It’s a question of logic

The quest for reliable delivery has prompted car makers to restructure their logistics setup.

Nobody questions the build quality of cars any more. Car makers have made today’s cars about as reliable as they can be.

Yet they still struggle to deliver their cars with the same reliability. How many dealers guarantee the model you want, when you want it?

Customer demand for shorter lead times and reliable delivery means car makers are now tackling their supply chain logistics in the same way they got to grips with quality 20 years ago – with programmes of supplier evaluation and continuous improvement. And their latest weapon is a 92-page questionnaire for assessing the logistics performance of suppliers.

Known as Logistics Evaluation Document Version 2.2 it has just been released by Odette International, the European car industry body that sets standards for electronic B2B communication and logistics. Many car manufacturers already have their own systems for assessing suppliers’ performance. But the aim of the Odette document is to replace all these with one common system accepted by all. It is not a third-party certification scheme like the environmental performance standard ISO 14000, but it’s pretty close.

The document can be used as a self-assessment tool by suppliers to see how well they perform against best practice, or by manufacturers to audit new and existing suppliers. And since it probes the flexibility, reliability and cost-effectiveness of how suppliers deliver what they promise, it can be applied to other industries such as electronics and aerospace. Odette is now offering it free on its website to any interested company.

How does it work? Imagine you are a supplier and you’ve been sent a copy by your customer to fill in. The document looks like a very fat exam paper, except that you mark it yourself. It is divided into six chapters. The first three ask general questions about your customer/supplier relations, work organisation, and measurement and improvement goals. The last three are more specific about your procurement process, production, and distribution.

Each page consists of one question, accompanied by a list of key areas or best practice that you should already be following and a space for the answer. Odette reckons it should take about two days work to collate all the information.

Knowing the score

Now you can start scoring each question. If you have well-defined and documented procedures and agreements in place for all the key areas, then award yourself top marks – 2 points. If you know what you’re doing but haven’t got documented procedures or haven’t negotiated agreements for some areas, then score 1 point.

And if no formal procedures or agreements exist, score 0. Yes, you can cheat, but most customers will demand copies of documents and written procedures as evidence.

Each question has a weighting of F1, F2, or F3 according to the impact on your customer’s business. The heaviest, F3, means that if you fail to meet any of the key requirements of that question you could be putting your customer’s production at immediate risk.

A score sheet lets you combine scores with weightings to produce an overall rating that tells you how well your logistics operation performs against best practice and identifies areas that need to be improved.

The Odette Logistics Evaluation Document takes over from a logistics assessment procedure developed at Volvo in Sweden about 10 years ago. Helena Holmgren-Karlsson, responsible for the development of materials planning and logistics at Volvo Cars in Gothenburg, says: ‘We had our document and other companies had started work on their versions. Odette decided it would be better if we all shared a standard one. It is a formalised way of asking the questions we’ve always asked.’

Since then the Odette document has been refined and revised to make it easier to use. Volvo is currently using the document for about 100 suppliers, says Holmgren-Karlsson. ‘We use it before we select a supplier so that we know what they are good at and what they need to improve. It is important to us that they do a good job rather than just fill in the numbers – it is not aimed at finding out the score.’

Sue Kiley is logistics projects manager at brake, clutch and battery supplier Delphi Lockheed Automotive in Warwick. She has worked on the latest version of the evaluation document as a member of Odette UK.

Marking improvements

‘We have about 120 suppliers at this site and we are about to start on a supplier development programme. This document will form part of that work.We will be using this document to work with them to help identify problem areas and what they — and we – can do to improve things.’

One of the problems in implementing the new document in the UK is the sheer diversity of the industry here, says Rob Exell, chairman of Odette UK and manager of purchasing support at PSA PeugeotCitroen in Coventry. ‘We have worked hard to produce version 2.2, but we haven’t rolled it out very far yet. There are seven UK-based car makers and getting them to work together is difficult.’

As for Peugeot UK, Exell says an earlier version of the Odette document was sent out to all its 70-80 UK suppliers asking them to evaluate themselves without revealing their scores. ‘But in the very near future we intend to ask them to send in the results of their evaluation so that we can see if they are up to scratch and to create action plans for them.’

The implication, which Exell doesn’t deny, is that if suppliers under-perform and fail to improve, future business with Peugeot will be under threat.

A free copy of Odette’s questionnaire is available at www.odette.org

On the web