FORD MOTOR CASE STUDY : SUPPLY CHAIN STRATEGY

Kahani ParekhSmit Shah Omkar Ghalsasi

By Team 9

AGENDA

Part – I Introduction to Ford, Time line review and Challenges faced by the company

Part – II Ford’s Existing Supply Chain Overview and Ford 2000 project’s Initiatives

Part – III Comparison of Ford with Dell’s Virtual integration Model and our Suggestions

INTRODUCTION TO FORD MOTORS

Ford Motor being the 2nd largest US Based Automaker, represents a $164 billion multinational business empire, with revenues of more than $ 144 Billion and 370000 employees with its Operation spanning 200 countries.

Ford Motor has manufactured vehicles under the names of Ford, Lincoln, Mercury, Jaguar, Volvo, Land Rover, and Aston Martin.

Ford Credit: largest automobile rental service, providing financial loan services both to buyers and dealers.

FORD MOTOR’S JOURNEYHenry Ford

Builds Quadri-

cycle

Ford Motor company incorporated in Detroit

Model T & first

Moving Assembly

Line

Ford acquires Lincoln Motors

Lost Market Share to

Rivals

Faced problems like Oil Crisis,

overcapacity and Threat from

foreign automakers

Ford introduces first truck, tri motor-airplane

1896

19031913

19171922

19381970

CHALLENGES FACED BY THE COMPANY• Push System resulting in low Inventory velocity and overcapacity issues

• Poor Demand forecasting

• Global competition• No direct connection with customers due to independent dealers/distributers

network

• Order to Delivery Time (45- 60 Days)

• Complex supplier network

• Lack of IT and Technological support at lower Tiers

TERI TAKAI’S PROBLEMDirector of Supply Chain Systems, Teri Takai addressed these problems in a discussion with senior executivesMajor Issue To be Addressed: How to incorporate use of emerging Information Technologies and ideas from High Tech Industries like Dell in existing Supply Chain system of Ford?Decision to be made on: Group I’s Exhibit : Radically redesign existing supply chain by incorporating virtual integration by using Dell’s model as a blueprint.Group II’s Exhibit : Outlined differences between Ford and Dell’s Virtual Integration Direct Business model.

GOALS OF FORD MOTORS

Vision: “ To become the world’s leading consumer company for auto products and services”

FORD MOTOR’S JOURNEY

Ford Acquires Jaguar

Car’s Ltd

Ford embarked restructuring

plan Ford 2000

Ford launched public Internet

Site and Companywide

Intranet

Ford amassed profits of

$ 6.9 Billion

Volvo is acquired in $6.5 Billion

Deal

Ford emerges as most

improved automaker in

world

1989

1995

19971998

19992001

FORD’S EXISTING SUPPLY CHAIN AND CUSTOMER RESPONSIVENESS

INITIATIVES

EXISTING SUPPLY BASE Legacy supply base: Complex 3 tier supply base.

Traditional view: Cost based supplier selection

Key considerations overlooked:

Supply chain costs

Complexity

Inventory ownership: Manufacturer oriented instead of supplier orientation.

HOW COULD FORD IMPROVE

ITS EXISTING SUPPLY CHAIN ?

EXISTING SUPPLY BASE Beginning in the early 1990s Shifted toward longer-term relationships with a subset

Tier 1Tier 2 Below suppliers.

Ford made its expertise available

Just-In-Time inventory Total Quality Management Statistical Process Control JIT TQM SPC

FORD PRODUCTION SYSTEM

Ford 2000 initiative produced five major, corporation wide reengineering projects.

One was Ford Production System (FPS).

It aimed at making Ford manufacturing operations:

Leaner

More responsive

More efficient

FORD PRODUCTION SYSTEM

Its level of production

moved to a more

pull based system

Continuous Flow

Synchronized production

Stability

SYNCHRONOUS MATERIAL FLOW (SMF)

Ford defined as “a process or system that produces a continuous flow of material and products driven by a fixed, sequenced, and leveled vehicle schedule, utilizing flexibility and lean manufacturing concepts.”

to SMF was “In-Line Vehicle Sequencing (ILVS)”

ORDER TO DELIVERYPurpose : Reduce deliver time to 15 days from 45 – 60 days using holistic approach.Bottlenecks in Ford’s supply chain:

MarketingMaterial planningVehicle productionTransportation processes

ElementsForecasting: customer demand from dealersManufacturing stability: 15 days criterionMixing centers: delivery optimization and transportProcess amendment: increase robustness

FORD RETAIL NETWORKPrincipal:Buy all ford dealers in the local market so that all dealers were in competition against the real competition (i.e. GE, Honda, Toyota) rather than each other.Goal:Create highest level of treatment and experience so that consumer comes again and again.

HOW DELL APPLIED VI TO THEIR BUSINESSIn 4 main areas:1. Organization simplification

Reduce working capital by outsourcing2. Inventory Management

JIT via information management and flowBuild to order, reducing cost of storing finished goods

3. Customer service and support Finer customer segmentation, more tailored solution, faster

response time4. Supplier collaboration

Information and feedback sharing, product development, R&D

HOW VI COULD WORK IN FORD

DELL VI Ford possibility

Organization simplifying

NO

Inventory management YES

Customer service and support YES

Supplier management YES

DELL VS FORD Supplier investing potential Expense Factoring

Enterprise Model Differences:

RECOMMENDATIONS TO FORD Supplier inventory Ownership Customer Service and Support : Product customization( Online and Offline),

demand forecasting by mining customer data Centralized IT Infrastructure to enable information sharing among all

suppliers. Explore Other compatible VI models: GM Transformation from Push to Pull systems

THE DECISION

Ford must extend its Virtual-business strategy by partially implementing the Dell’s model of supply chain.

The dealers would still play a role in the distribution since the buying experience of a car from a dealer cannot be substituted by something virtual like a 3d model on a computer or images and description online.

IT systems should be centralized and shared with suppliers of all the Tiers

QUESTIONS???

THANK YOU