Ford Motor Company: Supply Chain Strategy

Group 7, Section B

Name PGDM No

Anand S 14016

Nikita Lalwani 14089

Rohit Shettar 14124

Rony Francis 14126

Tony Sebastian 14171

Submitted to: Prof. Rajendra Todalbagi

Overview

Based in Dearborn, Michigan.

Second largest industrial corporation in the world.

Revenues of more than 144 billion dollars.

About 370,000 employees.

Operations spanned 200 countries.

Since Henry Ford had incorporated in 1903, the company had

produced over 260 million vehicles.

Automotive Industry

Big Three U.S. automakers—General motors (GM), Ford, and

Chrysler

Foreign-based auto manufactures

(i.e. Toyota and Honda)

Facing increasing overcapacity

Advantage in the industry was fast becoming global

Ford 2000

Product development consolidated into five Vehicle Centers (VCs)

Each responsible for the development of vehicles in a particular

consumer market segment

Making processes and products globally common

Eliminate redundancies

Realize economy of scales

Ford’s New Global Approach

Technology was employed to overcome constraints usually imposed

by geography.

Teams on different continents needed to be able to work together as

if they were in the same building.

In every reengineering project, information technology (IT) was

critical

Deployed to enhance material flows and reduce inventories

Substituting information for inventory

EXISTING SUPPLY BASE

Beginning in 1990s

Shifted towards longer-term relationships with capable

suppliers

Tier 1, Tier 2 & below suppliers.

Assist suppliers in improving JIT, TQM & SPC.

Ford expected yearly price reduction from these suppliers.

Tier 1 well developed IT capabilities, including Electronic Data

Interchange.

Order to Delivery

The purpose of OTD: Reduce to 15 days from 45 to 65 days

Pilot studies in 1997 and 1998 identified bottlenecks throughout Ford’s supply chain: Marketing

Material planning

Vehicle production

Transportation processes

Implementation of OTD

Ongoing forecasting of customer demand from dealers A minimum of 15 days of vehicles in each assembly

plant’s order bank to increase manufacturing stability Regional “mixing centers” that optimize schedules and

deliveries of finished vehicles via rail transportation A robust order amendment process

o to allow vehicles to be amended for minor color and trim variations without the need to submit new orders

Comparison - Ford vs Dell

Costs of developing web capabilities

Problems of connecting to suppliers and other external parties who

tend to be less technologically advanced than the Ford

Difficulties in implementing a true build-to-order model for so

complex product as an automobile

order

delivery

orderSuppliers Manufacturer Distribution

ChannelCustomers

Customers

Suppliers Dell

Direct Model

Traditional Model

Logistical Drivers

Facilities FRN VCs

Inventory JIT

Transportation Railways

Cross –Functional Drivers

Information FPS

Sourcing Materials procurements

Pricing Fixed pricing

How should Ford use Internet technologies to interact with suppliers

To address this problem Ford must think about its relationships not only with suppliers but also with dealers and customers.

As supply chain systems staff members study the Dell model in particular, they come to appreciate that “virtual integration” must include design not only of the supply chain but also of fulfillment, forecasting, purchasing, and a variety of other functions that had long been considered separately within the Ford hierarchy.

The question is in fact explosive in its implications, because it inevitably leads to fundamental questions about the way Ford has historically operated internally and how it has interacted with important partner constituencies (including dealers)

Recommendations

Ford to extend its Virtual-business strategy by partially implementing

the Dell’s model of supply chain.

Shift the ownership of raw materials to suppliers

Allow customization both offline and online

Collect customer data from dealers to

Segment customers

Contacting local dealers to forecast demand

Sharing design with the supplier to speed time to market

Involving supplier in R&D

Switch from push to pull strategy

Develop a support network through which spare parts can be exchanged and delivered in a short time.

Continued…

Thank you!