Summary: As per our meeting earlier this week, here is the information you requested regarding the supply chain strategy of the Ford Motor Company. I have also included a quick comparison to the strategy used by Dell Computers in attaining my final recommendation. Ford's Dilemma:
The director of supply chain systems at Ford has two options to consider before implementing its new strategy towards the company's supply chain strategy. First, it must consider virtual integration, and modeling its supply chain after companies like Dell. Secondly, it should consider the possibility of continuing the organization's current supply chain strategy based on the intuition that Ford's supplier network has more layers and more companies than Dell (Austin, pg. 1). Ford's Supply Chain
A Brief History:
In the 80's Ford picked suppliers based on the lowest cost and the overall costs of he supply chain was ignored. Dealing with so many suppliers led to a higher overall costs and a complexity that was difficult to control.
In the 90's Ford cut down the number of suppliers drastically and shifted towards longer term relationships with a set of suppliers that would provide entire vehicle sub systems. Although the numbers of suppliers were lower the supply base was different in its nature and more complex that the one used by Dell (Austin, pg. 3).
Currently, there are 5 major reengineering projects: Ford Production System (FPS), Synchronous Material Flow (SMF), In line vehicle sequencing (ILVS), Order to Delivery (OTD), and the Ford Retail Network (FRN).
FPS is an integrated system aimed at making manufacturing systems leaner, more responsive and more efficient. SMF is part of the FPS and is a process that produces a continuous flow of materials through a fixed and leveled vehicle schedule. This vehicle schedule is the aforementioned ILVS, which uses vehicle in-process storage devices and computer software to assure that the vehicles were assembled in order sequence (Austin, pg. 4). The purpose of Order to Delivery (OTD) was to reduce the consumer wait time from 45-65 days down to 15 days.
This was accompanied by an overall vision to create "a lean, flexible and predictable process that harmonized the efforts of all of Ford's components to enable it to provide customers with the right products in the right place at the right time. (Austin, pg. 5)" Finally there is the Ford Retail Network, with its main concern was to purchase all the Ford dealers in a local market to avoid competition against each other, and to focus on the "real" competitors like GM, Chrysler, or Toyota (Austin, pg. 5).
Ford vs. Dell: Ford does posses some similarities to Dell which are summarized below: -Suppliers are close with nearby ship points -External logistics supplier is used to manage inbound supply chain -Customers are encouraged to use PCs to balance supply and demand -Both companies are focused on strategic partnerships with its suppliers Although there are some similarities between Dell and Ford, there are quite a number of differences as well.
Dell supplies its own inventory until it is used in production and Ford does not. Dell forecasts its demand regularly with short-term forecasts and any modifications are immediately shared within the company and its suppliers while Ford relies on long term forecasting. Ford's supply chain is far more complex than Dell's. Conclusion:
For Ford to remain successful it must adopt the methods of a company like Dell. As Michael Dell stated in the Virtual Integration article, the whole idea behind virtual integration is that it lets you meet customer needs faster and more efficiently than with another model. Ford can continue to be an efficient producer, if it keeps its current strategy as long as the world around it doesn't change. Virtual integration, however, will allow Ford to be more efficient and responsive to change in real time (Magretta, 1998).
- Austin, Robert D. (1999). Ford Motor Company: Supply Chain Strategy. Harvard Business School.
- Magretta, Joan (1998). The power of Virtual Integration: An Interview with Dell Computer's Michael Dell. Harvard Business Review. Vol. 76 Issue 2 p 72-84