Ford Motor Case Study
Table of Contents
Environmental and Root Cause Analysis
Alternatives and Options
Monitor and Control
After reviewing Ford Motor supply chain, we became aware of its very complex nature. Due to this complexity we are forced to search for alternatives to overcome the costly supply chain challenges faced by our industry both now and in the future. The present system has an inefficient control of a large database and a vast and complex network of suppliers. We need to change our supply chain in order to make it more cost effective and profitable. After careful analysis we recommend the implementation of a partial virtual integration system, similar to the system used by Dell Computers. With this system, Ford will use information technology and the internet to interact and transact with both their suppliers and their customers. Ford can increase their sales by providing better customer service and faster communication from the supply end through to the manufacturing division and right on to their end user, the customer. This system will be implemented with their existing supply chain so Ford will cover both markets at the same time. If Ford concentrated only on the virtual system their competition would put them out of business, so by running both systems simultaneously will give them an edge over their competition.
Ford Motor Company is the second largest industrial corporation in the world with revenues of more than $144 billion and about 370,000 employees. Their operations span more than 200 countries worldwide. The company has both the design and manufacturing of cars division and they have a financial services division. Significant revenues and profits are realized in both divisions. The automobile industry has grown very competitive over the last two decades with not only competition being felt from the other two US automakers, General Motors and Chrysler, but also from foreign manufacturers like Toyota, Honda and Nissan. The industry is also facing an increasing over-capacity as developing nations realize the wealth and job-producing effects of automobile manufacturing, and are encouraged to develop and expand their own export auto industries.
The main issue with Ford is the management of their large data base of business partners, in particular their first tier suppliers and their second tier suppliers. When we compare Ford to Dell (See Exhibit 1) we realize that Dell only has about 50 suppliers, but Ford has thousands of suppliers that operate in a very complex network of business relationships. Each Dell computer system is made up of less than a hundred parts, whereas an automobile requires several thousand parts. In addition, where Dell sells directly to the consumer, Ford has a large number of dealerships who are spread through a large geographical area throughout the world. To manage both the suppliers and consumers in a single supply chain is a challenge for Ford. Ford is constantly looking for new ways to better control and to manage its supply chain in a more productive and cost effective way. Another issue faced by Ford is the lack of technology in their first tier business partners. This lack of technology makes it difficult for these suppliers to keep up with Ford’s demands. It results in a bottle neck situation for the supply chain. This lack of IT technology results in miscommunication and poor coordination between the suppliers which may result in longer lead times, higher costs and other problems. Because Ford has used independent dealers to sell their vehicles, they don’t have control on their end users, the customers. This lack of control, plus the dealer’s markups,...
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