CASE STUDY #2
FORD MOTOR COMPANY by A
Ford Motor Company - Supply Chain Strategy
TABLE OF CONTENTS Part I. Executive Summary
Part II. Issues Identification
Part III. Alternative Options
Part IV. Recommendation
Part V. Implementation
Part VI. Conclusion
Part I. Executive Summary Ford Motor Company was founded by Henry Ford in 1903; the company had produced over 260 million vehicles with about 370,000 employees today. Although Ford obtained significant revenues and profits from its financial services subsidiaries, the company’s core business had remained the design and manufacture of automobiles for sale on the consumer market. Since in the 1970’s, the automobile industry had seen an increase in competition, especially foreign competition, mostly from Toyota & Honda which led to overcapacity within the industry (estimated at 20 million vehicles).
In an effort to lower cost of developing, building cars and increase efficiency in 1995, Ford developed a restructuring plan known as Ford 2000 which included merging its North American, European, International automobile operations into a single global organization. Ford 2000 was focused on reengineering of some key projects such as Order to Deliver (OTD) and Ford Production System (FSP) whose primary goal was to reduce OTD from more than 60 days to less than 15 days. With Ford’s traditional business model, its goal was achievable but would it ‘survive’ at the long run?
In mid-1996, Ford attempted to overcome information constraints in its new global approach, by launching a company-wide intranet, and by early 1997, Ford had expanded upon that system to include Business-To-Business (B2B) capability through which the intranet could be extended in a secure manner beyond company boundaries, potentially connecting Ford with its suppliers. As a result of this, Ford teamed up with Chrysler and General Motors to work on the Automotive Network Exchange (ANX) whose aim was to create consistency in technology standards and
processes in the supplier network i.e. providing a unified communications standard through the internet to enable its suppliers provide common technology for all manufacturers just like Dell’s model.
Ford’s focus was to improve its supply chain & delivery process by making information on its web site more accessible and useful which was built on a model implemented by Dell computers known as “Virtual Integration”. Virtual Integration is a term used to describe the use of internet to replace physical components of a company with information (http://www.businessdictionary.com/definition/virtual-integration.html).
Dell’s vertical integration system helps improve data centre efficiency by responding to selected business requests in split seconds. It also helps to improve operational costs by controlling the complexity of the company’s infrastructure and improving its speed of response. It reduces inventory and increases speed and overall, offers the advantages of tightly coordinated supply chain. “Virtual integration means you basically stitch together a business with partners that are treated as if they are part of the company” - Michael Dell.
The issues Ford faced was mainly keeping large inventory which resulted in low profitability and at the same information sharing was a challenge. Ford could not communicate effectively in and outside the company because the lacked the information technology capacity for that.
As Teri Takai, my decision would be to implement the supply chain strategy of integration using the model of Dell computer. Dell’s direct model can be applied to many areas of Ford’s operations. Ford will have to manage...
References: Laudon, K.C. (2011). Managing Digital Firm. Fifth Canadian Edition. Pearson Canada
Supply Chain Management Module one Readings Manual
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