Auto makers and suppliers potentially could eliminate up to $1.7 billion in working capital by implementing a new parts-shipping system developed by the Automotive Industry Action Group.
Dubbed the Material Offshore Sourcing project, the system takes aim at cutting redundant, time-consuming processes that occur when automotive parts are shipped via ocean freighters from foreign suppliers to U.S.-based companies.
Development of MOSS was spearheaded byCo., of America Mfg. Inc. and Group LLC, all members of AIAG, a not-for-profit association of industry-related companies. TradeMerit Corp., a Canada-based international trade and logistics firm, assisted in the program’s development.
The MOSS system eliminates traditional forms of communication during the shipping process and replaces them with a Web-based solution built on agreed-upon global standards and shared among companies.
The solution enables shippers to input data and make it available at any point during the shipping process, eliminating the chance for errors, says Mike Comerford, head of the project.
Comerford says when his team began its work, members were surprised to discover how inefficient the ocean-going supply chain can be.
“To move intercontinental freight, email, paper, faxes and phone calls were used (to track shipments),” he tells Ward’s, adding redundancies in the process were overwhelming.
Results from a survey sent to 210 automotive organizations indicate 15% of all shipments experience delays due to inaccurate or incomplete data; 79% of all data used in the supply chain is re-keyed multiple times into proprietary systems; and 91% of companies still use manual procedures to correct shipments and communicate their status.
The inefficiencies led to many problems, including long delivery times, high shipping costs and the need to maintain excessive inventories.
“For some shipments, the average delivery time might be 34 days, but it could be 20-63, so you don’t know when you’re going to get your goods,” Comerford says. “It forces OEMs to maintain inventory.”
In some cases, late shipments caused auto makers to charter flights for critical parts, which is far more costly than transportation via freighter.
The MOSS team enlisted risk-assessor company Marsh Inc. to conduct a detailed cost-benefit analysis of potential savings from a standardized shipping solution.
“(Marsh) determined that when you eliminate the human touches and all the re-keying and email and faxing, you eliminated time, cost and error from the process,” Comerford says.
A 3-month pilot run of the system resulted in a reduction of inventory in transit, less reliance on air freight and improved delivery times. It also allowed for greater “transparency” for companies tracking their shipments and reduced the need for human interaction during the process, Comerford says.
“In the pilot, we identified 26 events where humans were required to be involved and we eliminated 17 of those,” he says, noting errors were reduced by 65%. “Information was entered once and transferred to e-documents automatically.”
AIAG plans on making the MOSS system available to its members within the next few weeks, Comerford says.
Members will be able to review the findings of the cost-benefit analysis and pilot program and decide how to best implement the system if they choose.
“It’s up to the individual companies to implement whatever pieces of it may best fit their needs,” Comerford says, noting some may opt to apply part of the system, all of it, or layer it over their existing systems.
“A couple of the OEMs are currently doing very extensive analysis between MOSS and their current processes,” he says.