Ford’s Supply Chain Strategy

Contents

EXECUTIVE SUMMARY 2

INTRODUCTION 3

ISSUE IDENTIFICATION 4

ANALYSIS 5

ALTERNATIVES 6

RECOMMONDATIONS & IMPLEMENTATIONS 8

CONCLUSIONS 9

EXECUTIVE SUMMARY

After carefully analyzing Ford’s existing supply chain I immediately became aware of its highly complex nature. This high level of complexity combined with other internal and external factors have pushed Ford to search for solutions in order to overcome the costly supply chain challenges that they are facing and may continue to face in the future. The main problem is their complex and inefficient control over their large data base of suppliers and even dealers.

After careful analysis of the whole situation, I have recommended the execution of the virtual integration direct business model that has been used by Dell. Through Ford cannot adopt Dell’s whole model, but Ford can use the mix of IT infrastructure and develop a plan to interact and transact with their suppliers and end users. Furthermore, Ford can boost its sales by providing better customer service and by having faster communication between suppliers, manufacturers, and customers in the value chain. Since Dell and Ford are two different types of manufacturing and business sectors, as people can buy Computers without testing it, but they will not buy Cars online, even though they are buying same model again with all similar features.

Ford should set up a special department in order to handle this new business process. Investment in new high tech equipment’s is required as well as training should be provided before the new project’s kick off date. Suppliers’ computers should be linked to Ford’s master computer network and customers should be made aware of this new shopping experience for buying an automobile.

To measure the performance of this model, Ford should schedule periodical review and evaluation meetings with each department attached to this program. The improvement of customer service and shareholder value should be the main aim of the whole project. At this time it’s hard to anticipate its success or failure, but by investing time and effort into it I will be confident of its success if not in the short term it will definitely in the long run.

INTRODUCTION

Ford Motor Company based in Dearborn, Michigan and was the second largest industrial corporation in the world, with manpower based of 370,000 and earnings of $144 billion. Ford operates in 200 countries. The auto industry had grown much faster with competition aroused from Japanese car makers such as Toyota, Honda and Nissan.

Increased market competition also increased the cost of manufacturing to cater the developing nations, as they are demanding due to increase in spending and per capita. But all this was not helping big auto makers even they have presence around the world. The main problem for Ford in this case was How to manage their complex nature of business in simple way or follow the Dell’s way.

So overall has to decide how to resolve their complex supply chain and ambitious to Embarked on plan called Ford 2000 and to improve global performance.

ISSUE IDENTIFICATION

During late 1990’s Teri Takai, director of Supply Chain Systems questioning her Board of directors on how should Ford change with information technology and uses the intranet to communicate with its suppliers, assembly areas and distribution facilities for better revenue generation and less complex nature of their current supply chain.

 Ford’s current supplier base

Ford needs to decrease their current supplier base and to come out of more complex business and supply network. Unlikely dell has about 50 suppliers and following straight supplier, dell and customer method. In addition to such large data base of suppliers, Ford too has large number of dealerships across the world. So managing and maintaining balanced supply chain is Ford’s top priority at present and looking forward to lower down cost with effective use of supply chain operations.

 Purchasing organization

Ford’s purchasing department is independent of the product development area. However, purchasing has a strong hold over the product design price and negotiations because “an efficient use of purchasing department can lower down inventory and limited list of suppliers could result in very significant savings” for the company.

On the other side Dell’s vertical integration is totally balanced because of purchasing departments work very closely with each supplier and managing inventory too. Could Ford also results in merging those areas closely?

 Forecasting within the Ford 2000 projects

The main motive of Ford 2000 project was to reduce cost to be obtained by

Reengineering and globalizing corporate organizations and processes. Ford was lacking in forecasting system and it is difficult to manage inventory from suppliers without having exact forecast from dealer’s network.

 The Two key initiatives under the Ford 2000 project are the Ford Production System (FPS) and Order to Delivery (OTD). The FPS project was geared at making Ford manufacturing operations leaner, more responsive, and more efficient by focusing on continuously flowing material through using vehicle in-process storage units and proper assembly order sequence. The OTD project was started to reduce the order time from 60+ days down to only 15.

 The accuracy of Ford’s forecasting is an integral step in being able to maintain the continuous flow of materials from suppliers as well as being able to turn the vehicles around within 15 days. This is the first time that Ford had ever involved the dealers with forecasting the customer demand.

 Less productive IT infrastructure

The inability of Ford’s first and lower level suppliers to keep up to date with IT technology, because Ford was not able to forecast their demand, to have a better supply chain network with suppliers. Improper use of IT technology could result in miscommunication and hassle between the supplier