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Ford Motor Company: Supply Chain Strategy
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Table of Contents
Page 3. Executive Summary
Page 4. Identification Issues
Page 5. Identification Issues, Environmental and Root Cause Analysis
Page 6. Alternatives
Page 7. Recommendation, Implementation, Control
Page 8. Conclusions, References
This case report addresses the challenges to implement virtual integration in Ford Motor Company, one of the largest automobile manufacturing companies in the world. It focuses on the viability of implementing a supply chain strategy following Dell’s “Direct Business model”
Dell’s direct business model used information and technology to revolutionize the PC industry; it focused on developing effective supplier partnerships and JIT manufacturing becoming a highly horizontal or “virtual integrated” company. Dell skipped the intermediate retailers, selling to customers directly eliminating the reseller’s markup and the cost and risk associated with carrying large inventories. All this combined gave Dell a leading position in a very competitive market in only a 13 year period time.
In 1970’s Ford’s main competition was with General Motors and Chrysler. However with the entry of Japanese companies like Honda, Toyota and Nissan the American firm faced a harder competition.
In order to maintain its leading position, in 1995 Ford initiated the Ford 2000 plan; aimed to restructure many of their key processes like Order to Delivery (OTD) and Ford Production System (FPS). They wanted to reduce the OTD from 60 or more to 15 or less days. FPS was created to convert the supply chain from a push type to a pull type basing their forecast, production and inventory decisions on real market demands. The decision to radically redesign Ford’s supply chain infrastructure may significantly affect in a positive way the growth and competitiveness of Ford Motor Company in a short, mid and long term period.
I strongly support the implementation of virtual integration and a pulled based system in Ford’s supply chain. It has been proven by Dell’s KPI’s that producing based on actual customer requirements using information technologies for the efficient information flow from the consumers all the way down to suppliers will directly improve the supply chain by reducing inventory levels and the related cost, reducing lead times, making your suppliers, the production systems and the overall SC more responsive and efficient.
This new strategy will include the creation of an IT platform which its objective is to support an online operation, it will establish procedures to enable customization and ordering by customers via advanced EDI, this platform will be integrated to the physical dealerships as well so they can transmit in real time customer’s requirements. All customer orders would be taken either via Ford's web site or by phone and then produce. A pull system would be implemented completely.
This Platform will also virtually integrated Ford’s supply chain where Ford and all its suppliers would share information by an intranet and Internet to coordinate in real time the flow of materials and production.
One major issue is the differences between the auto business and the computer business were compared to Dell’s; Ford’s supplier network had many more layers and many more companies making Ford’s supply chain more complex than Dell’s.
Change Management (short term issue)
For the reasons above some Ford’s SC staff thought that the Dell’s direct business model will not deliver the same results for Ford.
Ford’s staff never faced with the challenge of modifying work flow processes and standard operating procedures, this can result in employees being uncomfortable, dissatisfied and challenged by this new system, therefore they may fall back to their original...
References: Ford Motor Company: SC Strategy Case Study Harvard Business School by Robert D. Austin
The Power of Virtual Integration: An Interview with Dell Computer’s Michael Dell by Joan Magretta.
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