The Ford Motor Company finds itself in a dynamic business environment where new technologies and practices offer the potential to alter in a significant way the landscape in which it operates. Henry Ford was in his time an innovator in offering "cars for the masses". He introduced to the car industry methods and systems innovative in their day. Ford needs once again to forge new paths to ensure future competitive advantage.
Executives at Ford have been considering the "Direct Model" created by Dell Computer Corporation and finds that there is considerable appeal. Dell has been able to speed up inventory velocity such that there is only eleven days of inventory on hand. This has led to an inventory turnover rate of thirty times per annum. This achievement, termed by Michael Dell "Virtual Integration" has been achieved by blurring the line between supplier, Dell and client, to the extent that third party service staff are often thought, by clients, to be Dell's own staff.
2.0 The Company and Industry Background
Ford Motor Company entered the business world on June 16, 1903, when Henry Ford and 11 business associates signed the company's articles of incorporation. With $28,000 in cash, the pioneering industrialists gave birth to what was to become one of the world's largest corporations. Few companies are as closely identified with the history and development of industry and society throughout the 20th century as Ford Motor Company.
Ford's new global approach required that technology be employed to overcome the constraints usually imposed by geography on information flow. IT was placed within the process reengineering organization. In the supply chain area, there was general agreement that IT also could be deployed to dramatically enhance material flows and reduce inventories, substituting information for inventory. Ford continued to expand in the IT arena, releasing an Internet, Intranet and Extranet site. Ford teamed with Chrysler and General Motors to work on the Automotive Network Exchange, which aimed to create consistency in technology standards and processes in the supplier network so that suppliers, already pressed to lower costs, would not have to manage different means to interact with each automaker.
3.0 Identifying Ford's key problem areas
In spite of the success in the auto industry, Ford is facing serious challenge in its supply chain and other activities.
3.1 More suppliers. Without a highly efficient computerized system for doing business with its tire suppliers, Ford would not have been able to offer consumers this option. Relying on phone and fax messages would take far too long to communicate customer preferences from the dealer to the Ford factory to the tire companies, all of which are links in the overall car production supply chain.
3.2 Flow and cost. Ford keeps the following information about the flow and cost data for all distribution centers to dealer channels: distribution center identification number, dealer identification number, product identification number, the number of miles between each distribution center and its dealers using the road network.
3.3 Purchasing system. Suppliers even farther down the chain are more behind. Ford needs to consider not only the total cost savings a supplier provides. At Dell, purchasing activities reported in to the product development organization. At Ford, purchasing was organizationally independent of product development and had been-historically and up to the present-a powerful force within Ford. Because of the sheer volume of materials and services that Ford purchased, a very slim reduction in purchasing cost could result in very significant savings.
3.4 Ford Production System. The mass-producer uses narrowly skilled professionals to design Ford's products made by unskilled or semiskilled workers tending expensive, single-purpose machines. These churn out standardized products in very high volume. Because the...
References: Austin, R. D. (1999). Ford Motor Company: Supply Chain Strategy. Harvard Business School.
Greenstein, M. and M.V. (2000). Electronic Commerce: Security, Risk Management, and Control (2nd Edition). New York: McGraw-Hill.
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