies of an extended enterprise across their supply
chain in real me. This evolving network-based capability
provides the potenal to drive signicant improvements in
overall replenishment performance and cost goals.
A number of comprehensive business process and supply
chain specicaons designed for the automove industry
are in use today, including the TS16949 standards (related to
ISO 9001) and the AIAG Materials Management Operang
Guidelines (MMOG). As with most industry based eorts, the
intent is to basically follow Demings recommended approachto process excellence, which is to implement standard/
common/repeatable process, measure process performance,
reduce process variability, and connuously improve those
processes over me. In fact these two parcular eorts are
typically referenced in supplier contracts as compliance
requirements. The MMOG for example includes a graduated
severity index, F1 through F3 which dene a set of processes
and interacons within a supply chain relaonship which
must be adhered to with frequent measurement and
reporng. A poor grade can result in signicant contract
ramicaons.
The following is a breakdown of the crical supply chain
capabilies and acvies that should be in place within an
automove supplier organizaon to comply with todays
customer contract requirements and to execute perfect
supply fulllment:
Lean manufacturing, replenishment, and logiscs pracces
Establishment of replenishment processes, procedures, and
policies to assure on-me delivery at the highest level of
quality and lowest possible cost throughout the extendedsupply chain
Electronic communicaon between suppliers and
customers (zero latency preferred)
Demand analycs around EDI transacon sets 830, 862,
866, as well as any web based electronic communicaon
Automove Inbound SupplyBest Pracces
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
Real me collaborave communicaon throughout the
supply chain to address potenal issues in meeng
demand requirements
Ability to react to weekly schedule variaon, reconciling
Cums and comparing demand to capacity
Ship according to a latest set of transportaon
roung instrucons
Real me response to alerts, issues, and excepons
Repeatable processes that minimize human intervenon
including connuous process measurement and reporng
Idencaon and measurement of key trending metrics on
a weekly or monthly basis, with an emphasis on correcve
acon planning to address metrics that dont meet goals
From a measurement perspecve the key trending metrics at
a high level include:
Supplier on me delivery
Supplier shipment informaon accuracy
Supplier ASN compliance
This paper will focus on applying these crical supply
capabilies to the automove inbound supply poron
of the supply network. This is dened by an automove
Subsystem or Tier 1 Supplier driving demand upstream to
their Tier 2 suppliers. It is recognized that some suppliers to
the automove OEMs may use dierent terms or denions
to describe the various nodes that provide subsystems,
assemblies, components, or parts downstream toward the
end consumer. The naming convenon used seemed the
most popular and doesnt limit in any way the node to node
network-based funconality.
A NETWORK MODEL DRIVES INCREASEDPERFORMANCE AT LOWER COSTS
Implementaon of these crical supply chain capabilies
has been underway for quite some me in the automove
supplier market. As menoned above, signicant eort has
been put into guidelines like the MMOG to measure and
improve the performance of those capabilies.
Unfortunately we are typically trying to improve those
capabilies based on the wrong foundaon. ERP by denion
is an Enterprise based architecture. When faced with the
supply chain requirement, ERP responded based on the way
the architecture was designed, namely connecng nodes
in a sequenal fashion and protecng the inherent batch
ineciencies through long lead mes and freeze schedules.
Plus as we painfully came to realize, ERP is far from being
standard, even if we deployed the same vendor soware at
mulple locaons or nodes in our supply chain.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
Network Model at a Glance
Each supplier is connected to a shared
network plaorm
Single version of the truth with shared processes,
data, excepons, and metrics
Global visibility, process management, and reporng
Support for mul-er processes and visibility
One user interface regardless of back-end ERP system
In fact our supply chains arent really chains at all, they are
logical networks comprised of mulple enterprises and
trading partners operang across mulple physical ers whoneed visibility across the network to orders, shipments, and
inventory. These network parcipants also require a highly
secure, permission-based roles capability, governed by their
trading contracts, to interact with the supply network to
ensure that it operates without disrupon while incurring
the lowest costs. These trading partners include customers,
suppliers, contract manufacturers, 3PLs, 4PLs, carriers,
warehouse operators etc.
Today we do an incredible amount of work trying to execute
against these crical supply chain capabilies. It is a losingbale if we are execung based on an architecture designed
to do something else. Given that our requirement space
has now been redened as a supply network comprised
as a mul-party, mul-echelon environment, we need an
architecture designed to match that requirement which
is capable of driving a much higher level of visibility and
problem resoluon across that network.
Just think about the benet of reducing latency alone.
Whether the demand is for producon parts or aer market,
we know there will be some level of forecast error. Whyaccept all the informaon delays related to ERP node to node
processing and the related lack of visibility when a supply
network can operate in real me, eliminang this latency,
and providing full network visibility based on the secure
permissions framework?
Automove Subsystem and Tier 1 customers are requiring
that their Tier 2 Suppliers generate process innovaon around
lean manufacturing and logiscs. A network based supply
chain soluon that operates in the cloud where mulple
pares can subscribe and parcipate in transacons on a
real me basis will provide the plaorm for this innovaon.
While eorts like the MMOG are commendable, the
potenal results will follow the law of diminishing returns
if those guidelines are being applied to tradional ERP type
architectures.
Even the tradional EDI layer is laden with ineciency. Why
implement an enre point to point EDI framework when the
integrity and structure of the EDI transacon set can easily be
translated into a network-based supply soluon and be made
available across all subscribed trading partners? As part of the
network soluon, a Tier 1 supplier could operate a transacon
in concert with a Tier 2 supplier based on managing the state
changes of an order.
In fact our supply chains arent really chains at all, they are logicalnetworks comprised of mulple enterprises and trading partners
operang across mulple physical ers who need visibility across
the network to orders, shipments, and inventory.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
Expected Network Benets
Inventory Reducon
Drop in stock-outs
Improvement in On-me Delivery Reduced Cycle Time
Improved Supplier Payment Process
Reduced Operaonal Expenses
For example if the trading partners are operang a Min/Max
replenishment policy and the Tier 1 wants to prevent early
shipments which inate their inventory posions, they cancontrol the ASN such that they do not allow the Tier 2 to issue
the ASN if it is going to violate the Max inventory seng. This
transacon is represented by the procure to pay cycle.
Why try to understand and improve the performance of the
procure to pay cycle by recombining mulple transacons
across mulple systems when we can simply implement
a single transacon across mulple trading partners who
control the transacon by managing and reacng to state
changes within the transacon through a permissions
framework?
These transaconal state changes provide trading partners
the ability to control a transacon and address excepons
prior to execung a transacon that would have produced a
poor outcome given policy violaons or changing condions.
Thus at any point in the procure to pay transacon cycle,
whether it be sending the PO, acknowledging receipt,
comming the order, creang the ASN, order pick up, order
in transit, order scheduled to factory, order delivery etc.,
visibility and control is provided across trading partners based
on their permissions framework which is based on theirtrading contracts and easily set up as part of their network
subscripon.
Thus, the old and red ERP blueprinng process is now
a thing of the past. No longer do we have to change our
processes to accommodate the technology. Today our
technology provides us with a tunable system of control
across mulple trading partners across mulple trading
echelons. And not only is there signicant benet in
improving supply chain performance and lowering costs, but
these newer network technologies are subscripon based
through a cloud architecture, which signicantly lowers TCO,
along with providing much more exibility in deploymentwhere individual processes can be implemented and
integrated to the legacy environment rather than having to do
a big bang approach.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
FORECASTING AND DEMANDMANAGEMENT
For the purposes of this paper, the procure to pay
inbound supply cycle starts with forecasng and demand
management. A contract management capability could be
discussed as a precursor, but the Tier 2 supplier contract
structure is embodied as part of the process descripons
found in the balance of this paper. There is of course a more
interesng discussion around contracts related to the trading
relaonship between the OEM and their subsystem suppliers,
but this will be addressed in a later paper.
The 830 forecast/material release will grant fab & raw
authorizaons per the commercial terms between the
Subsystem or Tier 1 Suppliers and their Tier 2 Suppliers. (For
those involved with PDM related to aermarket components
they may also need to consider addional standards such as
ACES and PIES.)
Tier 2 Suppliers will be granted raw and fab authorizaons
in concert with the authorizaon being provided by the end
customer. For example, a Tier 1 supplier may grant 6 weeks
raw and 3 weeks fab, for a total of 6 weeks. Thus the Tier
2 supplier is authorized to convert 3 weeks of the raw (not
carry an addional 6 weeks raw). This authorizaon will be
provided to the suppliers via EDI in their 830 releases. Certain
commodity materials will be released using a modied set
of standards. In addion to EDI and especially for many
small and mid-size Tier 2 suppliers, web based electronic
communicaon is a viable alternate when properly staged
within a state-based transaconal process.
The Subsystem or Tier 1 Suppliers may or may not require
the Tier 2 Suppliers to ship according to the forecast release.
In some cases the forecast release does serve as the deliverysignal. Alternavely in other cases (i.e. electronic contract
manufacturers), they may for example receive periodic
forecasts via e-mail which would forecast aggregate quanes
over a predetermined horizon. Priority would be given to this
central forecast to drive component planning/purchasing
in order to meet the delivery signals sent by the collecve
manufacturing plants. In this case the central forecast would
override any EDI 830 forecast data sent by an individual
manufacturing plant.
The authorizaon on a release is the Subsystem or Tier1 Suppliers nancial commitment for released material.
However a key point is that the authorizaon for a Cum
amount may not cover the material required to cover the
lead-me related to the shipment. In some cases the supplier
will need to begin manufacturing without authorizaon if the
amount of lead me between recognion of an order and
receipt of the order (can include manufacturing me as well
as transportaon me) is longer than the Cum window.
For example if lead me is 6 weeks but the Cum authorizaon
is for 4 weeks, the supplier will operate with some risk.Thus we can already see the importance and impact of
excessive lead me in the system. The supplier contract calls
out for capacity ex since we know there is variability related
to both volume and mix. Using tradional ERP based supply
chain architecture cannot provide the visibility and control to
improve performance in this area.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
SHIPMENT AUTHORIZATION,REPLENISHMENT, AND ORDER
AGGREGATIONShipment authorizaon will be communicated to the Tier 2
supplier through the Subsystem or Tier 1 plant designated
replenishment policy. Eecve inventory replenishment
policies in use today include the 830/862 converted to a
delivery release, KanBan, Min/Max, and Sequencing. Spot
buys may be used as well during product launch
or pre-producon.
Using the 830/862 basically constutes a push schedule from
the supplier into their customers manufacturing operaon.
Truckload opmizaon is simpler under this technique, but
a price is paid in excess and obsolete inventory. Improved
technologies now provide the ability to opmize truckloads
simultaneously with inventory using pull policies. In fact
under todays prevailing strategies around Lean, many
companies are implemenng technologies that will allow
them to move from push to pull. Major automove
Subsystem and Tier 1 Suppliers are actually including
statements to this eect in their 10k lings.
KanBan, being one of the simplest pull policies, is designed
to pull supply based on a rate of consumpon. The KanBan
binning technique is designed to provide discrete quanes
the supplier must monitor and use to calculate required
shipment quanes.
Min/Max, a more exible pull policy, provides a range of
acceptable inventory levels the supplier must monitor and
use to calculate their required shipment quanes. Supply isdone dynamically based on a consumpon rate, and therefore
addional consideraon can be made for transportaon
opmizaon under this policy.
And nally Sequencing is designed as an hourly or shi based
replenishment technique where data is sent to suppliers
to priorize shipments. This method is commonly used
when suppliers make mulple deliveries in the same day
to a given site.
Using these types of standardized inventory replenishmentpolicies allows customers to reduce supply chain variability,
opmize inventory levels and minimize freight expense.
Typical measurements include inventory turns, truck
ulizaon, and premium freight reducon. Unfortunately in
order to provide this type of funconality most ERP vendors
must use plug-ins that are not integrated as part of the
transaconal ow.
However when these types of replenishment policies are
included as part of an overall supply network iniave, the
customer will also enjoy full internal and external visibilityof component parts based on a technology plaorm which
supports both an automated and an interacve capability
to enable full electronic commerce, including the ability to
communicate replenishment signals across the global supply
network in real me.
Using tradional ERP based supply chain architecture cannotprovide the visibility and control to improve performance.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
A complicang factor for a Tier 1 supplier will be that under
this mul-policy replenishment environment, it is possible
that the Tier 2 suppliers serving a parcular customer couldreceive replenishment signals being driven by dierent
replenishment policies across various receiving plants, or a
single plant could be using mulple replenishment policies
across a varied group of suppliers. In a tradional point to
point policy and communicaon architecture this would be a
dicult scenario to manage. In the type of subscripon based
network environment we have been discussing it actually
becomes quite simple, especially given that technology is now
available to handle all the heavy liing.
Although many factors are considered when choosing properreplenishment policies, primary consideraon is typically
given to the specic lean manufacturing strategy being
deployed, the variability of customer demand, and the overall
logiscs footprint in terms of delivery lead mes.
To determine the opmal replenishment method to use for
each component, manufacturers have tradionally adjusted
on an annual basis or when operaonal or supply chain
condions shi (i.e. when a supplier moves producon to
another locaon that is geographically dierent than the
exisng supplier locaon).
A beer method would be to use recent and historical
performance and outcomes to adjust replenishment policies
in order to improve performance. Using the power of an
advanced network plaorm, it is possible to select from an
improved set of policies, while also implemenng automated
excepon handling at increasing levels of precision. In
addion inventory planning can be invoked which helps
establish target inventory levels within the policies based on
variaons and lead mes.
Order aggregaon follows immediately aer a replenishment
policy has established a recommended set of orders.
Suppliers who ship either in truckload quanes or as part
of a milk run may be requested to ulize future forecasted
demand within their 830 authorizaons to ll alloed space
on the designated carrier. The supplier should ulize future
demand from material according to priority level, e.g. a part
with addional demand 2 days out should be used before
demand showing due 2 weeks out. When there is a choice,
the supplier should always ship the higher runner rst.Suppliers not lling their allocated space are somemes liable
for freight costs associated with lost ulizaon opportunies.
In this case pulling ahead in order to ll a truck will not
result in an over-shipment penalty. Manual replenishment
may be approved when it is not possible to use one of the
manufacturers designated replenishment methods.
Once order aggregaon has completed and an approved set
of orders exists, the delivery signal will show either a ship
date or a delivery date. A delivery date denes when the
goods are to be ulmately received by the Subsystem or Tier1Supplier rather than being delivered to the carrier. A ship date
indicates the date which the supplier should ship the goods.
The Tier 2 Supplier is expected to understand transit me and
have product ready for shipment in order to meet the delivery
date on the schedule, inclusive of transit me.
Using the power of an advanced network plaorm, it ispossible to select from an improved set of policies, while also
implemenng automated excepon handling at increasing
levels of precision.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
Further, the Tier 2 Supplier is required to:
Provide visibility and control within their processes toassure that their physical shipments correspond with
their customer demand. Full WIP tracking inbound to
a customers manufacturing operaon is a standard
requirement which could extend to include WIP tracking
within a manufacturers facility.
Run capacity planning inclusive of the typical contractual
requirement to ex throughput in order to meet either a
20% week to week net schedule increase or a 20% cum
increase over the period authorized under the 830 release.
Collaborate with the plant Materials Representave in
real me if unable to meet the replenishment schedule.Query the Supply Network and be prepared to supply the
following informaon:
Date the parts will be available
Plan to get back on schedule and resolve any delivery
issues including resources, transportaon, material, and
capacity
Determine whether an established window will be
missed or a release schedule cannot be met. Determine
whether an expedited shipment would be necessary
Collaborate with the Subsystem or Tier 1 supplier to
obtain approval for the mode & carrier chosen. If the Tier2 Supplier is responsible for the scheduling issue, then
in many cases the freight would be shipped PREPAID
with the Tier 2 Supplier choosing the logiscs provider.
In this situaon the Tier 2 Supplier is responsible for
tracking the in-bound freight to their customer, and
providing shipment status visibility to the plant Material
Representave
A Tier 2 supplier may be held responsible for customer
downme and other associated costs (i.e. premium freight
or charter costs) due to their inability to meet deliveryrequirements, in accordance with the purchasing terms
and condions. If a Tier 2 Supplier is behind in their ability
to meet a required Cum, a typical scenario would be that
the subsystem or Tier 1 supplier would expect the supplier
to have the Cum caught up by the Monday following the
authorized lead me to produce the parts.
Given these exacng requirements, every automove
supplier needs to consider the advantages of the newer
network-based architectures. These types of requirements
are becoming common in every supplier contract. It is notpossible to comply with these requirements, as listed above,
without considerable expense, ineciency, and inevitably
discrepancies and penales.
Most manufacturers will strive to produce one common
material planning and logiscs evaluaon that can be used by
both the suppliers and customers throughout the product life
cycle, including the early development phases. As menoned
earlier the MMOG guidelines are popular in the automove
supplier space and are somemes prescribed by the
customers onto the suppliers as a supplier self-assessmenttool. In order to drive both compliance and performance to
new levels, a beer approach should be considered.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
ELECTRONIC COMMERCE
EDI (Electronic Data Interchange) is required to be ulized by
most automove suppliers throughout the supply chain. This
includes the ability to receive releases (830 - weekly, 862
daily), and send ASNs (856).
Guidelines in this area have been established by the
Automove Industry Acon Group (AIAG) / VDA. Supplier
infrastructure will typically interface with one of the following
opons:
Tradional EDI package
Visibility tool
3rd party EDI provider
Suppliers must also develop conngency plans for their
primary EDI system given that delivery disrupon will most
likely result in missed commitments and potenal contract
violaons.
As menoned above, the EDI infrastructure should not be
divorced from the transaconal infrastructure. Transaconal
outcomes and process execuon will dene performance.
Why implement a standalone EDI infrastructure when the
EDI standard can be accommodated as part of the governing
order transacon through state based control?
The ASN is the electronic transfer of shipment data from
a supplier to a customer. Tradionally the customer plant
ulizes the informaon contained within the ASN in three
ways:
Determine and conrm goods in transit
Vericaon against the shipment as product is received
Generaon of an electronic invoice for supplier payment ifthe supplier is ERS (evaluated receipt selement) approved.
This way of thinking about the ASN does not maximize the
supply opportunity around cost control. Tradional soware
soluons do not allow for the case where if the trading
partners are operang a Min/Max replenishment policy and
the Tier 1 wants to prevent early shipments which inate
their inventory posions, they can control the ASN such
that they do not allow the Tier 2 to issue the ASN if it is
going to violate the Max inventory seng. This transacon
is represented by the procure to pay cycle. Why try tounderstand and improve the performance of the procure
to pay cycle by recombining mulple transacons across
mulple systems when we can simply implement a single
transacon across mulple trading partners who control the
transacon by managing and reacng to state changes within
the transacon through a permissions framework?
These transaconal state changes provide trading partners
the ability to control a transacon and address excepons
prior to execung a transacon that would have produced a
poor outcome given policy violaons or changing condions.Thus at any point in the procure to pay transacon cycle,
whether it be sending the PO, acknowledging receipt,
comming the order, creang the ASN, order pick up, order
in transit, order scheduled to factory, order delivery etc.,
Suppliers must develop conngency plans for their primary EDIsystem given that delivery disrupon will most likely result in
missed commitments and potenal contract violaons.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
visibility and control is provided across trading partners based
on their permissions framework which is based on their
trading contracts and easily set up as part of their networksubscripon.
The ASN must be created upon nalizaon of the shipment
and be received by the customer plant within one hour from
the me the shipment leaves the suppliers shipping locaon,
or prior to its arrival at the manufacturing plant, whichever is
earliest.
Given the sensivity to meliness, all shis in a
manufacturing plant must be capable of sending the ASN
to meet these requirements. Suppliers will be able toconrm customer receipt of the ASN if eecve network
connecons and visibility have been deployed as part of the
communicaon infrastructure. However receipt conrmaon
is not considered to be a successful transmission if certain
informaon is not included as part of the ASN.
Most manufacturers will require that the ASNs contain
accurate and mely informaon in the following areas: BOL
Number (Bill of Lading); Shipment date/me; Gross weight
of shipment; Net weight of shipment; Total Bill of Lading
quanty (e.g. # of cartons); Standard Carrier Alpha Code(SCAC); Mode code (e.g. E for expedite, A for air, etc.);
Pool point locaon (if applicable); Trailer number (or air bill
if its an air shipment); Packing slip number(s); Ship from
locaon (our supplier code or supplier DUNS Code); Ship to
locaon(s) (plant code(s) including dock code(s)) or DUNS
Code; Part number; Engineering change level (Part); Quanty
shipped; Unit of measure; Purchase order number; Number
of cartons shipped of each part; and Quanty per carton.
ASN accuracy is paramount given the importance placed on
the integrity of informaon related to inventory records,
supplier schedules, and invoice payments. Timeliness is
crical to informaon accuracy and funconality. Failure to
issue ASNs in a mely fashion will typically result in non-
compliance and the potenal for a charge-back. Visibility
and control related to accuracy and meliness, along with
an excepon-based framework that corrects issues prior to
them becoming problems, is what is required to nail the all-
important ASN poron of the order transacon.
INBOUND LOGISTICS REQUIREMENTS
Earlier we discussed the fact that the procure to pay
business transacon cycle includes transportaon events such
as tendering, pick up, in transit, dock scheduling and deliver
along with full track and trace. While there are a number
of detailed requirements listed below related to inbound
logiscs (which are fully complied with in the new plaorm
we have been discussing), the real key is that in addion to
opmizing transportaon and logiscs costs, we also want fullinventory visibility and control. Thus similar to EDI, logiscs
needs to be considered part of the transaconal ow, not a
separate set of funcons to be integrated.
Visibility and control related to accuracy and meliness, alongwith an excepon based framework that corrects issues prior
to them becoming problems, is what is required to nail the all-
important ASN poron of the order transacon.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
Considering the lengthy set of detailed Logiscs requirements
for an automove supplier list in the balance of this secon,one needs to wonder how an opmal level of analycs,
visibility, and control could have been provided using legacy
systems. As we all know it was not possible and thus we have
signicant ineciency in todays logiscs environment, maybe
not so much in the logiscs themselves, but in the value that
an integrated logiscs environment could bring to the overall
supply network.
Logiscs requirements include the determinaon of carrier
and related roung instrucons in order to eecvely manage
inbound freight through the consideraon of mulple factorsincluding supplier locaon, product volume, packaging,
transportaon costs, and lead me.
The expectaon that suppliers must share in the ownership
of the shipping process to ensure products are received in
a mely and cost eecve manner - essenally, at the right
me, in the right container, at the right shipping price, to the
right locaon require that they employ advanced analycs
and visibility.
And this isnt limited to process execuon. All supplier
shipments must be accompanied by appropriate
documentaon. Documentaon may include, but not limited
to, packing slip, bill of lading, NAFTA cercates, commercial
invoices, CMR (EU and Asia) and hazardous materials
informaon. Thus process outputs related to documentaon
must be error free.
Carrier informaon must also be included in the suppliers
Advance Ship Noce (ASN) transmission to allow fortrace-ability and to ensure supplier compliance to roung
instrucons. When electronic generaon of the ASN does
not exist the supplier is required to provide a faxed copy of
the shipping documents. As part of this process, suppliers
are responsible for contacng the appropriate carrier, freight
forwarder and customer materials personnel to ensure mely
pick-up and delivery. It is the suppliers responsibility to set
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
shipping window mes in conjuncon with the manufacturing
plant materials personnel and the carrier to ensure delivery
by the date shown on the release. Thus leveraging thecarrier as part of the supply network, leng him subscribe
with appropriate permissions, and then giving him access to
schedule delivery appointments makes all the sense in the
world.
Informaon to be provided should include, but may not be
limited to, product availability, expected delivery me, special
instrucons, container dimensions, and weights. If shipping
less-than-truckload quanes to one ship-to locaon, each
skid must include a label indicang the plant name and
address. All suppliers will be required to prepare their packingslip(s) in a standard format and must be aached (glue or
tape) to the packaging (pallet shipment). The packing slip
must be in a pouch/sleeve that protects it but also allows
it to be removed by receiving plant. Rather than building
custom integraon to meet this requirements, subscribing to
the network make this informaon available, in the correct
format, in real me.
Content required in a specic format/locaon on the packing
slip include: Packing Slip #; Sold To info; Supplier Producon
Plant; Ship to; BOL #; Customer part #; Descripon; Supplierpart #; Quanty shipped; PO #; Footer which includes page
number and repeats the pkg slip #.
A separate bill of lading must be created for each ship-to
locaon, even when shipping on the same carrier. Each BOL
must contain a unique BOL #. The supplier BOL must include
the following:
Number of Packages and/or Handling Units - If packages
are consolidated on a skid, provide both package count and
skid count on the bill of lading. Descripon of shipment - Enter the descripon of each line
item. Please note the type of package (carton, tote, barrel,
etc.) and the quanty per package. Each line item must
include the correct Naonal Motor Freight Classicaon
(NMFC) Item # and Class. This informaon is crical to
ensure correct rang so as to avoid excessive charges.
Weight - Enter the total gross weight, in pounds, for each
line item. Include the weights of pallets, skids or any
secondary container.
Freight Terms Indicate FOB Origin, Freight Collect terms
if the customer is responsible to pay for the shipment.All freight shipped to customer facilies must be shipped
freight collect unless Purchase Order states otherwise or
shipment is a Supplier paid expedite or roung deviaon as
discussed earlier.
Whenever the customer is responsible for paying the freight
charges, a roung instrucon will be provided to the supplier.
The roung instrucon will include at least one primary
carrier and an expedited carrier, and is issued by each
customer receiving locaon.
Plant approval must be obtained from the receiving plant
materials personnel for any roung instrucon deviaon. Any
deviaon from the roung instrucons without customer
plant approval may result in a supplier debit to compensate
for excess freight charges and/or administrave fees.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
Any premium freight which results from a supplier event
will be managed and paid for by the supplier. Typically
the customer will not take responsibility for the set-up,management, tracking or payment of a supplier-caused
premium freight event. The supplier will communicate to the
plant all expedite informaon and provide milestone updates
to keep the plant informed on the arrival of the expedited
components.
Many Subsystem and Tier 1 Suppliers will reserve the right
to take-over the management of the premium freight event
if the supplier fails to communicate and eecvely manage
the event themselves. In these cases, the supplier may be
charged for their customers me.
When expeding freight at their customers expense,
authorizaon must be obtained by the supplier from
the appropriate receiving plant materials personnel.
Unauthorized expedited freight may result in debit to the
supplier to compensate for excess freight charges and/or
administrave fees.
Upon authorizaon of an expedite shipment, the supplier
should be prepared with the following informaon to share
with the arranging party: Protect me (the me by which theshipment must arrive); Ready me (the me by which the
shipment will be ready for pickup); Shipment terms (collect
if at the customers expense); Origin - address, contact, and
operang hours of the shipping facility; Shipment details
weight, dimensions, and stack-ability; Desnaon details
address, contact, and plant number.
CUMULATIVE SHIPMENT MANAGEMENT
The generaon, vericaon, tracking and reconciliaon
of Cums is a standard requirement for Automove Tier 1
suppliers. Cums are a way to idenfy the amount of product
that is required for suppliers to ship to their customers.
Customers expect the supplier to reconcile Cums upon the
receipt of each EDI release. Idenfying and iniang the
resoluon process of cum discrepancies is the responsibility
of the supplier.
The life cycle of a Cum naturally starts at 0 upon the
issuance of a new purchase order. The last cum received
quanty will be noted on each EDI 830 material release.
Each shipment received will be accumulated to provide the
last receipt cum received. This will include the last quanty
received, date received into the customers inventory, and
the supplier packing slip number received by the customers
manufacturing facility.
As part of the shipment process, customers expect their
suppliers to; Track and accumulate all producon part
shipments - this will become the suppliers cum shipped
quanty; Update suppliers cum shipped quanty when the
supplier is issued a discrepancy report; Idenfy past due
quanes; Idenfy the customer cum required; and Resolve
any cum discrepancies with the appropriate materials
personnel in a mely fashion.
Within a legacy environment this Cum process is typically
done in a separate system and then integrated back into the
EDI framework which is then integrated back into the order
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
and inventory systems. In a network based transaconal
process the Cums are just one of the process outputs and can
be tracked and made available in real me to anyone with thecorrect permissions.
BALANCE OUT AND CLAIMS PROCESS
Obsolete material claims can be avoided by minimizing lead
mes, strictly adhering to producon schedules, and properly
managing inventory received by suppliers. Most obsolete
material claims occur at the balance out of a product. Balance
out is dened as end of model year as well as current model
engineering changes. The goal for most if not all automove
manufactures at balance out is to have zero obsolescence.
Tradionally one of the primary tasks in the balance out
process requires the materials plant representave to nofy,
in wring, the source supplying the components to be
balanced out. The customers nocaon of balance out, as
well as dened balance out ling parameters, will typically
take place outside of the established authorizaon window.
Aer receiving balance out nocaon, any supplier planning
to produce a contractual minimum run order which exceeds
raw/fab authorizaon must rst receive wrien approval
from their customers supplier scheduler or balance outcoordinator.
This process is convoluted at best. Timing, issues and
execuon related to balance out and any related claims by
suppliers for reimbursement should be visibility and under
control by all trading partners at all mes, not hidden within a
plant based system.
INTERNATIONAL SHIPPING
Given the global nature of automove manufacturing in
todays networked supply environments, internaonal
shipping will be a consideraon as part of the trading
relaonship between Subsystem and Tier 1 Suppliers
and their Tier 2 Suppliers. Understanding their supplier
responsibilies as exporters is a crical performance
component within a global supply chain. Suppliers must align
with the import procedures of their customers as the overall
supply network strives to adhere to any and all Customs
Regulaons. Each and every supplier is responsible for
complying with all customs laws and regulaons as it relates
to their acvies.
Visibility and ming once again take center stage related
to internaonal shipping. The problem isnt just the global
logiscs themselves, but the coordinaon of the assets being
moved as part of the larger inbound supply picture.
As with the inbound logiscs requirements discussed earlier,
these requirements are detailed and precise with signicant
negave ramicaons when not executed properly.
Popular INCO terms for internaonal shipments include;
FCA (free carrier), where the named place is the shipping
locaon or export port. The supplier will be responsible for:
loading material onto transport vehicle
providing all necessary paperwork such as export
licenses, and documentaon
authorizaons
Visibility and ming once again take center stage related tointernaonal shipping. The problem isnt just the global logiscs
themselves, but the coordinaon of the assets being moved as
part of the larger inbound supply picture.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
verify that the quanty and quality of the goods conform
with the documentaon
provide appropriate packaging and markings DDP (delivered duty paid), where the named place is the
manufacturers receiving locaon. The supplier will be
responsible for all items listed for FCA above, inclusive of
inland freight and any dues/fees payable for import unl it
reaches the desnaon.
In order to protect against disrupon and beer manage
variaon related to internaonal supply chains, most auto
manufacturers will ulize a regional warehouse/domesc
pick-up point to manage and retain inventory buer stock.
Therefore a supplier who is manufacturing all or a poron
of their parts overseas is expected to import to their
own domesc warehouse or distribuon center. Their
manufacturing customer will expect to pick up the freight
at the suppliers named domesc facility. In the situaon
that a supplier does not have a domesc presence, their
customer will typically act as the importer and expect that the
supplier will contract with a 3rd party warehouse provider to
manage their buer stock. Shipment clearance will usually be
performed by a customer designated broker.
Complete and accurate documentaon for all internaonal
shipments is the responsibility of the supplier. Each cross
border shipment must include specic documentaon which
typically includes the Bill of Lading, Packing List, Commercial
or Pro-Forma Invoice, and a Cercate of Origin (NAFTA
or other as requested) where applicable. Incomplete or
inaccurate documents may delay the mely delivery of
product and therefore failure to do so will most likely result in
a supplier incurring a cost for a delayed shipment.
As menoned above, a commercial or pro-forma
invoice needs to accompany each export along with
tari classicaon. Contents of the invoices and general
requirements are as follows: Port of entry to which the
merchandise is desned; Complete name and address of
consignee, along with the plant ID #; Name and address of
shipper, including tax ID#; Name and address of the customs
broker; Ship date; Detailed descripon of the merchandise,
including the manufacturers part number so that the
manufacturer can apply proper HS Classicaon and NAFTAeligibility; Quanes, weights and unit of measures of the
merchandise shipped; The purchase price in the currency
of purchase; Value of each item in the currency in which
the transacons are usually made; Type of currency; All
charges upon the merchandise itemized by name/category
and amount; All rebates, drawbacks, bounes, separately
itemized, allowed upon the exportaon of the merchandise;
Country of origin; Dies, molds, tools, engineering work and
cost associated; Tari classicaon number; INCO terms;
Invoice #; and Declaraon of truth.
Invoices and aachments must be made available in the
language appropriate for the country of importaon. If any
required content is excluded from the invoice, the customs
clearance of the shipment will be delayed. Typical omissions
occur in the areas of values, descripons, and country of
origin.
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
CONCLUSION
Overall One Network Enterprises provide a subscripon based
soware plaorm service in the cloud. The architecture
supports a deep automove representaon which can model
every automove supply requirement discussed in this paper
including forecasng, demand management, inventory
planning, policy based replenishment, order aggregaon,
shipments, electronic commerce, inbound logiscs, cum
management, balance out, and internaonal freight.
In addion, the capabilies described in our tunable system
of control, which is comprised of a subscripon based
network of trading partners, represented both as mul-
party as well as mul-echelon, gives our customers the best
chance of meeng and exceeding all AIAG/MMOG supplier
requirements.
For suppliers looking to more protability parcipate in
todays demanding automove supply chains, or for those
looking to expand their business through protable growth,
they must look outside the tradional soluon set. The One
network soluon, while being advanced as compared to
legacy, is well proven having been in producon for over 10
years and supporng some of the worlds largest internaonal
supplier networks including one of largest automove
OEMs, one of the largest automove Tier 1 suppliers, one
of the largest Aerospace companies, and one of the largest
electronics manufactures, along with a strong percentageof all consumer goods moved across the US and certain
internaonal countries.
COMPLETE AUTOMOTIVE INBOUND SUPPLY SOLUTION
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WHITE PAPER AUTOMOTIVE INBOUND SUPPLY BEST PRACTICES
Corporate Headquarters US
One Network Enterprises
4055 Valley View Ln, Suite 1000
Dallas, TX 75244
Tel: +1-866-302-1936 (toll free)
+1 972-385-8630Email: [email protected]
Web: www.onenetwork.com
Internaonal Headquarters
One Network Enterprises (Europe)
PO Box 59383
London NW8 1HH, UK
Tel: +44 (0) 203-28-66-901
Email: [email protected]: www.onenetwork.com
For more informaon contact One Network at:
Tel: +1-866-302-1936 (toll free)
Email: [email protected]