Ford Motor Company: Supply Chain Strategy

Ford Motor Company

Report on

Supply Chain Strategy

Table of Contents

Executive Summary                                                                                                       3

Introduction                                                                                                                    4

Issue identification                                                                                                        4

Environment and Root Cause Analysis                                                                       5                                                          

Alternatives and Options                                                                                              7

Recommendations                                                                                                         9

Implementation                                                                                                           10

Monitor and Control                                                                                                   11

Exhibit 1:

Dell Computer Corporation and Ford Motor Company comparison                  12

Exhibit 2: Ford 2000 Initiative Projects                                                                    13

Exhibit 3: Ford Motor SWOT Analysis                                                                      14

Executive Summary

Ford Motor’s new global approach requires that technology to be employed to overcome the constraints imposed by geography on communication process. Lead time reduction and, consequently, cost efficiency are hard to achieve without smooth information flow. Recommended partial implementation of Dell direct model, i. e. virtual integration of suppliers into one lean and efficient supply chain, would increase both operations control efficiency and shareholder value.  

Introduction

In the era of rapidly changing information technologies Ford Motor faces the challenge of changing its supply chain network. Supply chain team has split down the middle on the issue. Some insist on virtual integration following Dell model in order to reduce working capital and exposure to inventory obsolescence without risking being left behind. The others consider virtual integration being inappropriate for auto industry due to the business complexity and existing wide array of Ford’s suppliers, manufacturing facilities and customers.

Issue Identification

Ford Motor strategy puts emphasis on shareholder value and customer responsiveness. Virtual integration introduced by Dell has delivered on those dimensions. Implementation of emerging information technologies, including the Internet, and ideas from new high-tech industries into supply chain management is inevitable and vital for the future business development. Degree of virtual integration is evaluated by addressing the following issues:

• Supplier management;
• Lack of up to date IT infrastructure;
• Direct contact with end users.

Environment and Root Cause Analysis

Ford Motor is a global organization with operations spanning 200 countries with over 180 manufacturing facilities. In these conditions efficient data exchange, both internal and external is crucial for success. Direct model introduced by Dell Computer Corporation proved to be the best contemporary solution of the matter. In order to see how congruous the Dell model is to Ford’s business both companies’ business environment should be compared. Please refer to Exhibit 1.    

Main strategic issue for Ford is control and management of the numerous links of the supply chain. To produce a single unit Dell needs under a hundred parts, whereas Ford requires over a thousand. Unlike Dell which has less than 50 suppliers, Ford has several hundreds of tier-one suppliers. The shift toward long-term relationships with very capable suppliers who would provide entire vehicle sub-systems has significantly reduced the number of tier-one suppliers. They were provided with a range of techniques, e.g. Just-In-Time Inventory, Time Quality Management, and Statistical Process Control. Tier-one suppliers are in charge of managing lower tier suppliers who usually do not have developed IT capabilities, which slows down the process.

Extension of the intranet to Automotive Network Exchange (ANEX)^[1] would create consistency and promote industry standards, but lack of up to date IT infrastructure both of Ford and its suppliers could result in miscommunication and lack of coordination.  In order to improve activity coordination both with suppliers and end users the FPS, OTD and FIECo projects were introduced to support Ford 2000 Initiative. Please refer to Exhibit 2. All of them are aimed at cost reduction and improving customer service.    

In order to evaluate current business environment and identify the best opportunities for development and growth, SWOT analysis was performed. Please refer to exhibit 3.

Alternatives

A number of alternatives were analyzed regarding implementation of vertical integration.