Purchasing - Ford Vision

Luis A. Mendoza

Purchasing Senior Manager

2 Source: The Economist

Global influence in our

daily business

3

GDP Forecast Debt forecast

Unemployment

2012 in Figures

4

2012 in Figures

5

Global Sales Growth Stabilizes

Source: J.D. Power

6

Global Sales Expected to Cross 100M

by 2015

64 67 70 66 6472 73 77

8595 101 106

0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: J.D. Power

Global Launches 2012

and Tendency

8

Ford Sillicon Valley

¿Mobility?

I3 1lt, I4 1.6lt and 2lt, V6 Ford´s electrification strategy

Global Expansion, Asia

and Africa Regions

Global Launches and Tendency

FOM in Global Context

10

Ford Manufacturing Footprint

Salamanca

Ranking Country Volume

1 U.S.A 1,404,602

2 Germany 824,830

3 Mexico 393,200

4 Brazil 320,259

5 China 263,375

6 Canada 259,977

7 Spain 240,668

8 Belgium 200,734

9 Turkey 182,582

10 Argentina 75,559

Ford Worldwide Production 2010

11

Mexico in Global Context

Mexico came in second as a source of supply for global Ford

Source:: VCI January 2011

Top 5 countries supplying

parts for Ford

% of Ford Total Turnover

GERMANY, 10% BRASIL, 8%

SWEDEN, 5% MEXICO, 11.8%

U.S.A., 31.3% ROW

(62 countries) ,

35.1%

12

Worldwide Ford’s Supply Base

3.9

5 5.26

8.5

0

1

2

3

4

5

6

7

8

9

2005 2007 2009 2010 2012

246

298323

342370

0

50

100

150

200

250

300

350

400

2005 2007 2009 2010 2012

Buy in Mexico could reach $9.5 bils. for 2012 thanks to production volume recovery at North America

Mexico Purchasing Growth (USB Bill.)

Mexican Supplier Sites Growth in Mexico

Sites

Distribution by Region

North America 42%

Central and South America 1%

East Europe 1.4%

Europe 31%

Asia 22%

Oceania 1%

Rest of the World 0.2%

Quality Strategy

14

Quality Strategy

• Value for our clients

• Continuous improvement

• Q1 process

• PPAP Process – Early risk identification

15

KEYS: The three gears are

working together to

move the central

gear.

They have to work

together to achieve

the main goals.

Exceed the

customer

expectations

•Quality

•Cost

•Time Continuous

materials and

product flow

World class

reliability and

sustainability

Highly motivated

and efficient

people

Value for our Clients

16

Continuous Improvement

4. The OUTPUTS are

monitoring and

controlling

5. Constantly are

PERFECTED

CRITICAL

OUTPUT

0/100

0 Defects

100% Volume

100% Flexibility

2. The STANDARS are

followed with NO

excuses

3. The ABNORMALITY

is evident

PROCESS

Cultural Factors

Physical Factors

Operative Factors

A

N

D

O

N

A

N

D

O

N

1. The INPUTS are Clearly

identified

0 Missing

Parts

0 Equip/Tools

Fails

100% Assembly Feasibility

CRITICAL

INPUT

17

A standard used to qualify Suppliers for business with Ford

Q1 is a global reference to an elite Supplier

– Displaying the highest quality and greatest reliability

– Showing the discipline to ensure success & drive

improvement

Uses a point-based system to evaluate Supplier performance

– A few vital metrics determine which Suppliers are eligible

– Supplier Q1 information is maintained in the GSDB

database

– These metrics are reported in the Supplier Improvement

Metrics (SIM) database

Q1 Process

18 18

• Phased PPAP organizes the process into four phases

– Phase 0: Run-at-Rate

– Phase 1: Quality Verification

– Phase 2: Production Verification

– Phase 3: Capacity Verification

PPAP

X TT PP MP 1

Phased PPAP Phase 0 Phase 1 Phase 2 Phase 3

PPAP/Phased PPAP Comparison

19

Risks Identification

Capacity risks that are identified and addressed early reduce risk to launch and

save significant cost to the program

Capacity Planning Options for risk reduction are many without Jeopardizing launch and without excess cost

To program

Phase 0 (R@R) Risk increases as timing before launch is reduced.

Risk must be addressed with more urgency, and resolution may incur higher cost

Phase 3 (CapVer) Risk increases as timing before launch is

reduced. Risks must be addressed with more urgency, and resolution may incur higher cost

Buyers - Global Skills

21

Purchasing Leaders

1

2

3

4

Energy andutilities

Others Finantialinstitutions

Materials andconstruction

Chemicalsand

Healthcare

Packagedgoods

High tech andtelecoms

Automotiveand assembly

Overall average

Average purchasing score (scale 1= low to 5 = high)

Low High

While purchasing

leaders exist in

every industry

their number varies

widely across

industries

Source: McKinsey GPE Team

10 13 25 44 51 45 21

48 52 42 39 48

37 31

26 23

13 10 8

11

49

40

Average score of industry group

Purchasing leaders

Middle of the pack

Purchasing followers

64 50

22

Importance of Specific Skills in Strategic

Purchasing

• Communication skills

• Leadership/interpersonal

skills

• Negotiation skills

• Business management

skills

• Skills in developing

sourcing strategies

• Ability to build fact base

and analyze material

• Ability to identify

category-based

improvement levers

There are some skills all

companies consider important…

… but some skills are only

considered important by leading

purchasing organizations

Source: McKinsey GPE Team

!

23

Track Purchasing Performance Beyond

Pure Cost Savings

Source: McKinsey GPE Team

50

50

50

37

25

50

50

62

75

39

43

52

57

61

61

70

74

100

Supply base reduction

Cycle time reduction

Quality improvement

Innovation

Procure-to-pay processcompliance

Security of supply

Overall value generation

Internal customer satisfaction

Cost Savings

Followers Leaders

Purchasing leaders track more than just pure cost savings

Significant difference between leaders and followers

What is my own strategy

to develop my team?

Where supply base is?

25

3,571

3,200

2,700

1,576

?

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2005 2006 2008 2010 2012

Ford Motor Company

Supply Base Consolidation (# of Ford supplier sites)

26

I ask myself:

1. Segmenting the market based on my strategy

a) Do I know better to customer A than to customer B?

b) Geographically, where am I stronger?

c) What capacity ($) do I have?

d) Do I have global advantages

and synergies?

e) Can I supply to everybody?

27

I ask myself

2. Decide on What and How I

want to compete

a) Am I stronger as Tier II?

b) Do I get advantages making a

partnership?

c) Do I get disadvantages making a

partnership?

d) My manufacturing plants, how are

they regarding costs, quality, etc.?

e) Does my value chain give any

competitive advantage?

f) Do I have presence in key

markets?

28

Conclusions

• Does your company know where it goes?

• Have you identified your strengths and

opportunities?

• Do you have an strategy and a plan to take you

to success?

• Do you have clear metrics for them?

Thank you !!!