Ford Motor Company Case

Executive Summary:

The Ford Motor Company has been a leader in the automotive industry for decades and their dedication to maintain that ideology for years to come, they had to make some significant changes to their supply chain network in work to succeed. At the end of the 20th century, Ford was faced with challenges from completing globalization of automotive companies and the increasing market share from foreign companies. Ford needed to update its supply chain strategy and network in work to keep at pace with competitors or risk falling behind and eventually disappearing in such a competitive market.

Ford was slowly implementing processes to keep them current and competitive, but moving to a virtually integrated strategy would ensure their longevity and competitiveness in what has become a global market. Using the Dell Computer approach to their supply chain, the Ford Motor Company had to adjust the moto to reflect their needs. Implementing this strategy helped the Ford Motor Company stay competitive and maintain profitable.

Ford Motor Company Case

Introduction:

In this Case we focus on the Ford Motor Company and the decision to implement a virtually integrated system and redesigning their supply chain to maximize IT capabilities without affecting their quality. Using Dell Computers as the best practice example if virtual integration executives are faced with the decision to reduce their supplier network base from tier one to tier three, Also how the Ford Motor Company decrease cost but increase order to delivery time with keeping the quality of the product up to standard.

Ford Motor Company Case

Issue Identifiers:

The following are issues identified in the case focused around the Ford Motor Company:

-Growing competitive market

-Redesigning the supply chain

-Vertical integration

-Ford 2000 initiative

-Virtual integration

-Ford Retail Network

Ford Motor Company Case

Environmental and Root Cause Analysis

Environmental:

Ford Motor Company was the second largest industrial manufacture in the world and one of the big three in the North America(GM, Ford and Chrysler). Employer of about 370,000 people with operations in about 200 countries and revenues of over $144Billion, it felt pressure from foreign based auto manufacturers such as Honda and Toyota. In actuality all these companies faced the same challenges which were improving quality, reducing cost and increasing their order to delivery(OTD) time. Successfully achieve these goals would ultimately increase profit and increase market share. The industry was becomes more globalized as the future became a reality.

Growing Competitive Market:

Ford had grown substantially over the years to the point where in the late 1980’s, it had several thousand suppliers of production material in a complex network of business relationships. To the point where suppliers were picked mainly based on cost and little regard for the overall affect it had on supply cost, which is generally the case when dealing with such a large complex network of suppliers. In the 1990’s, Ford began to reduce the number of suppliers it dealt with directly shifting towards long-term relationships with capable suppliers who would provide entire vehicle sub-systems. These tier one suppliers would manage relationships with tier two and three suppliers. Ford also assisted in making their expertise available in order to improve operations as well as Just In Time(JIT) inventory, Total Quality Management(TQM) and Statistical Process Control(SPC).

Ford was faced with adopting Information Technology(IT), and joining them with supply chain management strategies in order to redesign their supply chain to increase quality, delivery time while keeping costs at a reduced margin.

Vertically Integrated:

Ford considered a stronger vertical integration which involved them to strengthen their relationships with customers, suppliers and their global partners. With such a board base of suppliers it was difficult to keep everyone in synch. With the push to minimize delivery time from 45-65days to 15days as well as modern technological advancements, Virtual integration was becoming a better alternative than vertical/horizontal integration.

Ford 2000 Initiative:

In 1995, Ford embarked in an ambitious restructuring plan called Ford 2000. This initiative introduced a merge of its North American, European and international automotive operations into a signal organization. Ford 2000 called for a dramatic cost reduction strategy involving a reengineering and globalization of corporate processes. Product development was activities were consolidated into five Vehicle Centre’s(VC’s), with this initiative Ford tried to eliminate product and process redundancies while reducing OTD’s from 60days to 15days.

With the globalization of the Ford Motor Company the information flow between a various of geographic areas became critical, the idea was to have information flow globally as if “all departments were under the same roof.” In 1996, Ford launched a company-wide intranet site, by early 1997 Ford developed a Business to Business(B2B) capability via the intranet which could be extended to suppliers called “extranet”. This initiative would move Ford from a push system to a pull system.

Virtual integration:

This was the development of the virtual integrated network via the Extranet. All suppliers would share information, this assisted in the moving the information flow via the intranet and extranet between suppliers and the Ford company. Using the Dell Computer Company as a model which used technology to reduce working capital and exposure to inventory obsolescence.

Ford Retail Network:

In 1998, Ford introduced the Ford Retail Network(FRN), introduced by the Ford Investment Enterprise Company(FIECo) which was formed to face the retail vehicle distribution system in North America. FIECo had two primary functions, 1.To be a test bed for practices in retail distribution and drive those practices throughout the dealer network. 2.To create alternative distribution channel to compete with publically owned retailers.

Ford Motor Company Case

Alternatives:
1) No Change

This would mean the Ford Motor Company continues with the Ford 2000 initiative

Maintains the push strategy in place which has already been proven to be profitable($6.9Billion in 1998).

This is meaning that Ford would not need to invest any capital into a new system or strategy.

The lack of improved IT sacrifices the potential improvement in the supply chain.

Eliminates the chance to increase value/profit

2) Implementation of Virtual Integration

Improvements in the supply chain in addition to what the Ford 2000 initiative has already accomplished.

Adopting the pull strategy allows for decisions to be made based on the market and customer needs.

Based on the Dell strategy, it may not translate identically in the automotive industry.

Implementing change in a large corporation is usually not always embraced smoothly.

Ford Motor Company Case

Alternatives
PRO’s
CON’s
Ford Motor Company continues with the Ford 2000 initiative
1. Maintains the push strategy in place which has already been proven to be profitable 2. This is meaning that Ford would not need to invest any capital into a new system or strategy 1. The lack of improved IT sacrifices the potential improvement in the supply chain 2. Eliminates the chance to increase value/profit Ford Motor Company Adopts the Virtual Integration Strategy

1. Improvements in the supply chain in addition to what the Ford 2000 initiative has already accomplished 2. Adopting the pull strategy allows for decisions to be made based on the market and customer needs 1. Based on the Dell strategy, it may not translate identically in the automotive industry 2. Implementing change in a large corporation is usually not always embraced smoothly

Ford Motor Company Case

Recommendation:

For this Ford Motor Company Case, my recommendation is the implementation of the virtual integration plan. With the added value the Ford 2000 strategy added to the Ford Motor Company, I believe virtual integration would help push the company to the forefront of the modern era on auto manufacturing and distribution. With Dell being known as one of the pioneers of this virtual integration strategy, they are a great example of how this strategy can increase profit and keep cost at a minimum. With the Ford 2000 strategy already in place and the industry becoming more focused on globalization, I believe the foundation is already set with the use of the extranet. Teaming up with General Motors and Chrysler to create the Automotive Network Exchange(ANX), has also been a major advantage as all companies have come together to share information in order to battle the growing market share of foreign automotive companies.

Ford Motor Company Case

Implementation Plan:

Adopt the Virtual integration strategy.

Redesign the supply chain or be left behind as technological advancements increase the potential of profits and market share

Aggressively use technology to reduce working capital and exposure to inventory obsolescence

Continue the B2B plan through intranet and extranet

Continue the use of the ANX along with the cooperation with GM and Chrysler

Actively continue to focus on reduced suppliers and continue to have the

engineering team to work closely with current tier 1 suppliers

Use the FPS to focus on a pull strategy for its supply chain

Actively continue to increase the OTD and maintain the schedule of 15days appose to the original 45-60days

Ford Motor Company Case

Conclusion:

The Ford Motor Company had an outdated supply chain which ran the risk of falling further back due to the increased global competition as well as the increased market share foreign automotive companies. Ford hoped to take the efficiencies demonstrated by Dell Computers and the emerging information technology and implementing them in their supply chain. Ford planned to reduce suppliers and establishing long-term relationships with existing ones, incorporating IT into their supply chain and also the implementation on JIT, TQM, SPC, would prove beneficial.