A comprehensive set of guidelines intended to identify waste, errors and miscommunication across intercontinental, ocean-going supply chains is now available from AIAG, a not-for-profit, member-supported organization that works with a wide range of manufacturing companies and service providers to help them operate at peak performance.
"Companies expect global shipments will be late, so they build waste and inefficiency into their operations to compensate for a bad process," said executive director J. Scot Sharland. "AIAG volunteers, who represent stakeholders at all levels of the global supply chain, have proved that it doesn't have to be that way. They have developed an affordable, easy-to-deploy system that will let companies reduce parts inventories and premium freight shipping costs, and dramatically reduce the time employees spend tracking shipments."
The guidelines, contained in Recommended Business Practices for Long-Distance Supply Chains, are based on the findings of AIAG's Material Offshore Sourcing (MOSS) project, which studied ocean-going supply chains, including order, transport and customs processes, to identify the root causes of errors that lead to shipping delays.
Among the findings:
o An estimated 15 percent of all shipments experience delays due to inaccurate or incomplete data.
o Most errors stem from the manual input of data, which is often re-keyed multiple times by different parties, and through phone and fax communication.
o North America-based automakers and suppliers may be able reduce working capital by as much as $1.7bn if these delays are eliminated.
The new AIAG guidelines, developed by a team of 11 supplier and solution provider organizations led by Honda of America Manufacturing, Inc., and General Motors Company, are built around a trade collaboration system that uses a cloud-based internet solution with common message templates. Essentially, every member of a supply chain that adopts the guidelines will have visibility into a shipment at any point in time, and will communicate with one another via a secure Web portal using standardized forms.
A three-month pilot program involving 20 shipments between General Motors and a Korean supplier was 100-percent effective in reducing shipping errors. Other participants in the pilot included TradeMerit Corporation, which developed the trade collaboration software, the National Institute of Standards and Technology, Pohang University of Science and Technology, Menlo Worldwide Logistics, Marsh Inc., APL, Atlas BX Co. Ltd., Eagle Global Brokerage, CEVA Logistics and Exel.
Based on the results of the MOSS study and pilot project, AIAG estimates that annual cost savings of 1 to 4 percent the global value of imports, or a conservative estimate of $21bn, could be achieved if there were global adoption of the guidelines.
Recommended Business Practices for Long-Distance Supply Chains can be purchased through aiag.org. It is available to AIAG members for $39 and to non-members for $126.
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