1. Midwest User Group
MMOG/LE Assessments and U.S. Government Regulation of Conflict Minerals
David Doyle, Senior Solutions Consultant
Terry Onica, Director, Automotive
Kathryn Sepke, Senior Solutions Consultant
September 24, 2013

2. Safe Harbor Statement
The following is intended to outline QAD’s general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, functional capabilities, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functional capabilities described for QAD’s products remains at the sole discretion of QAD.

3. Agenda Introduction What is MMOG/LE? The “real” value of MMOG/LE
Midwest User Group
Agenda
Introduction
What is MMOG/LE?
The “real” value of MMOG/LE
MMOG/LE version 4
Conflict Minerals

4. Midwest User Group
MMOG/LE Assessments

5. What is MMOG/LE? What it IS… Supplier Self-Assessment Tool
Midwest User Group
What is MMOG/LE?
What it IS…
Supplier Self-Assessment Tool
Guidelines for building a solid supply chain strategy
An evaluation of the Quality of customer service
An assessment of supply chain performance and capability
An AIAG/Odette Excel-based document
Purchased through AIAG or Odette
Briefly provide background on MMOG/LE for those in the audience who are not familiar with MMOG/LE – review what it is to what it is not. The “nots” are things suppliers sometimes think it is. 5

6. What is MMOG/LE? What it IS NOT… Completed by customer
Midwest User Group
What is MMOG/LE?
What it IS NOT…
Completed by customer
Step-by-step Instructions for managing supply chain
An evaluation of Quality of product
A formal TS16949 Quality certification process
Owned by the customer
Free or distributed by customer
Briefly provide background on MMOG/LE for those in the audience who are not familiar with MMOG/LE – review what it is to what it is not. The “nots” are things suppliers sometimes think it is. 6

7. MMOG/LE is Good for YOU Let’s talk about why… Midwest User Group 7
Dave to provide an analogy. 7

8. Who Says it is Good for You?
Midwest User Group
Who Says it is Good for You?
Case studies
14+ Tier 1 and 2 suppliers
Located around the world
Supplier executive management
OEMs
Recognized supplier improvements
Performance ratings
Proactive risk management
Increased competitiveness
The following slides provide real life, reported feedback from suppliers who have gone through the mmogle assessment and taken it seriously.
Supplier case studies in this presentation are from China, Czech Republic, Serbia, US, Canada, India, Mexico, and Slovenia.
Benefits reported in the case studies were, for the most part, from executive level management.
Additionally, the OEMs and suppliers agree that improvement can be seen performance ratings and increased competitiveness from suppliers in which they have validated their assessment. Not, only do suppliers see increased competitiveness and therefore giving them confidence to go out and gain additional business, but OEMs confirm that after suppliers going through reviews that the OEMs feel confident to continue to award the suppliers more business.
Additionally, OEMs reported supplier improvements from mmogle in the area of proactive risk management. NEED AN EXAMPLE HERE 8

9. Why it is Good for YOU! Customer satisfaction Inventory
Midwest User Group
Why it is Good for YOU!
Customer satisfaction
Inventory
Planning system
Sub Supplier Performance
Increase Revenue
Employee satisfaction and training
Here are the following commonly reported benefits that you will cover in the following slides 9

10. Customer Satisfaction
Midwest User Group
Customer Satisfaction
Better understanding customer expectations
Customer Specific Answers
Increased customer satisfaction
Enhanced our relationship with the customer
Improved customer delivery ratings
Customer Satisfaction
Suppliers in general report that after going through an assessment that they usually find that “customer specifics” are missing or significantly lacking in areas such as Ford’s DDL, customer EDI data, packaging and labeling, capacity, etc. In 2008, after the global economic crash many senior executives didn’t realize a lot of the experience that was let out the door. As a result when the volumes starting coming back right away, they realized that the new people in these positions were not aware of the details of how to supplier customers. As a result, Ford indicated that 30% of the suppliers lost Q1 due to new people on the job. They not only did not know how to track such things as DDL and Supplier Ratings, they didn’t even know how to get a password on Ford’s systems or even their own (Planning system).
After going through an MMOG/LE assessment, especially when a customer is doing a review, it does build a stronger relationship between the customer and supplier. Typically, after a review and when customer’s validate the level A score. It not only validates to the customer that they have confirmed you have good processes but it also makes them more confident in awarding you more business. Ford is a great example, after you are awarded Q1 it means that Ford is confident that you have good processes in place that you have the ability to be a global suppliers and have robust processes to take on more business.
Suppliers, especially, those that were interviewed that were troubled suppliers when they took the MMOG/LE assessment, always report that after all the processes are in place and the customer has validated their MMOG/LE that vendor ratings go from 76-90% to 100%.
At the bottom of this slide, this is a common statement among suppliers who go through audits – organizations typically after they go through an MMOG/LE validation with their customer are normally very proud of the accomplishment. We would have to say that most go into the process being drug by the ear, kicking and screaming, but ALWAYS come out the other side seeing the value of the process. They realize that they didn’t have the robust processes in place that they thought they had and the corrective actions they take in all cases always provide the benefits that you will see on the following slides.
“Our customer validated our operations to be a Level A” 10

11. “We have confidence in our inventory levels”
Midwest User Group
Inventory
Reduced inventory by 17-50%
Reduced physical inventory frequency from monthly to annually
Increased available floor space
Reduced scrap
Real time inventory tracking by lot
More efficient inventory management
Inventory is typically one of the big areas that suppliers see reduction in costs.
Suppliers we have spoken too after they have gone through the process have reported any where from a 17% to a 50% reduction in inventory. This is mostly the result of better usage of the planning system, automating processes and communicating electronically with their sub suppliers.
Once the inventory management process is streamlined, suppliers have reported physical inventories are not needed as much as the system is accurately reporting what is happening with inventory. We have had several report that by implementing sub supplier EDI/Web that they have freed up floor space by carrying less inventory. We had a customer about 8 years ago that told us that they reduced so much inventory, they were able to put a new line in the plant (Metaldyne).
We had one executive report that by better leveraging bar code scanners and the planning system to track WIP, they were able to reduce scrap by $1M. Prior to MMOG/LE, they just reported the cost of the scrap. It was not until they went through the MMOG/LE process that they realized they were scrapping products several stages into the process – therefore the scrap cost they were initially reporting was really not the right cost, it was actually much higher. This allowed them to do a continuous improvement event and fix the process at the point it was causing them the issue.
Prior to MMOG/LE manual spreadsheets to calculate month-end inventories, however, now it is done real time and any part can easily be traced to its specific lot (Wagon).
The quote here was from a COO at a plant…”we not have confidence in our inventory levels”. Most all suppliers report inventory efficiencies after going through the MMOG/LE process.
“We have confidence in our inventory levels” 11

12. Planning System Improved capacity planning process
Midwest User Group
Planning System
Improved capacity planning process
Eliminated spreadsheets for tracking and reporting
Employees are better informed
Employees are empowered to resolve issues quicker
Increased visibility of customer requirements
“We used to spend all of our time just trying to get the numbers. Now, we spend our time trying to understand the numbers and correcting the issues they help us to identify.”
Both multi-national suppliers as well as SMBs have reported a better handle on the capacity planning process. By leveraging the systems and being able to generate real-time, more accurate reporting, most all suppliers see an improvement in this areas. This has been particularly important as NA volumes keep coming back since It allows the suppliers to have visibility into seeing the changes coming.
Even in places like Fuzhou, China suppliers through a translator told us this. They indicated once everyone had better visibility into the customer’s orders, they were all able to react to the needs of the customer….shop floor, purchasing, finance. We had one executive tell us that now that the employees are using the system, he had empowered them to resolve issues as they see them and therefore things get resolved much faster.
We had a CFO tell us that they used to spend all their time just trying to get the numbers for month-end reporting, now with real time visibility and system usage, they can see the numbers ahead of time and even be proactive in correcting and resolving the issues sooner. So instead of waiting until the end of the month to find a big issue, they find it sooner, react on it and resolve it. 12

13. What About spreadsheets?
Midwest User Group
What About spreadsheets?
Spreadsheets are OK for “analysis” of data
OK : Truck windows and returnable containers
Not OK: MRP, capacity planning, supplier scheduling, inventory management, scrap reporting, etc.
Difficult to share information across departments
Complex spreadsheet (e.g., macros, linked data) are dependent upon a few people to maintain
Spreadsheets do not validate data
No real time visibility to all parties involved 13

14. Sub Supplier Performance
Midwest User Group
Sub Supplier Performance
Reduced inventory by 17% after implementing EDI/Web
Reduced supplier expediting/premium freight by 18%
Improved communications within the supply chain
Shared customer forecast
Improved responsiveness and decision making
“It helped to bring our suppliers closer to our expectations”
“100% connected with suppliers in just two weeks
on the web”
We had one multi-national supplier (Freudenberg) who reported reducing excess on-hand for both us and our sub suppliers by 17%.
We have had several suppliers in our case study who have reported a reduction in premium freight – one reported by 18% (Freudenberg) and another supplier (Gates) reported premium freight went from $180K a year to $25K a year.
We have had executives comment that with better information, it allows them to make more better and informed decisions. One executive (Marshall) commented that even with schedules that sometimes fluctuate with customers, it allows them to only have to focus on the abnormal things as the regular normal day-to-day is now better handled in the system allowing them to only have to focus any surprises from customers. This executive allow reported this benefit is now passed on to his suppliers as they also have better visibility into the OEM demand from what is passed on to them. Therefore, he noticed benefits in the entire supply chain. He felt everyone was better able to make decisions and react quicker.
Every supplier that we have spoken to said that while they did not believe that sub supplier EDI/Web was of value to them before MMOG/LE, they all clearly see the value now. Also, they find that sub suppliers like having the visibility into their requirements. After all, can you imagine what life would be like at your organization if all of your customers decided to stop sending you EDI? Would you want to go back to manual processes (fax, and paper)?
We even had one company report that with the web portal technology, from the time they cut the PO with their vendors until the time that they got all their sub suppliers using their new web portal (including training the sub suppliers on the portal) was just 3 weeks!
Talk about schedule adherence 14

15. Midwest User Group
Increase Revenue
New capabilities and efficiencies attracted new customers
“We doubled sales in 3 years without increasing staff”
“We booked business that will double our revenue”
“It gave us confidence to double our business in five years”
“Operating more efficiently has helped us to taken on more business and not have to add employees”
“We were able to grow the business without growing inventory”
“Time gained from efficiencies goes to focusing on new business”
Stress Increase in revenue is better than an decrease in cost
How many of you would like to increase your revenue? Well this is also one of the most reported benefits. Probably, a result of more confidence internally, more confidence by your existing customer, and increased efficiencies that allow you take on more business without taking on more costs.
Some suppliers reported that prior to MMOG/LE if they had to add another customer, they would have to add more head count to handle the new customer. However, with MMOG/LE companies report the opposite. They take on more business and do not have to add more head count because they are letting the system do the work and they have overall better work instructions and informed/better trained employees. 15

16. Employee Satisfaction and Training
Midwest User Group
Employee Satisfaction and Training
Increased employee confidence in managing daily tasks
More accurate work instructions that are better aligned to daily operational activity, best practices and customer requirements
Documenting and mapping processes lead to a 50% reduction in time to train new users on a new product launch
Most all report more accurate documentation of processes means better informed employees and back ups. We had a CEO report that prior to MMOG/LE he would have to call people while they were vacationing and even once when someone’s wife was having a baby. He reported that after MMOG/LE it forces them to have work instructions that “anyone” can follow and by default that is a definition of a good work instruction!
Also, MMOG/LE forces an organization to better align work instructions with daily activities. Typically, before MMOG/LE work instructions are written at a very high level. One in which no back up would be able to follow. However, after MMOG/LE they took the time to document instructions that anyone can follow.
Tell story about Wagon and the losing power story.
We had one multi-national that reported (Lear) that by documenting all their processes in the ERP system that they were about to reduce time by 50% in training a plan on a new product launch in Mexico. They also said they reduced the time having to fly back and forth to the plant for training as all processes were documented in the system. This process was so successful, they leveraged it next at their facilities in China.
“We now have processes and procedures
anyone can follow” 16

17. MMOG/LE Version 4 Work group is engaged in analysis
Midwest User Group
MMOG/LE Version 4
Work group is engaged in analysis
VDA (Germany) has formed a MMOG/LE Work Group
MMOG/LE version 4 includes two groupings for Assessment Questions:
Full Assessment required by OEMs of Tier 1 Suppliers
Separate Assessment for Sub-tiered suppliers
Assessment and Gap analysis tabs are combined into one
Target completion date December 2013
AIAG/Odette will announce when v4 is available
Check OEM bulletins for adoption of v4 17

18. Midwest User Group
Conflict Minerals

19. Conflict Minerals Q&A What are conflict minerals?
Midwest User Group
Conflict Minerals Q&A
What are conflict minerals?
Currently include gold, tantalum, tin, and tungsten
What is the Conflict Minerals Rule?
Mandated by the Dodd-Frank Act
Enacted by the SEC in August 2012
What does this rule mean?
Determine and disclose whether these raw materials in the organization’s supply chain originated at mines in the Democratic Republic of the Congo or its nine adjoining countries

20. Midwest User Group
Conflict Minerals Q&A
What if conflict minerals originated in the DRC or its neighboring countries?
The issuer must determine and disclose whether the sale of these minerals financed or benefited armed groups.
What does this Dodd-Frank act hope to accomplish?
Using minerals from “conflict” mines is legal, but human rights groups hope that the disclosure requirement will cause companies to source from conflict-free mines
When are the first reports due?
The first Conflict Minerals Reports are due to the SEC on May 31, 2014, and will report on the 2013 calendar year.

21. Conflict Minerals Q&A What Functions May Be Impacted?
Midwest User Group
Conflict Minerals Q&A
What Functions May Be Impacted?
Corporate executive management
Purchasing
Quality
Engineering
Chemical Management
Materials, Planning and Logistics
Sales
Legal IT

22. Conflict Minerals Q&A What if I am a privately held company?
Midwest User Group
Conflict Minerals Q&A
What if I am a privately held company?
While the organization may not be not required to report to the SEC, your customers, or your customers’ customers may have reporting obligations.
These entities may require you to conduct similar inquiries and due diligence activities for the purposes of their own conflict minerals obligations.
How is the data collected and reported?
The EICC/GeSI Reporting Template is used to facilitate the exchange of data related to due diligence and smelter information between companies in the supply chain
iPoint developed the iPCMP system, which is a web-based tool (database with reporting mechanism)which is recommended to manage data from the EICC/GeSI Template

23. Midwest User Group
EICC/GeSI Template
Available at

24. More Information Available at AIAG
Midwest User Group
More Information Available at AIAG
Located at Initiatives, Corporate Responsibility, Conflict Minerals
Scroll down towards bottom
Resources/Links/Tools
Documents available to assist you
AIAG Executive Summary Post Rule
FAQs
Templates to help gather information from your suppliers

25. More Information Available at AIAG
Midwest User Group
More Information Available at AIAG
Located at Initiatives, Corporate Responsibility, Conflict Minerals
Scroll down to the bottom
Resources/Links/Tools
Documents available to assist you
EICC GeSI Conflict Minerals Reporting Template
iPoint Conflict Minerals Platform

26. More Information Available at AIAG
Midwest User Group
More Information Available at AIAG
Located at Events
Scroll down
Industry webcasts

27. Midwest User Group
For QAD customers using .Net UI, a ‘temporary’ solution is possible by following a few steps
Using Configurable screens, Modify the Supplier Maintenance (SE) and Supplier Data Maintenance (EE) screens.
Add and re-Label, one of the Logical User Fields to be “Conflict Free” (Y/N). Make this a required field, with Default = Yes.
Add and re-Label a second Logical User Fields to be “ EICC/GeSI Conflict Minerals on File (Y/N)? Make this a required field, with Default = Yes.
Attach the supplier answered EICC/GeSi Conflict doc to the vendor’s record.
Using the Browse Maintenance Update the Supplier Browse to include these fields, and link the answered doc as part of the browse

28. Midwest User Group
For QAD customers using .Net UI, a ‘temporary’ solution is possible by following a few steps
Next:
Using Configurable screens, Modify the Item Master Maintenance screen (SE and EE).
Add and re-Label, one of the Logical User Fields to be “Conflict Free Item?” (Y/N). Make this a required field, with Default = Yes.
Add and re-Label a Character User Fields to be “Country of Origin”, build a generalized code of acceptable country codes. Make this a required field, with Default = USA.
Connect a country code look up to the new CoO field
Modify the Item Browse to sort on CoO, and or Conflict Item = Yes, to show the Conflict Minerals

29. Supplier Data Maintenance
Midwest User Group
Supplier Data Maintenance
EE version: Use configurable screens (defined in .NET UI User Guide), move into design mode, select the frame that you wish to add the fields on to. Note: You must be in the UIDesign group in order to configure screens. Design capability can be password protected.

30. Supplier Data Maintenance
Midwest User Group
Supplier Data Maintenance
Here two fields were added, both were selected as logical fields, the first for Conflict Free? Y/N, with the default set to ‘true’. The second was for EICC-GeSI on file, with default set to ‘true’. The ‘edit’ tab in the left frame was used to make these settings as well as change the label to reflect the new field names. You can add Generalized Code-validated lookup for a selection of valid values.
Standard attachment is used to store the Supplier’s filled out and returned EICC-GeSI. For more control, a ‘date’ field could be added for sorting on expired EICC-GeSI, should that requirement be needed.

31. Supplier Browse Midwest User Group
Using Browse Maintenance, the new fields of Conflict free and EICC-GeSI, are added to the browse

32. Supplier Browse Midwest User Group
Now using the new Supplier Browse, the user can sort, and search on the new fields as well as search for those suppliers that have not returned their EICC-GeSI. An Operational Metric could be built to monitor this.

33. Item Master Maintenance
Midwest User Group
Item Master Maintenance
Using the Configure Screens function again, the Item Master has had two new fields added to reflect ‘Conflict Free Item? Y/N’ and we have added the Country of Origin as well with the default here set to USA. The country look up could be added, and an Op Metric used to identify items that do not have CoO update.

34. Item Browse Midwest User Group Add fields to Item Browse
Browse maintenance was used again to add the Country of Origin and Conflict Free Item? to the Item browse

35. Item Browse Midwest User Group Filter for Conflict Free
The user can now search on the Country of origin, and with an Op Metric track compliance to both Conflict Free Item settings, and Items without Country of Origin.

36. Additional Updates Midwest User Group Available on QAD App Store
Automotive Process Maps v2
Easy On Boarding Bundle v2
Customer Schedule Variance Browse

37. Questions & Answers Dave Doyle: dfd@qad.com Terry Onica: tjo@qad.com
Midwest User Group
Questions & Answers
Dave Doyle:
Terry Onica:

38. Midwest User Group
©QAD Inc. 2013