Collaborative Managed Inventory (CMI) and Vendor Managed Inventory (VMI) in the aftermarket. Process description and general comments

Transcription

1 VDA Collaborative Managed Inventory (CMI) and Vendor Managed Inventory (VMI) in the aftermarket Process description and general comments 9001 T1 This recommendation describes a standardised CMI/VMI process in which customer inventories are managed jointly by customers and suppliers. The document includes a recommendation for electronic data interchange (EDI) of the data required in the CMI/VMI process, as well as the process description. This recommendation has been issued by the VDA Project Group Interchange of master data and movement data in the aftermarket Version 1.0, February 2010 Transparency of Master and Variable Data in the Aftermarket Project Group Issued by: Verband der Automobilindustrie Copyright Behrenstraße 35 This document may not be printed or Berlin otherwise reproduced without reference Phone +49 (0) to the source Internet:

2 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 2 of 13 Disclaimer VDA recommendations are freely available for general use. The user is responsible for ensuring correct application for the specific case. They represent the latest technology available at the time of issue. Application of VDA recommendations does not relieve the user from responsibility for his own actions. In this regard, all users act at their own risk. VDA and those involved with VDA recommendations do not accept any liability. Anyone applying VDA recommendations who identifies inaccuracies or possible incorrect interpretations is invited to inform VDA immediately and any errors can thus be rectified.

3 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 3 of 13 Contents 1 General Preface Objectives of the recommendation Structure of the recommendation CMI/VMI process description Basic principle/objective Process benefits CMI/VMI general conditions CMI/VMI process set-up CMI/VMI process operation Measuring performance in the CMI-/VMI process Summary Appendix Abbreviations, terms, definitions Bibliography Example of delivery performance measurement Part 2 Data structure

4 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 4 of 13 1 General 1.1 Preface This recommendation outlines specific aspects of Collaborative Managed Inventory (CMI) and Vendor Managed Inventory (VMI) for the aftermarket business. The process sequence for a standard application is defined and an EDI interface format is developed for standardised interchange of relevant data between supplier and customer. A suitable method for measuring delivery performance in the aftermarket is also recommended. A general description of the CMI and VMI processes can be found in the ODETTE Global CMI min/max and Vendor Managed Inventory (VMI) recommendations. 1.2 Objectives of the recommendation The purpose of this recommendation is to describe a standardised CMI and VMI process for the automotive aftermarket. It covers aftermarket-specific aspects and extends existing ODETTE guidelines for CMI and VMI. A broader range of customers and suppliers should accept CMI/VMI applications through the introduction of a standardised data structure supporting process entry and implementation. Associated potential to reduce inventories and improve service levels for the customer can thus be realised. 1.3 Structure of the recommendation Chapter 1 provides general comments regarding the recommendation. Chapter 2 gives a process description for CMI and VMI. The basic principle and objectives for application in the automotive aftermarket are outlined here. General conditions for successful application are described and the benefits of the process are highlighted. There is also a schematic overview of the process. Chapter 3 illustrates a method to measure delivery performance specifically adapted for the aftermarket. Chapter 4 summarize the process. Chapter 5 lists abbreviations, terms, definitions and references. Part 2 of the recommendation includes preferred EDI interface format for standardised interchange of relevant data, including technical description.

5 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 5 of 13 2 CMI/VMI process description 2.1 Basic principle/objective Inventories should be jointly managed by customers and suppliers through the Collaborative Managed Inventory (CMI) and Vendor Managed Inventory (VMI) processes. In the CMI process, the customer is responsible for scheduling. The supplier receives forecast data in the form of delivery schedules over a suitable (agreed) period for planning to take place. The actual delivery is however not carried out through a delivery schedule, but through the mutually agreed general conditions for the CMI process. Essentially these include minimum and maximum inventory levels and time parameters to be observed (transport times, goods receipt processing times etc.) Within these general conditions, the supplier can manage deliveries independently. In other words, there are no fixed delivery dates specified by the customer. The delivery date can be set by the supplier within a period of time, observing prescribed parameters. In the VMI process, the supplier is responsible for scheduling and implementing the process. In other words, the customer does not have to draw up a forecast for the supplier. The delivery capacity of the customer has top priority here. To control the CMI/VMI processes, data must be transmitted regularly (e.g. every day) and at a defined time by the customer to the supplier. Through the data, the supplier can finely adjust and adapt inventories at the customer. Transmission of the data at least for large volumes should take place with a standardised data format. This is the only way that CMI/VMI can be implemented effectively for a larger number of material numbers and multiple customers/suppliers. The corresponding data format is outlined in Part 2 of the recommendation. Application of CMI/VMI does not necessarily also mean simultaneous management of consignment stocks. 2.2 Process benefits The following benefits can be achieved through co-operative application: Improved delivery performance for the customer Greater transparency regarding inventories, flexibility in production and supply Optimised production batches Reduced inventories through virtual pool (capital commitment, storage area) Optimised delivery frequencies, bundling of transport

6 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 6 of 13 Focus on essential problem cases, fewer exceptions, thus lower communication costs, more efficient bottleneck management Prevention of special deliveries/transport costs 2.3 CMI/VMI General conditions The following general conditions and rules must be established for successful application. The basic pre-requisite for implementation is co-operative and regular coordination between the supplier and customer. As a rule, single sourcing of the customer is required for the CMI/VMI process. If there is multi-sourcing, the process conditions for handling CMI/VMI must be established with realistic delineation from other sources of supply. CMI/VMI is generally only used for one storage level. As a further step, multi-stage processing is also conceivable. The suitability of CMI/VMI processing for a material number increases according to its constancy of demand planning reliability and the quantity required. To evaluate planning reliability, refer to the planning KPI according to VDA recommendation It is sensible to have a stable usage history of at least 6 months when including a material number in the CMI/VMI process. In the CMI process, a customer forecast is required (at least 6 months, if possible 12 months). Through drawing up a forecast, the customer retains responsibility for a key function in material planning. The supplier must know the customer s requirement history in order to create a customer requirement forecast in the VMI process (it is possible to transmit the requirement history in the data format described in Part 2). Parameters must be mutually agreed when measuring performance (see Chapter 3). The process performance and general conditions are reviewed regularly, consistently checking and adjusting if necessary. In particular, the min/max limits are validated according to planning performance and volatility of demand and the range of parts adjusted if necessary. Exceptions, e.g. in response to sudden significant changes in demand, must be agreed between customer and supplier immediately. This is assisted by prompt communication of market or demand information from the customer and purchasing information from the supplier (supported if necessary by VDA recommendation Suggestions to standardise communication for exception handling through the supply chain in the aftermarket, VDA 4949). Special care must be taken to set upper and lower inventory limits for new product launches. Frequent process monitoring is required. Performance measurement needs to be interpreted appropriately as demand in such cases is generally uncertain. For product withdrawals (phase-out period, technical change or replacement by cut-off date), it is necessary to communicate the expiry date and agree future action.

7 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 7 of CMI/VMI Process set-up The following points are to be observed when setting up the CMI/VMI process: Mutually define and agree range of parts Agree exchange of data Set date of data update at the customer, also the interchange Establish transmission timings/frequency Mutually define upper and lower limits, also adaptation procedure The following factors must be taken into account when setting the min/max limits - Replenishment lead time - Production time/production cycles - Transport time - Delivery frequency - Goods receipt processing/repacking times There must be one full batch size difference between the min/max limits (packaging units, frequency of supply etc. must be taken into account). The necessary details are transmitted, e.g. customer part number, part number, supplier, description, batch size, min/max limit, also the average daily consumption, the last three delivery notes in the goods-in department, inventory, demand, delivery schedule ID, valid order number. See Part 2 for a detailed description of data and formats to be exchanged. Agree date of use Measure performance as soon as the part is in the inventory corridor between the min and max limit for the first time 2.5 CMI/VMI Process operation A schematic overview of the CMI/VMI process is outlined below. The numbers refer to the various process steps marked on the flow diagram. The requirement forecast transmitted per schedule is not essential for consistent supply and measurement of delivery performance is not based on the forecast. It can however be used to measure forecasting accuracy (CMI) Regular (e.g. daily) information on inventories, requirements and goods received by the customer, transit of stocks (by customer) using standardised data format (Part 2) 3 Information on despatch EDI despatch notification (by supplier) when a delivery is created 8 The supplier determines whether a consignment is due by viewing the status of each part. Visualisation through a traffic light system (green = within the min and max limit, amber = between min limit and zero stock at the customer, red = shortfall at the customer, blue = above max limit

8 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 8 of 13 Establish the inventory days in the green range for all parts. Purpose: to identify replenishment time 4-6 Organise replenishment supply. 9 If restocking cannot take place (due to production problems or insufficient quantities following higher than forecast call-offs etc.), escalation management takes place (see VDA Recommendation Suggestions to standardise communication for exception handling through the supply chain in the aftermarket, VDA 4949) 7 CMI/VMI process visualisation To complete the process, monitoring must be supported by alerts. The following alerts can be used here: Above max limit Below min limit Below critical limit (established as an alert signal to identify potential stock-out situations at the customer) Stock-Out

9 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 9 of 13 These alerts are shown in graphic form below: Stock limits for alerts

10 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 10 of 13 3 Measuring performance in the CMI/VMI process Performance measurements against customers delivery schedules are not required in the CMI/VMI process, since these schedules are not delivery-relevant. The supplier makes deliveries based on agreed arrangements. The following standard measurement method is therefore recommended. Daily measurements are taken, regardless of deliveries carried out, to compare the stock level in the customer s warehouse with set target levels. Measurement is based on the customer s available and transmitted stock The quantity of stock is evaluated Measurement is carried out daily Unscheduled/extraordinary fluctuations in demand in relation to daily variations and deviations from forecast must be taken into account (carried out bilaterally in monitoring between customer and supplier) Stock is categorised into the following areas: Area Green range Amber range Red range Blue range Description Stock within agreed min/max limits Stock below minimum limit and above zero Zero stock and/or customer shortfalls Stock above maximum limit (also see illustration on page 9) The defined areas receive the following % ratings in the daily measurements Area Rating Description Green range 100% Amber range 100% For the first 5 working days below the minimum limit, but before reaching the red area 70% From the 6 th working day below the minimum limit, but before reaching the red area Red range 0% Blue range 100% For the first 5 working days above the maximum limit 0% From the 6 th working day above the maximum limit NB: the agreed time limits are suggestions which may be amended if necessary (e.g. tolerance must not be smaller than the target in days for the minimum limit)

11 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 11 of 13 Values across an agreed period (e.g. rolling period or monthly measurement) are calculated from the arithmetic mean of daily totals for each material number The proportion of days in which customer stocks are within the various areas during the measured period should also be shown Results are shown in % (0 100%). Aggregation of material numbers and/or times can be carried out by arithmetic averaging or depending on turnover. Instead of measuring delivery accuracy in the conventional way, values may be included in the relevant supplier ratings, without any direct comparison. The effect on the customer s supplier rating must be agreed in each case. Unscheduled/extraordinary fluctuations in demand in relation to daily variations and deviations from forecast must be taken into account (carried out bilaterally in monitoring between customer and supplier) For comprehensive interpretation of the delivery performance figures in the CMI/VMI process, the following parameters must be taken into account: Coverage of minimum limit (range) Coverage of maximum limit (range) Max/min limit ratio (range of stock) Planning quality ratio (see VDA recommendation 9000) Volatility of demand An example to clarify delivery performance measurement is given in Chapter 5, Section 3 4 Summary This recommendation provides specific details of the CMI/VMI process for the aftermarket. Emphasis is focussed on standardised interchange of data, enabling versatile application of CMI/VMI processes for a wide range of materials and customer-supplier relationships. Delivery performance for maintaining targets is also outlined. The essential pre-requisites are thus created to realise potential to improve service levels and at the same time optimise customer and supplier inventories.

12 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 12 of 13 5 Appendix 5.1 Abbreviations, terms, definitions VDA CMI VMI EDI EDIFACT ODETTE AIAG LAB WE Association of the German automotive industry Collaborative Managed Inventory Vendor Managed Inventory Electronic Data Interchange Data Interchange For Administration, Commerce and Transport Standardisation organisation for the European automotive industry Automotive Industry Action Group (USA) Delivery schedule Goods received 5.2 Bibliography Vendor Managed Inventory (VMI): Publisher: Odette International Limited, 2004 Global CMI Min/Max: VDA Recommendation 9000: Publisher: Odette International Limited, 2005 and AIAG Automotive Industry Action Group Measuring planning quality in the aftermarket VDA Recommendation 4949: VDA 4949 Suggestions to standardise communication for exception handling through the supply chain in the aftermarket

13 VDA Recommendation 9001 Version 1.0, Februar 2010 Page 13 of Example of delivery performance measurement day 1 day 2 day 3 day 4 day 5 day 6 day 7 day 8 day 9 day 10 day 11 day 12 day 13 day 14 day 15 day 16 day 17 day 18 day 19 day 20 day 21 day 22 day 23 day 24 day 25 day 26 day 27 day 28 day 29 day 30 Max limit Min limit inventory customer back orders range green green gre en green gre en blue blue blue blue blue blue blue green gre en amber amber amber amber amber amber gre en green amber red red red green green green gre en rating % average rating: 82,33% green amber red blue sum number of days share % 43,33 23, , Ma x l imit Mi n li mit i nventory customer back orders ra ting % day 1 day 2 day 3 day 4 day 5 day 6 day 7 day 8 day 9 day 10 day 11 day 12 day 13 day 14 day 15 day 16 day 17 day 18 day 19 day 20 day 21 day 22 day 23 day 24 day 25 day 26 day 27 day 28 day 29 day 30