ford motor company hbr case analysis
TRANSCRIPT
Ford Motor Company: Supply Chain Strategy
Group 7, Section B
Name PGDM No
Anand S 14016
Nikita Lalwani 14089
Rohit Shettar 14124
Rony Francis 14126
Tony Sebastian 14171
Submitted to: Prof. Rajendra Todalbagi
Overview
Based in Dearborn, Michigan.
Second largest industrial corporation in the world.
Revenues of more than 144 billion dollars.
About 370,000 employees.
Operations spanned 200 countries.
Since Henry Ford had incorporated in 1903, the company had
produced over 260 million vehicles.
Automotive Industry
Big Three U.S. automakers—General motors (GM), Ford, and
Chrysler
Foreign-based auto manufactures
(i.e. Toyota and Honda)
Facing increasing overcapacity
Advantage in the industry was fast becoming global
Ford 2000
Product development consolidated into five Vehicle Centers (VCs)
Each responsible for the development of vehicles in a particular
consumer market segment
Making processes and products globally common
Eliminate redundancies
Realize economy of scales
Ford’s New Global Approach
Technology was employed to overcome constraints usually imposed
by geography.
Teams on different continents needed to be able to work together as
if they were in the same building.
In every reengineering project, information technology (IT) was
critical
Deployed to enhance material flows and reduce inventories
Substituting information for inventory
EXISTING SUPPLY BASE
Beginning in 1990s
Shifted towards longer-term relationships with capable
suppliers
Tier 1, Tier 2 & below suppliers.
Assist suppliers in improving JIT, TQM & SPC.
Ford expected yearly price reduction from these suppliers.
Tier 1 well developed IT capabilities, including Electronic Data
Interchange.
Order to Delivery
The purpose of OTD: Reduce to 15 days from 45 to 65 days
Pilot studies in 1997 and 1998 identified bottlenecks throughout Ford’s supply chain: Marketing
Material planning
Vehicle production
Transportation processes
Implementation of OTD
Ongoing forecasting of customer demand from dealers A minimum of 15 days of vehicles in each assembly
plant’s order bank to increase manufacturing stability Regional “mixing centers” that optimize schedules and
deliveries of finished vehicles via rail transportation A robust order amendment process
o to allow vehicles to be amended for minor color and trim variations without the need to submit new orders
Comparison - Ford vs Dell
Costs of developing web capabilities
Problems of connecting to suppliers and other external parties who
tend to be less technologically advanced than the Ford
Difficulties in implementing a true build-to-order model for so
complex product as an automobile
order
delivery
orderSuppliers Manufacturer Distribution
ChannelCustomers
Customers
Suppliers Dell
Direct Model
Traditional Model
Logistical Drivers
Facilities FRN VCs
Inventory JIT
Transportation Railways
Cross –Functional Drivers
Information FPS
Sourcing Materials procurements
Pricing Fixed pricing
How should Ford use Internet technologies to interact with suppliers
To address this problem Ford must think about its relationships not only with suppliers but also with dealers and customers.
As supply chain systems staff members study the Dell model in particular, they come to appreciate that “virtual integration” must include design not only of the supply chain but also of fulfillment, forecasting, purchasing, and a variety of other functions that had long been considered separately within the Ford hierarchy.
The question is in fact explosive in its implications, because it inevitably leads to fundamental questions about the way Ford has historically operated internally and how it has interacted with important partner constituencies (including dealers)
Recommendations
Ford to extend its Virtual-business strategy by partially implementing
the Dell’s model of supply chain.
Shift the ownership of raw materials to suppliers
Allow customization both offline and online
Collect customer data from dealers to
Segment customers
Contacting local dealers to forecast demand
Sharing design with the supplier to speed time to market
Involving supplier in R&D
Switch from push to pull strategy
Develop a support network through which spare parts can be exchanged and delivered in a short time.
Continued…
Thank you!