Mitsubishi Powers -- Using J-SOX Supply Chain Excellence to Get Green

May 18, 2009
Mitsubishi leveraged its requirement to comply to Japanese Sarbanes Oxley (J-SOX) as an opportunity to gain tighter inventory control, quicker response to customer demand, reduce supply chain cost, and automate the order to cash cycle.

Mitsubishi Electronics Automotive America (MEAA) is synonymous with exceptional customer service and unsurpassed quality. As a thought leader in the automotive value chain, MEAA leadership knew that they must ensure that their supply chain became leaner and more streamlined, so that they could move forward and thrive during the global economic downturn. To that effect, a U.S. initiative was launched to consolidate their ERP and EDI platforms into a single version of the truth.

As the number one Japanese supplier among North American OEMs, MEAA had the foresight to anticipate that in order to remain competitive, critical improvements in processes and systems would be necessary. MEAA leveraged its requirement to comply to Japanese Sarbanes Oxley (J-SOX) as an opportunity to gain tighter inventory control, quicker response to customer demand, reduce supply chain cost, and automate the order to cash cycle. At the same time, the initiative would allow MEAA to support their ongoing commitment to the environment by moving to a paperless, electronic environment, both internally and with external customers.

Driving a Single Point of Truth

MEAA has four locations in the U.S.: a starter and alternator plant in Mason, Ohio, a radio, ECU and ignition coil plant in Maysville, Ky., a rebuild operations plant in Garden Grove, Calif. and a sales and marketing office in Northville, Mich.. Frequently, each one of these locations is involved in some or all aspects of a particular OEM order.

Many global companies, with geographically disparate operating companies or locations, have faced the same challenge. Whereas localized, separate ERP, Accounting and EDI systems can initially create a flexible business model, ultimately a company's ability to communicate becomes crippled without a single version of the truth. In addition to J-SOX compliance challenges, multiple systems cause redundant, manual and inefficient processes. Multiple systems require additional staff to perform the same functions rather than sharing those functions across multiple divisions. The issue becomes exacerbated in complex supply chains: multiple instances of the "truth" cause communication bottlenecks and blind-spots, resulting in inefficiencies of inventory and cash flow.

William Hammock, Information Technologies Corporate Manager for MEAA, describes the top project motivators: "The three drivers for consolidating were to comply with J-SOX security levels and obtain J-SOX certification, to bring together several disjointed systems and spreadsheets, and to integrate segmented systems and processes under a single umbrella so as to provide better information sharing. We wanted to gain efficiencies, and have global visibility -- particularly with respect to inventory visibility, sales and finance. Now, we will have global visibility in all four locations."

Overcoming Challenges

MEAA had a core group of leadership, IT and business staff who were up to the challenge. Yet with the additional work load, the number of internal staff that MEAA could to dedicate to the consolidation was limited. MEAA had to act quickly without having to hire and train new internal staff or being subject to long term commitments. They also knew that the level of activity would be constantly changing through the on-boarding timeline, calling for a flexible support team that was capable of gearing up and slimming down as required throughout the process.

When searching for an implementation partner, MEAA had to consider the specific challenges the partner had to be able to meet. Experience with J-SOX, as well as their ERP and EDI platforms was critical. Time was of the essence for this enterprise level rollout. Hammock says, "the greatest obstacle was the timeframe we needed to achieve J-SOX compliance. We were under pressure to complete the consolidation within 8 months. Another roadblock was a shift in mind sets. We needed to get everyone used to the system and understanding the benefits they would gain."

MEAA leadership selected Avatar Partners, a U.S.-based software systems integrator, to provide best practices knowledge for EDI optimization. With help from Avatar Partner's on-demand EDI services, MEAA could deliver J-SOX compliance reliably and on-time, without needing to hire more staff. Avatar Partners' resources were chosen for their high level of competency in the selected ERP platform, JD Edwards EnterpriseOne, the leading ERP that provides robust functionality and reliability on a global scale. Avatar also utilized its experience with Inovis, the EDI solution chosen by MEAA, and the foremost EDI and B2B integration platform and provider of on-demand business community management. Avatar Partners worked closely with Terillium, MEAA's trusted ERP implementation partner and certified Oracle Advantage partner, with extensive expertise in JD Edwards and Oracle.

The project was not without its struggles. "The challenge of going to a single system was completely redoing all of the EDI maps," Hammock said. "But in the long term, it reduced the number of maps because before we had separate maps for each division even though they were for the same customers. Now we can support each other to do more with less fewer resources. We were able to significantly reduce the resources needed to support us going forward."

MEAA Leadership Delivers

The ultimate objective of this initiative was delivering the perfect order -- on time, to the correct location, in the right manner -- and having visibility to that order throughout the process. Avatar Partners worked with MEAA to deliver this end result while keeping in mind future initiatives, which will include expanding visibility tools and providing EDI capability to MEAA suppliers. Bill Hammock explains, "Our customers will definitely see benefits. One of the main benefits is inventory visibility. When an order comes in, we can now ship product out of any branch plant. This also allows us to reduce shipment time. We can now support the customer and manage inventory levels. We also have the ability to close the supply chain loop by expanding EDI to our suppliers -- this will be a huge help in resource savings. EDI allows us to receive and move more product, more efficiently."

The team looked for areas where supply chain events could increase cash flow to the company. "At the end of the day," says Deon Colchester, Executive Vice President, Engineering and Operations, Avatar Partners, "it's all about cash flow. The purpose of any solution is to help a company get their cash faster, and optimize their use of that cash." Just as EDI is the backbone of data flow throughout the supply chain process, so is visibility the backbone to cash flow throughout the company.

MEAA worked with Avatar Partners to conduct a gap analysis on each trading partner prior to mapping and integrating each trading partner onto EDI. "Between March through December, we implemented 40 customers with 300 ship-to's at 3 separate locations. We are now 100% EDI with nearly all of our customers. We also went through J-SOX compliance in December and passed it," says Hammock of the major project milestones. After go-live, Avatar Partners remained on standby to quickly resolve any issues that may have come up. This way, MEAA's processes could continue uninterrupted and their trading partners felt no impact to the transition.

Hammock describes a key to his success: "Experience level was the biggest reason. It was important they not only know the EDI transactions themselves, but more than that, knowing how to populate the interface files with JD Edwards EnterpriseOne and Oracle was the major point that made it a success for us. Knowledge of the interface files with JD Edwards was key." By utilizing Avatar Partner's scalable staff, MEAA could supplement as needed on as little as a day's notice. MEAA appreciated being able to use as little as 1 resource, and up to 5 resources at one point in the project. This on-demand, scalable model gave MEAA the support they needed without the headache of the learning curve, short term hiring, and management of new resources.

Says Hammock, "The most importance thing to us is that the partner have experience and the knowledge to guide us in right the direction. We needed to be able to rely on the experience level, and the ability for the partner to lead us in best practices."

MEAA Drives Towards the Future

From all angles, it is clear that this project has enabled MEAA to comply to J-SOX while delivering best practice methodology within MEAA and for its supply chain partners.

Hammock says, "In the future, we will be able to expand electronic invoicing from our overseas partners and automate outbound payments. This will reduce the number of days in which we pay our suppliers, while at the same time reduce the number of resources to manually enter invoices. We simply couldn't do this before because of the volumes. We receive 8-12 containers per day -- each container has multiple PO's and multiple parts. Our suppliers invoice monthly, and we have 250-400 suppliers. We get 500-600 page invoices from suppliers overseas who provide 80% of our parts."

The upgrade from legacy EDI and ERP systems went so successfully that MEAA plans to deploy the solution to other MEAA locations. MEAA is now able to support all data formats and integration requirements that their trading partners may need on a global scale. Potential MEAA future projects include analytics for improved forecasting and proactive visibility, as well as supporting EDI to automate the procurement process.

Marlo Brooke is the president of Avatar Partners, a systems integration and software development company with solutions that help companies improve cash flow and manage cash throughout the supply chain process. Avatar Partners implements best-in-class solutions in electronic commerce, EDI to ERP midddleware, eInvoicing, receivables and payment reconciliation, order to cash, credit and collections and cash management.

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